Vanguard Says the Median 401(k) at 65 Is About $95,000. Why Even Twice That May Not Be Enough

Quick Read

• Vanguard estimates the median 401(k) balance at age 65 at about $95,000; even double that amount, roughly $191,000, produces only about $7,600 a year under the 4% rule.

• Taking out more to fill the income gap can make as much as 85% of Social Security taxable because the income thresholds were never adjusted for inflation.

• Longevity, inflation, Medicare costs and an early-market downturn can all strain a relatively small nest egg, so retirees should look at total household assets and keep cash reserves.

• The biggest 401(k) choices often get made once and never revisited: whether to roll the account over, what to invest in, and when to start withdrawals. That is what the report 401(k) & IRA Tips and Answers is designed to cover, and it is available free now. (Sponsor)

Vanguard's How America Saves 2025 shows the median 401(k) balance for participants age 65 and older at $95,425, based on year-end 2024 account balances. For the same age group, Vanguard puts the average balance at $299,442, more than three times the median.

For retirees in this age bracket, the median is the more useful figure. A small number of very large balances lifts the average. In Vanguard's data, the median reflects the saver in the middle, or what a typical 65-year-old has saved. For context, Vanguard's median across all participants was $38,176.

If someone has saved twice the median, or $190,850, that person is ahead of most peers. But that still leaves meaningful risks.

What Twice the Median Generates Each Year

Using the traditional 4% rule, $190,850 would support about $7,634 in first-year income, or roughly $636 per month.

Add the average retired worker's Social Security benefit of $2,071 per month after the 2026 COLA, which comes to $24,852 a year, and total income rises to about $32,486 before taxes and healthcare. For anyone leaving a middle-class career, that is a sharp income decline.

------

Now Available: The 401(k) Answers Nobody Gives You.

For many Americans, saving in a 401(k) only leads to more retirement questions. Should the account be rolled into an IRA, and if so, when? What happens tax-wise if the rollover check is made out incorrectly? When do required withdrawals start, and how much must be taken?

------

Taking More to Close the Gap Can Raise Taxes

The obvious solution is to withdraw more from the 401(k). But every dollar from a traditional 401(k) counts as ordinary income, and it also affects how much of Social Security is taxed.

Benefits begin to become taxable once provisional income, roughly adjusted gross income plus half of Social Security, exceeds $25,000 for single filers or $32,000 for joint filers under 26 U.S.C. § 86(c).

Above $34,000 for single filers or $44,000 for joint filers, as much as 85% of benefits can be taxed. Those thresholds have never been indexed to inflation.

A single retiree receiving the average benefit crosses that first threshold after about $12,574 in 401(k) withdrawals. After that, each additional dollar is taxed once directly and again through the Social Security benefits it makes taxable. Medicare's IRMAA surcharge does not begin until income tops $109,000 for single filers, so at this balance the hidden tax on benefits is the bigger concern.

Four Risks Facing a $190,850 Cushion

1. Longevity. A 65-year-old Vanguard participant who lives to 90 needs the money to last 25 years. The 4% rule was tested against 30-year retirements, and a smaller balance leaves little room for a weak market stretch or a major unexpected expense.

2. Inflation. The research CPI for Americans age 62 and older rose 3.6% over the past year. That outpaced the 2.8% COLA applied to 2026 benefits. The 3.6% COLA for 2027 helps catch up, but the purchasing power already lost does not return.

3. Healthcare. Medicare Part B costs $202.90 a month in 2026, or about $2,435 a year per person. On top of that, the Part A hospital deductible is $1,736. All of it comes out of the same limited withdrawal stream.

4. Sequence of returns. Vanguard says participants age 65 or older had a median equity allocation of 50%. That is not enough stock to build much growth over 25 years, but enough exposure to be hurt by a downturn.

   For example, a 30% drop in stocks during the first year would cut about $28,628 from the stock half. If the retiree still withdraws $7,634, that is now roughly 5% of what remains.

Your 401(k) Is Only One Part of the Balance Sheet

Many workers roll old 401(k) balances into IRAs, and Vanguard's plan data does not include those assets. Federal Reserve data show that households age 70 and older hold 26% of all defined benefit pension entitlements, along with substantial home equity and brokerage assets. A pension, a mortgage-free home, or a spouse's benefit can change the picture dramatically. The 401(k) should be judged in the context of the full household balance sheet.

Three Steps to Take Before or at Retirement

1. Map out your income floor. Add your Social Security estimate from ssa.gov to a 4% withdrawal from all retirement accounts combined. Then compare that total with your actual spending, including Part B premiums. The difference is the amount to plan around.

2. See where withdrawals push provisional income. If planned withdrawals would exceed the $25,000 or $32,000 base amount, consider taking more money in the years before claiming Social Security. Once benefits start, those same withdrawals can make part of the benefit taxable.

3. Keep one to two years of withdrawals in cash or short-term bonds. A cash cushion helps prevent a market drop from forcing stock sales at a loss in the first years of retirement.

Released: 401(k) & IRA Tips and Answers

(sponsor) 401(k)s are powerful retirement tools. But even experienced savers can make mistakes that quietly cost money for decades. Choosing the wrong fund, overlooking small fees that add up, or handling rollover steps in the wrong order are all examples.

Those kinds of mistakes are exactly what 401(k) & IRA Tips and Answers was created to help prevent. It is a free guide from Fisher Investments covering rollovers, contributions, required withdrawals and the mistakes that can do the most damage to a retirement account. Learn More Here ›