What Is the Average 401(k) Return in 2025?
Written by
Rudri Patel
Edited by
Joe Evans
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When you think about your 401(k), one of the first questions that comes to mind is: How much is it actually growing?
On average, 401(k) returns typically fall between 5% and 8% annually, depending on your portfolio mix, fees, and whether you’re capturing your full employer match. But that range doesn’t tell the whole story.
In 2023, for instance, investors saw exceptionally strong 401(k) performance, with the average portfolio gaining between 17.5% and 18%, according to Vanguard and Fidelity data. The five-year average sits closer to 9.7%, showing how year-to-year swings can impact long-term averages.
Knowing what the “average 401(k) return” looks like helps you set realistic expectations — and more importantly, take control of your strategy.
Consistent contributions, smart fund choices and patience through market ups and downs can make a huge difference over time.
Key Takeaways
- The average 401(k) return ranges from 5% to 8% annually, but recent years, like 2023, demonstrate the volatility of performance.
- Your real results depend on fees, allocation and contributions.
- Even a 1% contribution increase can translate to tens of thousands more at retirement.
- The Secure 2.0 Act adds new tools for catch-up contributions and automatic savings.
- Focus less on “average returns” and more on consistency, low fees and steady contributions.
What Is a Good 401(k) Return?
A “good” return depends on your investment mix and time horizon. Historically, a diversified 401(k) with 60% stocks and 40% bonds averages around 7% annually.
Here’s how different portfolios might perform:
| Portfolio Type | Stock Allocation | Average Annual Return (20-Year) |
|---|---|---|
| Conservative | 30% stocks/70% bonds | 4.9% |
| Balanced | 60% stocks/40% bonds | 7.1% |
| Aggressive | 80%+ stocks | 8.3% |
Average 401(k) Balances by Age
It helps to put returns in context by seeing what people actually have saved:
| Age Group | Average 401(k) Balance | Median 401(k) Balance |
|---|---|---|
| Under 25 | $6,200 | $2,200 |
| 25-34 | $37,200 | $15,000 |
| 35-44 | $97,000 | $36,000 |
| 45-54 | $179,000 | $61,000 |
| 55-64 | $256,000 | $89,000 |
| 65+ | $279,997 | $87,725 |
The median numbers show that half of savers have less than these amounts, underscoring the importance of consistent contributions over time.
Average 401(k) Contribution Rates
According to Fidelity Investments, as of early 2024:
- The average employee contribution rate is 7.7% of salary.
- The average employer match adds another 4.6%.
- Combined, that’s a total savings rate of roughly 12.3% — a solid benchmark if you’re aiming to replace 70% to 80% of your pre-retirement income later.
If you can, increase your contributions by 1% each year until you hit at least 15% combined with your employer match.
What Americans Have Saved in Their 401(k) Plans
How Fees Impact Your 401(k) Growth
Even small fees chip away at your balance over time. Most 401(k) investors pay between 0.2% and 1% in plan fees, but some legacy plans can exceed 2%.
A Yale University study found that a 1% annual fee can reduce your retirement balance by as much as 20% over 30 years.
Tip: Check your plan’s quarterly fee disclosure, which breaks down administrative, fund management and advisory costs. Opt for low-cost index funds or target-date funds whenever possible.
How Target-Date Funds Affect 401(k) Returns
Target-date funds (TDFs) are now the most common 401(k) investment vehicle, used by over 60% of participants.
These funds automatically adjust their stock and bond mix as you approach retirement — providing convenience and diversification. However, they also:
- Tend to underperform during strong stock years (due to gradual risk reduction)
- But limit losses during downturns
- Are ideal for hands-off investors seeking balanced, long-term growth
If you prefer more control, you can manually mimic a target-date fund’s allocation using index funds to reduce fees.
Visualizing Compound Growth
To understand why even small contributions matter, consider how a $200 monthly contribution grows at different return rates:
| Annual Return Rate | Value After 30 Years |
|---|---|
| 5% | $166,000 |
| 7% | $227,000 |
| 10% | $376,000 |
That’s the power of compound interest — each percentage point matters.
Even boosting contributions by just 1% annually can add tens of thousands of dollars to your retirement total.
Behavioral Finance: Why We Undersave
Even with knowledge and access, many Americans struggle to save enough. Behavioral finance research identifies common biases:
- Present bias: Preferring immediate spending over long-term savings
- Loss aversion: Pulling money out during market drops instead of riding it out
- Status quo bias: Never increasing contributions once enrolled
Combat these by automating contribution increases, setting “future you” reminders and focusing on long-term milestones rather than short-term volatility.
Secure 2.0 Act: What It Means for Your 401(k)
The Secure 2.0 Act, passed in late 2022, introduced key changes to help savers:
- Higher catch-up limits: Workers aged 50+ can contribute up to $7,500 extra annually.
- Automatic enrollment: New 401(k) plans must auto-enroll eligible employees at 3% to 10%.
- Student loan match option: Employers can now match student loan payments as if they were 401(k) contributions.
- Roth catch-ups: High earners must make catch-up contributions to Roth accounts starting in 2026.
These updates make it easier to build savings — especially for younger and mid-career workers.
401(k) vs. Other Investment Options
| Account Type | Avg. Annual Return | Tax Benefits | Flexibility |
|---|---|---|---|
| 401(k) | 5%-8% | Pre-tax, tax-deferred | Limited until age 59½ |
| Roth IRA | 5%-8% | Post-tax, tax-free growth | Withdraw contributions anytime |
| Traditional IRA | 5%-8% | Pre-tax, tax-deferred | Similar to 401(k) |
| Taxable Account | Varies | None | Full access anytime |
| S&P 500 Index (Avg) | 10.3% (2003-2023) | None | Full access anytime |
While a 401(k) may not match S&P 500 returns, its tax advantages, employer match and automation make it a cornerstone of retirement planning.
Final Take to GO: Focus on What You Can Control
The average 401(k) return gives you a benchmark — but it shouldn’t define your success. What truly matters is staying consistent, contributing regularly and minimizing costs.
With employer matches, tax benefits, and compounding on your side, even small steps can lead to a powerful outcome.
Want to boost your overall savings strategy? Check out our guides to:
FAQs About 401(k) Returns
Here are answers to some of the most frequently asked questions about the average 401(k) return.- What is the average rate of return on a 401(k)
- Typically between 5% and 8%, though long-term stock market returns are closer to 10%.
- How often should I rebalance my 401(k)?
- At least once a year -- or anytime your asset allocation drifts significantly.
- Is it better to max out my 401(k) or pay down debt?
- It depends on your situation. High-interest debt should usually come first, but don’t leave an employer match on the table.
- Can I lose money in a 401(k)?
- Yes. Your balance will fluctuate with the market, but staying invested long-term typically smooths out downturns.
- How much should I contribute?
- Financial planners often recommend saving 15% of your income, including employer match, if possible.
Information is accurate as of Oct. 7, 2025.
Our in-house research team and on-site financial experts work together to create content that’s accurate, impartial, and up to date. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. You can learn more about GOBankingRates’ processes and standards in our editorial policy.
- Vanguard "How America Saves 2025"
- Vanguard "How America Saves 2024"
- Fidelity "Fidelity Funds"
- Vanguard "Vanguard economic and market outlook for 2024: A return to sound money"
- The Yale Law Journal "Beyond Diversification: The Pervasive Problem of Excessive Fees and "Dominated Funds" in 401(k) Plans"
