The Average 401k Balance by Income Level

 in Blog / Invest  tagged retirement

The 401(k) is one of the largest retirement platforms in America, and for good reason. It allows you to invest your hard-earned salary tax-free upfront. Then, you pay taxes as you take money out in retirement. 

These tax benefits cause a compound effect. It allows you to plow more money into your account (because taxes don’t take away a chunk), so it can grow faster in the long run. 

It’s no wonder many Americans take advantage of these benefits. But, does someone who makes a bigger salary actually contribute more to their 401k? Let’s find out. 

The Average 401k Balance By Income Level 

One of the largest 401(k) holders in America is Vanguard. Each year they perform a study on all 5 million retirement accounts. 

One of the areas that they look at a variety of things from the average 401(k) balance by age, gender, industry, and income level. 

Vanguard data proves that income matters when it comes to your 401(k) balance. It is expected that as your income rises, you will save more in your 401(k). This is because a 401(k) is a way to automate your savings. Each time you get a raise, your 401(k) will get a higher contribution rate. It automatically goes up. That is why we always recommend automating your savings each paycheck. That will allow you to save money before you have the chance to spend it. 

Annual incomeAverage 401(k) balanceMedian 401(k) balance
Less than $15,000$15,843$1,376
$15,000 to $29,999$10,283$2,678
$30,000 to $49,999$22,679$6,909
$50,000 to $74,999$54,588$21,359
$75,000 to $99,999$92,596$41,507
$100,000 to $149,999$137,058$61,635
$150,000 and above$193,130$76,448
Source: Vanguard Study

Less than $15,000 Per Year 

Average 401(k) Balance: $15,843

Median 401(k) Balance: $1,376

As you can imagine, if you are making less than $15,000 a year it is tough to save. In most areas, at this income level, you are just trying to get by. You are most likely living paycheck to paycheck to make ends meet. 

Unless, you have already paid off your mortgage, and have downsized to a simpler lifestyle. You wouldn’t expect anyone in this income range to have a large 401(k) without a financial windfall such as an inheritance or the nearly impossible lottery win. 

Recommendation: I know it may be tough, but work to save a little bit of money each month for retirement. Maybe it’s only $50, but every little bit helps. If you are young, that time horizon is your best friend. Live with roommates and slash your expenses. Your goal is to increase your income. Look to get certifications or degrees that help you increase your income.

$15,000 to $29,000 Per Year 

Average 401(k) Balance: $10,283

Median 401(k) Balance: $2,678

Surprisingly, this income bracket has a lower average balance than the “less than $15,000” range at $10,283. But the median Is slightly higher at $2,678. 

These balances still should not be surprising. This income level is usually for those who have a low paying entry-level job or just a high school diploma. Most folks in this range are still just trying to make ends meet in most parts of the country. 

Making it very difficult to save for retirement. Especially if they have to support other people on their income. 

Recommendation: Start your saving habit now. You may not be making much, but every little bit counts. Look to save every extra dollar you can. If you have nights and weekends available, look to take on a side-hustle. This will help you increase your income significantly. 

$30,000 to $49,999 Per Year 

Average 401(k) Balance: $22,679

Median 401(k) Balance: $6,909

This income bracket is where many college graduates may start their careers. In some high-cost areas of the country (like New York City or San Francisco) it would be tough to make it on this income. 

Yet in others, you can live a comfortable middle-class lifestyle in this range. This is the income range where you can start saving some of that salary for retirement. Maybe you start with 20% of your income and work your way up from there. 

Recommendation: Save at least 20% of your income. This will help you build a strong financial foundation. Believe it or not, these early dollars will work much harder for you than huge sums will later. 

$50,000 to $74,999 Per Year

woman looking at 401k balance

Average 401(k) Balance: $54,588

Median 401(k) Balance: $21,359

This income bracket had the highest median balance jump. This bracket is where people are making a living and have additional disposable income in many areas of the country. You may be a tenured blue-collar worker, small business owner, a college graduate with an entry-level salary, or middle-level management. 

That allows you to stuff more money in your retirement account. It is also the income bracket that in many parts of the country allows for a comfortable standard of living. Although, in high cost of living areas this may still be too low. This is where you can start to ramp up your savings. 

Recommendation: Save at least $1,000 per month towards your 401(k). This will ensure that you definitely hit millionaire status in less than 30 years. 

$75,000 to $99,999 Per Year

Average 401(k) Balance: $92,596

Median 401(k) Balance: $41,507

As you hit the $75k – $99k bracket you will notice that you have much more disposable income. You can really begin to put that money to work. This is the income range that maxing out your 401(k) shouldn’t be a huge burden anymore. Yet as you can see, most people don’t even get close to maxing out their 401(k). 

Recommendation: Focus on maxing out your 401(k) when you are in this range. It may be uncomfortable at first, but you will see a massive payoff in the long run. 

$100,000 to $149,999 Per Year 

Average 401(k) Balance: $137,058

Median 401(k) Balance: $61,635

The $100,000 to $149,999 per year income range is surprising. They have a lousy average 401(k) balance for being high-income earners. Most people in this bracket don’t have one year of income saved for retirement!

This shows the lifestyle creep problem that we have in this country. When you reach the six-figure club, many times you have allowed your lifestyle to inflate too much. This can decimate your savings rate. 

A way to combat this is to save half every time you get a raise. You are already living on less, and will not feel the difference. 

Recommendation: Make sure you are maxing out your requirement accounts in this income range. You are earning more than 99% of Americans. Remember, the more money you keep, the sooner you can achieve financial freedom.

$150,000 and Above

Average 401(k) Balance: $193,130

Median 401(k) Balance: $76,448

If you make over 150k a year, you should have the opportunity to max out your 401(k) every year. Odds are, you are a business owner, executive at your company, or have very specific skills in the medical or legal field. 

The average in this range should be higher. What the average tells us is that there are a number of people in this bracket who spend too much of their income.

What Can We Learn From This? 

Americans are not taking advantage of their retirement plans as they should. Especially in the high-income range. If you are getting your finances together, aim to beat these numbers. In fact, if you want to be a 401(k) millionaire, try to blow these numbers out of the water. 

Building wealth is about saving more than others around you. They want to buy more stuff, you want to buy freedom. It is that simple. 

andrew
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