Investment giant Vanguard’s annual “How America Saves” report paints a bleak picture of how Americans are saving and preparing for retirement.
Based on the analysis of nearly 5 million defined contribution (DC) plan participants in 2024, most Americans are not saving enough, there’s a wide gap between different age groups and even seniors who are approaching retirement are struggling to meet conventional targets.
In other words, if you think you’re falling behind you’re probably not alone. The other piece of bad news is that hardship withdrawal activity increased, as 4.8% of participants initiated one, up from 3.6% in 2023.
Here’s a closer look at this snapshot to help you benchmark your own savings progress.
Unsurprisingly, the youngest Americans have the smallest average account balances, according to Vanguard’s report.
Participants between the ages of 25 and 34 had an average balance of just $42,640 while those aged 35-44 had an average balance of $103,552. Median balances were even lower, at $16,255 and $39,958, respectively for these cohorts.
These numbers barely cover a single year’s worth of living expenses, let alone a full retirement. However, younger Americans haven’t had the luxury of time to build up savings, benefit from compounding growth in assets and boost their earnings with relevant skills and experience.
Nevertheless, if you’re between the ages 35 and 44 and already have more than $40,000 in your 401(k) plan, you’re doing better than at least half the people your age with such retirement accounts.
Your 40s and 50s are probably the best years to boost your retirement savings. By this age, you’ve probably established a successful career, which allows you to generate excess income. You’ve also had plenty of time to invest this excess cash in assets that appreciate or generate income over decades.
Unfortunately, most middle-aged Americans seem to be struggling to take advantage of this window of opportunity. Americans aged 45 to 54 have an average balance of $188,643, but the median savings is just $67,796 — highlighting a sharp gap in retirement readiness.
For those between 55 and 64, the average rises to $271,320, yet the median remains a modest $95,642, underscoring that even those closest to retirement are often underprepared.
If you’re under the age of 64 and have around $300,000, for instance, you’re probably outperforming most of your peers. But that doesn’t mean you’re prepared for retirement.
Based on the 4% rule, you could safely withdraw just $12,000 a year from this nest egg, which is woefully inadequate for any comfortable retirement.
Meanwhile, the “magic number” for a comfortable retirement sits at roughly $1.26 million as of 2025, according to a Northwestern Mutual study.
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Given that the average age of retirement in the U.S. is 62, according to a 2024 Mass Mutual survey, we can assume most Americans over the age of 65 are already retired or within striking distance of it. Many have probably begun withdrawing money from their retirement nest egg.
The average 401(k) balance for someone over the age of 65 is just $299,442, barely higher than the 55-64 age cohort. Median balance is $95,425, slightly lower than the 55-64 age cohort.
To be fair, many retired Americans may have financial assets beyond their 401(k) plan and real estate which they could rely on to sustain their living expenses. But 40% of baby boomers believe it is likely that they could outlive all their savings, according to Northwestern Mutual.
Put simply, a significant number of seniors could be in an unsustainable retirement.
The first step is understanding how much you should have saved by a certain age.
T. Rowe Price published retirement savings benchmarks to aim for depending on age. For example, at age 50, the analysts recommend you should have 4.5x to 8x of your salary saved today.
Keep in mind these are simply guidelines and most Americans will fail to achieve these goals.
The best thing you can do for yourself is start investing early and shape your strategy based on your risk tolerance and investing horizon.
When you’re young, invest not just in assets that appreciate over time but also skills that advance your career and boost your earnings.
If you’re middle-aged, focus on reducing expenses and maximizing savings as much as possible.
If you’re older, consider delaying your retirement to add a few more years of employment and savings. You could also consider side hustles and self-employment to boost your earnings in the final stretch of your career. You can also make catch-up contributions to your retirement plan.
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This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
