Americans are increasingly focusing on retirement planning due to the dwindling availability of extensive pension packages. Money, a previously taboo subject, is now discussed more openly to improve financial literacy. The average 401(k) plan participant’s total savings rate in 2023, when combined with employer contributions, was a record-high 11.7%, according to Vanguard, one of the world’s leading investment management companies.
However, knowing if one’s retirement savings are on track can be challenging. Research by Vanguard in 2024 showed that the average 401(k) account balance was $134,128, with the median account balance among all participants being $35,286. These balances vary significantly by income level. For example, the median account balance for those earning $100,000 to $149,999 was $91,323, while for those earning $150,000 and above, it was $188,678.
Age, gender, and job tenure also significantly influence a participant’s defined contribution plan balance. Men, on average, had an account balance of $157,489, while women had an average balance of $112,401. However, many studies show that average retirement savings may not be enough, with people in the U.S. believing they will need $1.46 million to retire comfortably, according to Northwestern Mutual’s 2024 Planning & Progress Study.
For those concerned about their retirement savings, there are steps to take. One-quarter of respondents increased their savings to decrease the gap between what they have set aside now and what they hope to have in the future. Others have sought professional advice or initiated a financial plan. Additionally, many are becoming more knowledgeable about ways to reduce their tax burdens during retirement.
In conclusion, it’s essential for Americans to start saving for retirement as early and as much as possible to ensure a comfortable retirement. Achieving this goal involves increasing savings, seeking professional advice, and understanding tax reduction strategies.