How Americans Depend on 401(k)s, Social Security, and Other Retirement Income

Key Takeaways

• Only 45% of retirees say a workplace retirement plan is an income source, compared with 83% of workers who expect one to be.

• The median Vanguard 401(k)-style balance for Americans 65 and older is about $103,000, or roughly $4,100 a year using the 4% rule.

• Many 401(k)s get rolled into IRAs by retirement, so retirees may still be using old workplace savings but under a different label.

Many workers expect their 401(k) savings to become a major source of retirement income. In practice, current retirees are far less likely to say they are actually drawing income from workplace plans.

For Vanguard participants age 65 and older with an active 401(k)-style account, the median balance is $103,202, according to Vanguard’s report. Using the common 4% withdrawal rule, that would translate to about $4,100 a year—useful, but not enough to cover retirement on its own. That difference is not necessarily alarming, but it does highlight an important point: by their late 60s, many retirees have moved old 401(k) money into an IRA.

Pensions, 401(k) withdrawals, and IRA distributions can be an important part of retirement income, but they do not tell the full story. A Congressional Research Service analysis of surveys tied to Social Security records found that older Americans also depend heavily on Social Security and earnings, with the balance shifting significantly as people age.

Why This Matters To You

The disconnect between what workers expect from 401(k)s and how retirees actually pay for retirement can help you build a more realistic mix of income sources.

The 401(k) Expectation Gap

Many workers believe 401(k)s will eventually provide substantial retirement income, but retirees report a different experience. The Employee Benefit Research Institute Retirement Confidence Survey found that 83% of workers expect a workplace retirement savings plan to be an income source in retirement. Yet only 45% of retirees say theirs is, down from 54% in the prior year.

The share of retirees who cited a traditional IRA as an income source declined to 54% from 59%, while the share naming a defined benefit pension fell to 56% from 64%.

Self-reported survey answers are not perfect, though. Retirees often overstate how much they rely on Social Security and underreport 401(k) and IRA withdrawals, sometimes by a wide margin.

Where Retirement Income Comes From

A Congressional Research Service analysis of 2019 income records, which linked survey responses with tax and benefit data, offers a clearer look at how Americans age 65 and older fund retirement. Social Security makes up about 30% of total income. Earnings from wages, salaries, and self-employment account for 27%. Pensions and retirement savings, including defined benefit checks, 401(k) withdrawals, and IRA distributions, represent 24%.

The mix changes with age. For Americans ages 65 to 69, earnings are the biggest source at 49%, while Social Security accounts for 19%. For those age 80 and older, earnings drop to 5%, while Social Security rises to 40% and pensions and retirement savings reach 29%. Even then, retirement-account income still does not surpass Social Security.

Why 401(k) Balances Don’t Tell the Whole Story

Vanguard’s median 401(k) balance was just over $103,000, but the average stood at $330,186. Because the average is more than three times the median, it is being lifted by a relatively small number of much larger accounts.

By their late 60s, most retirees no longer have active workplace retirement plans, according to the Federal Reserve’s Survey of Consumer Finances. When workers leave a job—whether because they retire, change employers, or are laid off—they often roll their 401(k) savings into an IRA. Nearly 60% of traditional IRA-owning households held rollover assets as of mid-2024, according to the Investment Company Institute.

That movement has made IRAs the largest single pool of retirement money in the United States. At year-end, IRAs held $19.2 trillion, while 401(k) plans held $10.1 trillion.

The Congressional Research Service found that about 29% of Americans age 65 and older drew household income from IRA withdrawals, but much of that money may have originally come from a 401(k). The account name does not always reveal where the savings started, which means 401(k) figures alone can understate how much workplace savings ultimately support retirement.