Investing News

Proper Planning for Retirement

Your financial objectives and investment goals relate to you and your family alone. The steps you should take to ensure a safe and happy financial future aren’t based on what your peers require but on what you estimate that you’ll need.

However, finding a benchmark for an appropriate amount of retirement savings at any given time isn’t a bad idea. In fact, knowing the amounts that others in your age group have put away in their 401(k)s may help you focus your savings efforts and stay on a successful retirement savings track.

Key Takeaways

  • Americans’ 401(k) balances have slipped slightly, primarily due to market activity.
  • 401(k) account balances and contribution rates vary greatly by age, with those in their 60s racking up the biggest numbers.
  • The average employee 401(k) contribution rate, as a percentage of salary, was 13.9% in 2021.
  • According to the Social Security Administration, its retirement benefits are only designed to replace about 40% of the average worker’s wages.
  • Most Americans aren’t saving sufficient amounts of money for their retirement years, several studies show.

Average 401(k) Plan Balances by Age

According to Fidelity Investments, the financial services firm that administers more than $11.8 trillion in assets and has 34.7 million workplace participant accounts, the average 401(k) plan balance decreased to $121,700 in the first quarter of 2022.

However, the savings rate (a combination of employee and employer 401(k) contributions), was about 14%. This percentage almost met Fidelity’s suggested savings rate of 15%.

How does workplace plan saving break down by age? Here’s how Fidelity crunches the numbers.

Twentysomethings (Age 20 to 29)

  • Average 401(k) balance: $10,500
  • Contribution rate (% of income): 7%

The participation rate of Generation Z participants in defined contribution plans in Q3 2021 was 15.8%. In 2019, it was 12.6%. Fidelity defines Gen Z individuals as those born from 1997 to 2012.

Thirtysomethings (Age 30 to 39)

  • Average 401(k) balance: $38,400
  • Contribution rate (% of income): 8%

Among millennials (those born between 1981 and 1996), women investors opened 31.3% more IRA accounts in Q3 2021 than they opened a year before. Millennials overall opened 58.5% more Roth IRA accounts in Q3 2021 than they had in Q3 2020. The amount of contributions increased 58.1% in the same period.

The average combined assets at Fidelity of millennials investing in both 401(k) plans and IRAs increased 23.5% from Q3 2020 to Q3 2021.

Fortysomethings (Age 40 to 49)

  • Average 401(k) balance: $93,400
  • Contribution rate (% of income): 8%

The account balance size for Gen Xers may reflect the fact that these folks have logged a good couple of decades in the workforce and have been contributing to plans for that long.

Fiftysomethings (Age 50 to 59)

  • Average 401(k) balance: $160,000
  • Contribution rate (% of income): 10%

The jump in this contribution rate over earlier age groups suggests that many workers are taking advantage of the catch-up provision for 401(k)s, which allows people age 50 and over to deposit more (an extra $6,500 in 2022) than the standard amount.

Sixtysomethings (Age 60 to 69)

  • Average 401(k) balance: $182,100
  • Contribution rate (% of income): 11%

Workplace plan savings-wise, it’s now or never for this group. This contribution rate suggests that many baby boomers are using their workplace plans to add as much as possible to their retirement savings. Fidelity research indicates that Baby Boomers may be too aggressively invested.

Seventysomethings (Age 70 to 79)

  • Average 401(k) balance: $171,400
  • Contribution rate (% of income): 12%

As of January 2020, the Further Consolidated Appropriations Act removed the age limit that made it impossible for individuals 70½ or older to make contributions to traditional IRAs. This opened up an additional retirement savings option for those currently working or running their own business.

Of course, we’re living in a vastly different world today than in years past. How each generation’s ability to save for retirement will be affected by the financial impacts of the COVID-19 pandemic and other global events is uncertain.

How Much Should You Save for Retirement?

Fidelity has some pretty concrete ideas.

  • By age 30, you should have one time your annual salary saved. For example, if you’re earning $50,000, you should have $50,000 banked for retirement.
  • By age 40, you should have three times your annual salary already saved.
  • By age 50, you should have six times your salary in an account.
  • By age 60, you should have eight times your salary working for you.
  • By age 67, your total savings total goal is 10 times the amount of your current annual salary. So, for example, if you’re earning $75,000 per year, you should have $750,000 saved.

Another Way to Estimate Savings

There’s also the tried-and-true 80% rule. Save enough to have 80% of your pre-retirement salary. For example, if you make roughly $75,000 a year, you’d need 80% of that, or $60,000 per year during your retirement years to maintain the same standard of living you had while working.


The 2021 average workplace defined contribution plan savings rate as a percentage of salary (employee and employer rates combined).

What’s the Reality?

If you compare recommended saving amounts to Fidelity’s 401(k) average balance figures, it appears that most Americans are behind in saving for retirement, even if they have savings in addition to what’s in their 401(k)s.

A 2019 Government Accountability Office study found that nearly 48% of Americans age 55 and older didn’t have any retirement nest egg or traditional pension plan as of 2016.

Those who did have retirement accounts didn’t have enough money in them. According to our research, 56- to 61-year-olds have an average of $163,577. Those age 65 to 74 have even less. 

If that money were turned into a lifetime annuity, it would only amount to a few hundred dollars a month. Any financial planner would agree that it’s not nearly enough to get by on.

In its 20th annual survey, the Transamerica Center for Retirement Studies found that millennials had median retirement savings of approximately $23,000, compared to $64,000 for Gen Xers and $144,000 for baby boomers.

Similar findings come from the Economic Policy Institute. It estimated in 2019 that those age 32 to 37 had saved around $31,644. That figure rose substantially to around $67,270 for those age 38 to 43. For those age 44 to 49, the average retirement savings were $81,347. Finally, those age 50 to 55 had saved an average of $124,831.

Although these may seem like healthy amounts, they are well below even the most conservative goals.

According to Transamerica, part of the problem might be a lack of financial understanding and education. Sixty-eight percent of workers believed they didn’t know as much about retirement as they should. 

In fact, 37% of workers said they didn’t know anything about asset allocation, and around 22% admitted to not knowing how their retirement money was invested.

For that matter, only 20% of Americans said they knew a great deal about Social Security, even though nearly 74% expect it to be a significant source of income when they stop working.

The Social Security Administration states that its retirement benefits are designed to replace only about 40% of the average worker’s wages.

Tips to Save for Retirement

That most Americans don’t have nearly enough savings to sustain them through retirement is sad but true. How do you avoid that fate? Here are some steps that you can take, whether you’re early in your career or closer to your retirement.

  • Take the time to carefully consider and estimate how much you’ll need to live comfortably after your 9-to-5 days are over. Based on that, you’ll be better able to develop a plan to accrue the sum you need, by the time you need it.
  • Maximize your contributions to your workplace plan. If you cannot contribute that much, at least contribute the amount needed to enable the matching employer contributions that can boost your savings.
  • If you haven’t yet, open an IRA and contribute as much as you can to it annually, as well. For 2022, you can contribute up to $6,000, or $7,000 if you’re 50 or older.
  • Invest more aggressively earlier in your career to capitalize on opportunities to increase your account value. Even if you’re older, you may want to consider adjusting your allocations to allow for greater growth. Speak to a financial advisor to be sure you’re up to speed on different asset allocations and what might be appropriate for your needs and age.
  • Examine the fees related to your investments. Since they can have an impact on your account balances over time, lowering them should be a priority.
  • Learn how Social Security (and Medicare) work, and what you might expect from them in benefits. Register for an online account at the Social Security Administration’s website. You’ll be able to view and estimate how much you’ll receive per month in benefits when you retire, based on the years you’ve worked and your earnings.

Of course, start saving and investing as early as you possibly can. The longer you have, the better, especially where the power of compounding interest is concerned. Retirement may seem a long way off but when it comes to saving for it, the days can dwindle away quickly and any delay costs more in the long run.

What Is a Solid 401(k) Balance for a 30-Year-Old Person?

Fidelity reports that individuals between the ages of 20 and 29 have an average 401(k) balance of $10,500. Those in their 30s have $38,400 on average. It recommends that by age 30, you should have an account balance equal to 1x your annual salary.

How Much Should Someone in Their 60s Have in Their 401(k)?

According to Fidelity, the average 401(k) balance for the 60-to-69 age group is $182,100. It suggests that by age 60, you should have eight times your annual salary saved. Of course, you shouldn’t limit your saving effort. The more you can add to your savings at any age, the better.

How Much Money Is Needed for a Comfortable Retirement?

Fidelity estimates that the average person should expect to spend between 55% to 80% of their annual income during their retirement, based on their retirement lifestyle, and healthcare costs. You can use that range to estimate what dollar amount that suggests for you.

The Bottom Line

Saving for your retirement is perhaps one of the most important financial goals that you will ever have. When you can’t, or don’t wish to, work any longer, you will need substantial savings to sustain you, whatever your lifestyle.

Carve out the time to review your savings today. Launch a concrete savings plan if you’re younger or corrective savings course of action if you’re older. Be disciplined about putting money aside now to ensure a financially secure future.

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