Here's How Much the Average American Puts Into Their 401(k). How Do You Compare?


As a retiree, the last thing you want to do is spend your days worrying about whether you have enough money in your bank account to cover the basics. You deserve to enjoy yourself after a lifetime of working, which means that ideally you have plenty of cash to pay for necessities and the things you’ve been dreaming of doing.

If you want that future, though, you need to make sure you’re investing enough money to get it. But are Americans putting enough cash into their investment accounts to provide the future financial security they deserve? Here’s what you need to know.

This is the typical 401(k) contribution

According to recent research from Fidelity, the total savings rate in 401(k) accounts for the third quarter of 2023 was 13.9% of income. This is the total amount people are contributing to their accounts, on average, including employer matching contributions.

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Now, this doesn’t mean everyone is contributing that amount. Baby boomers are contributing more than other generations, putting away about 16.7% of their income in their retirement plans. But the average is fairly consistent, and it’s not too bad of an amount, although it is a bit below the common recommendation of around 15% of income.

The amount you’ll end up with if you contribute 13.9% of your earnings does vary depending on the age when you start investing and the amount of money you make. But if you’re diligent with doing this throughout your career, you could set yourself up for a pretty good retirement.

In fact, if you start with a $25,000 annual salary at age 22, get a 2% annual raise, and contribute 13.9% of your income from retirement until age 66, you’d have about $1,254,161.95 in your 401(k), assuming a 10% average annual rate of return on your investments.

That would produce about $50,000 in annual retirement income, assuming you followed the 4% rule. That rule advises you to take out 4% of your account balance in year one then, adjust the amount annually to maintain buying power despite inflation. The 4% rule is designed to help you avoid running out of money, which can happen if you spend your retirement funds too quickly.

How do your contributions compare?

Ending up with over $1 million could be a great place to be in as a retiree but not everyone is actually contributing 13.9% of income (even with an employer match). Many people fall short, and if you’re one of them, you may find yourself with a lot less. You can use the calculator on Investor.gov to input your savings amount and account balance to see what you’re likely to end up with.

If you aren’t putting as much money as you should into your 401(k), look for ways to increase the amount you invest. One of the easiest is to simply divert any salary increases to your retirement plan. So if you get a 2% raise, before you get used to living on more, up your retirement account contributions by 2%.

You can also slowly inch up contributions by, say, going from 9% to 10% and then a few months later up to 11% until you’ve hit your target. By making slow increases, you don’t have to make big lifestyle changes at once.

Budgeting to prioritize 401(k) contributions is another option, as is cutting a big fixed expense (like getting a cheaper used car) and investing the difference.

If you make saving for retirement a priority and try to get up to at least the average contribution amount — and ideally 15% of income — you can have the retirement you deserve. You owe it to your future self to make that happen.

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