401k: The Average Balance at 65 Years Old

According to a 2019 report by Vanguard on how Americans save for retirement, the average 401k for a 65-year-old is $192,877.

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Have you saved enough for your retirement? Well, looking at how your savings compared to those of your peers can give you an idea of whether or not you have enough. That's why knowing the average 401k balance is critical.

We've always been told not to compare ourselves with others as it's not good for our peace of mind. While theirs is some truth in that, comparing your retirement savings to those of your fellow peers can give you a good idea of whether or not you have enough to take you through the rest of your life. Again, it can be quite difficult to know exactly how much you may need to live comfortably in your retirement days. As such, having a benchmark for setting your retirement goals and milestones is of great importance. This is why knowing the average 401k balance is an important step.

According to a 2019 report by Vanguard on how Americans save for retirement, the average 401k for a 65-year-old is $192,877. While this may seem like quite a lot, it might not be enough to retire over the course of three decades. If anything, the median balance for a 65-year-old American is just about $58,035, which means that many senior citizens have less than the average 401k balance.

These alarming figures should serve as a wake-up call for older Americans who are about to retire but run the risk of retiring with inadequate retirement money. This article will, therefore, look at some of the issues revolving around the 401k balance for senior citizens and how much you might just need to retire comfortably.

Table of Contents

What is a 401k?

A 401k is essentially an employer-sponsored savings plan that allows employees to set aside a given percentage of their salary for retirement. The 401k plan is named after a section of the Internal Revenue Code and is a very simple way of saving for your retirement since the money can be automatically taken from your monthly salary package. While many Americans heavily rely on Social Security to cater for their living expenses in their post-career days, it's generally not enough to cater for a senior's living expenses without any additional income. For this reason, it's of great importance to consider using 401k as a way of saving for retirement. That's if your employer offers it.

For most Americans, 401k is the most common vehicle to save for retirement. It's a great way to save for your retirement in a tax-sheltered way of up to $19,500 annually in 2020, thereby helping you in maximizing your retirement savings. Things can be even much better if your employer offers to match your contributions. As such, failing to use 401k under such a scenario would mean that you're leaving money that would be very beneficial during your retirement on the table. And even though the 401k plan remains one of the best ways to save for retirement, nearly 32% of Americans are utilizing it. That's at least according to the U.S. Census Bureau.

Benefits of 401K Saving Plans

401k plans have various benefits that might be of great help now and in the future.

Lifetime Contributions - While there may be some age limits for contributions in some 401k retirement accounts and IRAs, most 401k are designed in such a way that you can contribute and save for your retirement as long as you're employed.

Employer Matching Contributions - Most 401k plans are structured in such a way that an employer may offer to match the amount of money that you put in your 401k plan. Most employers are known to offer a given percentage of what you put in the plan to even match your exact contribution. Needless to say, this is practically free money and is a great way to swell up your retirement savings. You should, however, keep in mind that your employer's contributions do not count towards your yearly limit.

Tax Benefits - The savings that you direct to your 401k is pre-tax. This means that the amount of money that you contribute to your 401k plan will not be subject to an income tax and this is a great way of lowering your taxable income. In other words, you won't have to pay tax on the amount you contribute to your 401k plan until when you withdraw them. This is even beneficial if you take into account the fact that you'll be in a lower tax bracket during your retirement and this may lower the amount that you're required to pay in taxes.

Automatic Investment - There's a reason why the 401k plan remains one of the easiest ways for Americans to save. Well, the funds will be deducted automatically from your salary and directed into your 401k plan. As such, you don't have to procrastinate about these savings.

So How Much Retirement Savings Do You Need to Retire Comfortably?

As we noted earlier, it can be quite difficult to determine exactly how much you may need to retire comfortably. This is perhaps why there are a lot of things that go into planning for your retirement. The problem is, most Americans are not prepared for retirement, especially when looking at the financial side of things. Remember, planning for retirement doesn't necessarily revolve around having a given amount of money. Instead, it's all about having enough to live comfortably in retirement.

Again, we all have what might constitute living comfortably and this may differ from one individual to the other. With that in mind, the amount of money you require to retire comfortably isn't as easy as it may seem. Generally, it's been suggested by retirement experts that you may need about 80% of your working days' salary to live comfortably in retirement.

You should, therefore, have a retirement budget that's mainly based on the type of lifestyle that you want to lead in your post-working career. This should form the basis of your plan but you should consider things such as:

  • Unexpected medical expenses
  • Housing costs
  • Debt or mortgage payments
  • Replacement vehicles or repair
  • Other expenses such as entertainment and travel

When is the Right Time to start for 401k?

Given the importance of 401k and its benefits, especially in retirement, it's very obvious that every American should have a concrete 401k plan. On the contrary, most Americans do not get the chance to start investing for their retirement. But as soon as an opportunity to get employment and a 401k plan presents itself, you should never think twice about it. By starting early, you won't be overburdened when you're in the last hurdle of your working career with retirement looming on the horizon.

So while it may be ideal to start saving for 401k in your 20s, it's generally quite difficult. This is because you probably still have to repay your student loans, change jobs a handful of times before getting something more viable, or even perhaps still working in jobs where 40k1k plans are not on offer. That being said, it's best to start saving as soon as you hit 30.

A general rule of thumb is to save one year of salary for every five years and you might be on the right track to having enough for your post-career days. Here's a breakdown of what you should have in your 401k based on your age.


Average 401k balance - $11,800

As we've just noted, many people in their 20s are still new to the working world and are just starting to save for retirement. The best thing to do if you're still in this age bracket is to save at least an equal amount of your annual salary by the age of 30. 


Average 401k balance - $42,700

You should at least double what you had saved in your 20s. 


Average 401k balance - 102, 700

This might be your peak earning years so it's important that you save more than double what you saved in your 30s. If anything, you should be in other businesses and have a wide source of revenue stream. 


Average 401k balance - $174,000

In this age bracket, the IRS allows for catch up contributions, so you're allowed to save about $6,000 more. This can be beneficial for those feeling that they're lagging behind with their retirement savings. 


Average 401k balance - $192,877

Your growth is now slowing down and retirement is just around the corner. Your time is now limited and you have to boost your retirement savings for one last time before your working-career comes to an end. You are just about to start withdrawing your contributions over the years. It's just about that time you start reaping what you sow.

So what's the Importance of the Average 401k Balance?

To be honest with you, knowing the average 401k balance may not be of great importance to you. Instead, it's just a benchmark that will help you know if you're on the right track with your retirement savings. It's all about measuring your savings with your fellow peers and using it to analyze your own situation.

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