Here’s How Much Americans Have in Their Retirement Savings Account at Every Age
Written by
Georgina Tzanetos
Edited by
Ashleigh Ray
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Retirement seems like a far-off thing that we never really feel prepared for, but young people might be on a better path than they think.
According to data from Vanguard’s “How America Saves 2022” report, people under 25 with a defined contribution plan, such as a 401(k), have an average of $6,264 in their account. While this is a great start, the key to a comfortable retirement is saving early and consistently. By the time Americans start actually considering retirement, do they have enough saved?
Is it enough?
Here’s more data concerning average balances for other age groups:
- 25-34: $37,211
- 35-44: $97,020
- 45-54: $179,200
- 50-59: $256,244
- 60-69: $279,997
Experts at Fidelity recommend that you save 15% of your salary over the course of your career — from age 25 to 67 — in order to be prepared for retirement. If you get a late start, then you may need to save 20% or more. This means that savings should start early, and from Vanguard’s data, it looks like people early in their careers are doing just that, even in small amounts.
Don’t Forget About Taxes
An important thing to remember is that this money grows tax deferred. Let’s look at the 60-69 range Vanguard provides us — an average account balance of $279,997. While this seems like a considerable lump sum, this will be paid out to you in increments. Let’s assume you take payments monthly — those payments will be taxed at a rate that is still unknown. The benefit to a 401(k) is that it is contributed to with pre-tax dollars, before you pay income taxes. That tax though will simply just be deferred to when you begin to draw on the funds.
A sum of $279,997 broken down over the course of 10-20 years, broken down further to monthly payments and then additionally taxed to an unknown rate 20-30 years down the line paints a more sober picture.
Consider a Roth IRA
To offset this, many consider also investing in a Roth IRA, which is funded with post-tax dollars but are drawn on tax-free — essentially the opposite of a 401(k). However, not all employers offer Roth IRAs. However, it’s important to keep in mind that since IRAs are individual accounts, you will not get any employer-based benefits like contribution matching.
The combination of different retirement accounts with varied tax treatments allows for the least amount of tax hit at one particular time, while maximizing the tax benefits of each.
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James Holbach and Cynthia Measom contributed to the reporting for this article.
