Benchmarking Your 401k Savings

In a recent Vanguard study looking at the state of saving in America, called How America Saves 2021, I ran across this interesting chart. It shows how much people have saved in their 401k accounts for different age groups.

It’s often difficult for savers to be able to benchmark where they are at in their journey to retirement, so I thought I would share it here. One caveat that was pointed out to me is that many savers don’t stay in one job or with one 401k plan administrator their whole careers.

You can see that there is a big difference between the ‘average’ (mean) and ‘median’ savers. Too many people have little to no savings, so that pulls the median amounts way down.

Conversely, the average column is skewed upward on the strength of folks that save as much as they can. These are the amount someone on a journey to FIRE (financially independent & retired early) should strive to beat.

As I look at the history of our savings, we were off the charts in our 401k savings from the start. We both joined MegaCorp 401k plans when we were in our early 20s. We maxed them out from the beginning.

For most people, your 401k is your ‘base level’ of retirement savings. Fewer people have access to pensions these days so maxing out your 401k from the start is critical. How aggressive have you saved in your 401k?

Image Credit: Pixabay

5 thoughts on “Benchmarking Your 401k Savings

  1. My wife and I both made maximum 401-K contributors from the day we got married. Your earlier post about it taking around 25 years of doing this to reach retirement is spot on. Quite a bit of my time working was in sales where it was feast or famine in terms of commission. We lived on my base pay and invested 100% of my commissions above and beyond maxing 401-Ks.

    Your chart is shocking how little people are saving. We would have been off the chart sometime in our 30’s.

    Liked by 1 person

    1. I’m pretty libertarian in my views of government, but I would just automatically have people enrolled in a 401k when they start a job. Have it be a ‘opt-out’ choice instead of ‘opt-in’.

      Liked by 1 person

      1. I think some companies are doing that now, but the amounts are too small to make a dent in the savings problem.

        Liked by 1 person

    1. Yes – that’s an important consideration. Without reading the details, it seems the Vanguard study doesn’t adjust for that. I noticed the study cited by quite a few news outlets as “average American’s 401k balance”. I’m not sure if that means that the figures are too high, or too low, to represent all Americans, since there is also a bias in that many Americans don’t have access to a 401k at all. (I added a note to the post to reflect your comment)

      Like

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