The Average 401k Balance And Why It’s Too Low

Beef Wellington Medium Rare 401K

According to Fidelity, one of the largest 401k providers in the world with over 12 million accounts, the average 401k balance is now around $110,000 as of 4Q 2021. Among employees participating in a 401k for at least 10 years, the average balance hit $251,600, up 12% from a year ago. Separately, Vanguard reported that the average 401k balance has now shot up to $120,650. For workers 55 years of age or older, the average balance is $163,300.

In 10 not so short years, we’ve finally breached the peak average balance of $69,000 in 2007 and are now at record highs. It’s not so hard to believe since the Dow Jones and S&P 500 are also at record highs. At the depths of the crisis in 2008, the average 401k balance plummeted 25% to around $50,000.

401k participation levels hover at a respectable 71% for those making $40,000-$60,000 a year. Participating levels are therefore clearly much higher for those making more, but the exact number is unclear. For those making $20,000 to $40,000 a year, the participation level drops to just 53%, which is understandable.

Let’s say the average age surveyed is between 30-35, you can now see how absolutely pathetic these balances are if you are actually depending on your 401K to retire. You need to have the mindset of always maxing out your 401(k) every single year while saving at least 20% of your income after full contribution. There really is no other guaranteed way to retire comfortably if you aren’t saving a good amount. The power is all in your hands!


It may seem daunting to save $18,500 ( 2021 max) pre-tax dollars a year if you’re not making more than $60,000 a year, but trust me when I tell you it’s a must. If you spread out your contributions evenly over 12 months, you will be contributing $1,458 each month pre-tax. Hence, what’s really coming out of your paycheck is not $1,458 each month, it’s more like $500 every two weeks or $1,000 every month thanks to not having to pay taxes. You can do it. Millions of people survive on much less.

I recommend not stopping at the company’s 401(k) match, which often equals 3% of your base salary or $3,000, whichever is larger. I’ve heard many examples of a much higher contribution, all the way to a full 100% contribution match as well. Whatever the case may be, you need to do your best to max it out.

After 10 years, you’ll have at least $175,000 given it is very rare that one loses money in a balanced equities and bond portfolio in any 10 year stretch. Furthermore, I haven’t included any of the company matching or profit-sharing. Doesn’t at least $175,000 in your 401(k) sound good when you are 32 (assuming you graduated at 22), and $330,000 sound good at 42? The fact of the matter is, you’re more likely to have $200,000+ and $500,000+ if you keep maxing out your 401(k) based on average 4% returns, company matching, and profit sharing.

By 50 an 60 years old when you retire, you are well on your way to a million dollar 401(k) balance or more. However, the sad thing is that $1,000,000 in today’s dollars certainly buys much less than $1,000,000 dollars 10, 20, and 30 years in the future.  Hence, your 401(k) cannot be depended on. It can only be considered a supplement during your retirement.

Here’s is my recommended 401(k) savings chart by age or work experience:

401k savings targets by age


Once you have a sizable portfolio, your $19,000 contribution will start making less of a difference. For example, a reasonable 4% return on a $500,000 portfolio is $20,000. If you made 20%, that’s a nice $100,000 return while you kicked back doing little. It’s all about building your nut as large as possible so that your money just starts doing all the work for you. Some of you gunslingers might laugh at a 4% return, but when you have millions of dollars in the bank or in your portfolio yielding a risk free 4%, it adds up!

You become more risk adverse as you get older. It’s partly because you might have more liabilities and dependents and don’t want to blow yourself up. But, it’s also because once you have a $500,000 portfolio, it will STILL make you sick to your stomach if you lose 10% of it, even though you are much wealthier than when you were first starting out  Some say 10% is 10%, but trust me, when I saw my portfolios go down by $100,000+ during the downturn, it wasn’t a pleasant feeling.

Here is the reality of how much people have in their 401ks today:

Average 401k Amounts By Age 2014


At some point in 2010, I noticed that finally, I had breached my 2007 highs. I haven’t bothered to calculate my portfolio’s real rate of return given that it is quite messy with the company match and profit sharing plan. All I really care about is how much is in the darn portfolio, and I’m pleased to say it is about 25% above its previous peak. Here’s how often you should re-balance your 401k.

There’s no magic involved in the portfolio at all. The most important thing is an asset allocation between equities, bonds, and cash which you are comfortable with, and that you keep on maxing it out! I like the idea of keeping roughly your age as a percentage in bonds, and the rest in equities.

Couple your 401(k) with your hefty after-tax investment account, you will be good to go when it comes time to no longer work.


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About the Author: Sam began investing his own money ever since he opened an online brokerage account online in 1995. Sam loved investing so much that he decided to make a career out of investing by spending the next 13 years after college working at Goldman Sachs and Credit Suisse Group. During this time, Sam received his MBA from UC Berkeley with a focus on finance and real estate. He also became Series 7 and Series 63 registered.

In 2012, Sam was able to retire at the age of 34 largely due to his investments that now generate roughly $200,000 a year in passive income largely thanks to investments in real estate crowdfunding. He spends time playing tennis, hanging out with family, consulting for leading fintech companies, and writing online to help others achieve financial freedom.

Updated for 2021 and beyond. Take advantage of contributing a maximum $19,000 to your 401k.

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