The Golden (Nest) Egg

What is the size of the average retirement nest egg? It depends on what you mean by "average."

A 2019 analysis of more than 30 million retirement accounts by Fidelity Investments found that the average balance in corporate-sponsored 401(k) plans at the end of 2018 was $95,600. For traditional, Roth, and rollover IRAs, the figure was $98,400. And for 403(b)s and other defined-contribution retirement plans in the non-profit sector, it was $78,700. Those numbers were down about 7.5% to 8% on average from the same quarter of the previous year, due largely to a downturn in the stock markets in late 2018.

Key Takeaways

  • American workers had an average of $95,600 in their 401(k) plans at the end of 2018, according to one major study.
  • But 401(k) and other retirement account balances vary widely by the age of the worker.
  • Other major factors that influence retirement savings include household income and education.

Generational Divides

Of course, overall averages like these only tell us so much. As you might expect, young workers tend to have less money saved for retirement than older workers do, in part because their salaries are usually lower and they haven't had as many years to contribute to their retirement accounts.

The gap, as it turns out, is pretty wide. A June 2018 report from the Transamerica Center for Retirement Studies looked at a nationally representative sample of 6,372 workers, age 18 and up, and broke down their retirement savings by generation. It found that baby boomer households had estimated median retirement savings of $164,000 as of 2017, while Generation Xers had $72,000, and millennials had $37,000.

Even those figures tend to obscure how much (or little) many people have saved. For example, the Transamerica study found that 14% of the millennials it surveyed had $0 to $4,999 saved for retirement, while 42% of the baby boomers had $250,000 or more.

Even if your retirement nest egg is bigger than average, that doesn't mean it will be big enough.

The Importance of a Good Education

Aside from age, other factors that come into play include income and education. Perhaps not surprisingly, people with higher incomes tend to put more money into their retirement accounts. The Transamerica study reported that households with annual incomes under $50,000 had estimated median retirement savings of $11,000, households with incomes between $50,000 and $99,999 had median savings of $61,000, and those with incomes of $100,000 or more had $215,000.

Advisor Insight

Rick Fingerman, CFP®, CDFA®, CFS®, CCPS®
Financial Planning Solutions LLC, Newton, Mass.

A better question to ask instead of "What is the size of the average retirement nest egg?" would be: "How much will I need in retirement?" Everyone is different. Some might need $100,000 a year to live in retirement, but others might need more or less depending on their lifestyle requirements. If a so-called expert says you need a nest egg of $1,000,000 or $2,000,000 and they know nothing about you, then this is inaccurate.

To calculate how much you need to save, first determine what you suspect you will spend in retirement. Then, add up your expected future income, such as from a pension plan or Social Security, and subtract that from your spending budget. The discrepancy is what you will need to make up. Be sure to factor inflation into this amount as well, as purchasing power will inevitably decrease, especially for services like healthcare.

The higher their level of education, the more money people are likely to have set aside for retirement, as well. For those with a high school education or less, the estimated median was $36,000. For those with some college or trade school it was $51,000. For college graduates it was $154,000. People with graduate degrees or at least some grad school had saved even more, for a median of $225,000.

So if you're wondering how your retirement nest egg stacks up against the "average" one, you first need to decide to whom you want to compare yourself (and your egg)—the U.S. population in general or people more like you in terms of age, income, education, and so forth.

And bear in mind that even if your nest egg towers above the averages, that doesn't necessarily mean it will be sufficient to support you when retirement finally rolls around.