How Does Your 401(k) Compare with the Average?

When it comes to your retirement accounts, comparing how much you have saved with the national average can help you benchmark your savings.

For most employees, their 401(k) holds a significant portion of the money for expenses for their retirement years. Knowing how your 401(k) stacks up against industry averages may inspire you to adjust your savings rate or perhaps choose different investments. You can compare your own account with the average account sizes for your age group.

Key Takeaways

  • A 401(k) offers tax-advantaged savings opportunities, often with an employer match.
  • Compare your 401(k) with the average account size range for your age group to help you set your goals.
  • Average 401(k) contributions have increased in recent years, and average balances have grown.

What Is a 401(k)?

A 401(k) is an employer-sponsored retirement plan that offers tax savings to the employee. There are two types of 401(k)s—traditional and Roth—and they offer tax advantages in different ways. Traditional 401(k) contributions are made with pretax money, lowering your taxable income for that year. Roth 401(k)s contributions are made with after-tax money, so you do not get immediate tax advantages. Then, during retirement, you can withdraw your Roth 401(k) funds—including any earnings—tax free.

Employees choose how much they want to contribute from their paycheck each cycle. In some companies, that percentage can be matched all or in part by the employer. The employee can decide how to invest the money. Typically, they may choose from various mutual funds offered by the plan.

A 401(k), especially one with an employer match, can be an ideal way to grow your retirement nest egg because of its tax advantages and potential employer match.

What Is the Average Balance for a 401(k)?

The Internal Revenue Service (IRS) sets yearly limits for how much employees can contribute to their 401(k) each year. For 2022, workers under age 50 may contribute $20,500 per year. Those 50 and older may contribute an additional $6,500.

According to a recent report by Vanguard, savings rates are increasing slightly, most likely due to automatic contribution plans. The average percentage contributed by employees for 2021 was 7.3%, and 11.2% with employer matches.

The overall average in a 401(k) account is $141,542, but this number includes balances for workers across all experience levels and tenure. When broken down by age, the average account amounts are significantly different.

  • Under 25—$6,264
  • 25–34—$37,211
  • 35–44—$97,020
  • 45–54—$179,200
  • 56–64—$256,244
  • 65 and older—$279,997

These numbers are only part of the retirement savings picture. Many people also invest in traditional or Roth individual retirement accounts (IRAs) and taxable brokerage accounts.


Increasing your contribution by a percentage every year can help you make strides toward your retirement goals. Consider investing a portion of any bonuses that you receive.

What to Do If You’re Behind

Everyone’s financial needs in retirement will vary based on their cost of living and goals, but financial advisors often recommend saving enough to replace 80% of your current salary.

If your balance is lower than you would like and you’re not contributing the maximum to your account, you can take steps to catch up. First, make sure that you’re contributing at least as much as your employer will match. This matching contribution is essentially free money.

If your cash flow is tight, try to increase your contribution percentage incrementally as your salary increases. If you’re closer to retirement, remember that you can contribute an extra $6,500 if you’re age 50 or older as a catch-up contribution.

You can also save outside of a 401(k). You can open a traditional or Roth IRA on your own with a bank or a credit union. You cannot contribute as much each year as you can with a 401(k), but you can get the same tax advantages. For 2022, you can contribute $6,000, or $7,000 if you’re 50 or older.

Finally, you can invest extra funds in a traditional brokerage account. While you may not get the tax advantages, you can invest in assets that can help you grow your retirement funds.

Do all employers offer a 401(k) match?

Not all employers offer a 401(k) match, although many do. Employers are not required to contribute on their employees’ behalf. Many employers require their employees to contribute a certain percentage to qualify for matching contributions. Check with your employer to learn what your company provides.

Is there a limit to how much my employer can contribute to my 401(k)?

There is a limit to how much you can contribute each year to a 401(k). There are also limits to how much your employer can contribute. For 2022, total contributions, including from your employer, cannot exceed $61,000 per year. If you’re age 50 or older, that total increases to $67,500.

When can I start withdrawing from my 401(k)?

While you can withdraw from your traditional 401(k) after age 59½, you will incur early withdrawal penalties if you withdraw earlier. You can withdraw your contributions from your Roth 401(k) at any time with no penalty, but you must pay taxes and potential penalties on earnings if you withdraw them early.

The Bottom Line

If you’re behind in retirement savings compared with the average in your age group, consider increasing your contributions as soon as possible. Think of your 401(k) as one tool in your retirement toolbox. Paired with IRAs, taxable brokerages, and Social Security income, they can be a powerful tool for funding your retirement years.

Article Sources
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  1. Internal Revenue Service. “Traditional and Roth IRAs.”

  2. Internal Revenue Service. “IRS Announces Changes to Retirement Plans for 2022.”

  3. Internal Revenue Service. “Retirement Topics — 401(k) and Profit-Sharing Plan Contribution Limits.”

  4. Vanguard Institutional. “How America Saves 2022,” Pages 33 and 41 (Pages 35 and 43 of PDF).

  5. Vanguard Institutional. “How America Saves 2022,” Page 47 (Page 49 of PDF).

  6. Internal Revenue Service. “Retirement Topics — Exceptions to Tax on Early Distributions.”

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