Average 401(k) Savings by Age Compared With Retirement Targets

Depending on whom you ask, the United States is either in the middle of a serious retirement problem or simply doing what Americans often do best: putting it off. I’ll leave you to decide which description fits.

For now, I’m sticking to the numbers and saving my opinion for the end.

The latest figures come from the Federal Reserve’s Survey of Consumer Finances. It finds that just 54.9% of families have any retirement account, and the median balance among those households is $106,000.

What the Fed says Americans have saved at different ages

The Fed’s survey is released every three years and combines 401(k)s, IRAs, and similar retirement accounts.

Unlike data from a single provider such as Fidelity or Vanguard, it reflects households across the country, whether they save through an employer, on their own, or both.

Even so, the numbers still do not capture everything. Pensions, home equity, and taxable brokerage accounts are excluded.

Why very wealthy savers distort the averages

The reason averages look so much higher than medians is simple: wealth is unevenly distributed.

Imagine one high-saving tech worker with $2 million in a 401(k), then place that person in a room with nine coworkers who each have $100,000. The average balance in that room would be $290,000, even though the median person still has just $100,000.

Now add billionaire Peter Thiel to the mix. According to leaked tax records reported by ProPublica, his Roth IRA balance is an eye-popping $5 billion.

At that point, the room’s “average” balance would jump to more than $450 million, while the other nine people would still each have $100,000.

The 10x savings rule suggests many Americans are behind

So how much should you have saved for retirement at your age?

One of the best-known benchmarks comes from Fidelity, which says workers should aim to have 10 times their salary saved by age 67. Here is what that path looks like along the way:

• By age 30: 1x your salary
• By age 40: 3x your salary
• By age 50: 6x your salary
• By age 60: 8x your salary
• By age 67: 10x your salary

That helps show why the typical American falls short. If a 50-year-old earns $75,000 a year, the rule suggests she should have about $450,000 saved.

But the typical saver between ages 45 and 54 has just $133,000, which is less than a third of that amount.

Some people see that as proof that a retirement crisis is real. Others argue that the 10x figure is simply a target set by an investment company that benefits when people save more.

Personally, I think 10x is too low. But that may be because I live in Los Angeles, where gas is approaching $7 a gallon and smoothies cost about $22.

What I’m doing to avoid running out of money later in life

You have probably heard plenty of the usual personal-finance advice about how to catch up if you are behind, so I’ll skip the lecture and trust you to make the right decisions for yourself.

That said, I’ll share a few things I’m doing to avoid running out of money when I’m old.

First, I max out my Roth IRA and 401(k) every year. This year, I’m also trying a Mega Backdoor Roth for the first time, which involves contributing extra after-tax money to a 401(k) and converting it to Roth, assuming the employer plan allows it.

I’m also shifting more of my money into index funds. I sold my rental property a few months ago and I’m finished being a landlord. I’d rather take the market’s average return and do nothing for it.

And yes, I still buy the occasional lottery ticket. Mostly joking.

My view on the retirement problem

For what it’s worth, I do think retirement insecurity is getting worse. The divide between extreme savers and everyone else keeps growing, and more financial education is needed at younger ages.

I want to be part of the solution. Encouraging people to save and invest more is a major reason I write about money. And if you do not have access to a workplace retirement plan, a regular brokerage account can be a straightforward way to build wealth after you have maxed out an IRA.