Average 401(k) Balance by Age (2024 Edition)

Brian Preston
Put on your bib. It's time to eat. 401K by age.

Bo Hanson
I am so excited about this. And because we love that we get to do this show every year, because we know that one of the most powerful tools in our tool belt, one of the things that we can use to our advantage the most on our wealth building journey is our employer sponsored 401k. So today, we wanna load you up with everything 401K. But look, I don't want you to stress out because we are gonna give you so much information. We're gonna talk about the basics of 401 ks, hidden secrets and provisions of 401 ks, why we love these tools, and what you need to focus on by age.

Brian Preston
But here's a big upgrade for you guys. If you will go to moneyguy.com and just type in 401k. We actually have a 401K hub now, so you can actually not stress out. We're gonna make this as easy as possible so you can create your inevitable wealth. Cause here's what we do.

Bo Hanson
Every time we recognize there's something that might be valuable to you, we try to upgrade and improve. But the only way you're gonna know about those things is if you subscribe right now to the channel so that we know you are out there. So when we have new crazy 401K stats come out, we can share them with you, we can let you know about them. And this year is no different. Cause we know that right now, 37% of workers increased their 401K contributions this last year.

37% of folks said, hey, I'm going to save more into my four. That's a golf club. Golf club. I'm going to save more into my 401k this year than in last year. That's good news.

That's thumbs up. That makes us very, very happy. This one. Now, we debated this in pre show planning. 22% of Americans don't get their full employer match.

Brian Preston
But guys, that number is actually an improvement from prior years. So kudos. I'm not going to give you a golf clap because there's still as close to a quarter that are missing it, but still an improvement. And think about this, when we look at 401 ks, 63% of all 401K participants have all of their money invested in a target date in our target date fund. And 84% of Gen Z workers have everything in a target date fund.

Bo Hanson
So what that tells me is 401 ks are now making available really easy investment options where if you're not saving, if you're not building, you cannot blame it on complexity anymore because now the options are available. And I do think it's worthwhile while in noting, we love index target retirement funds. And why do we say index when we put so much emphasis on the indexes? Cause they have a lower cost than their siblings, which are just the normal original OG target retirement fund. So you wanna take advantage of that.

Brian Preston
And then I would also encourage you guys go research some of the biggest providers. Cause they are a little bit different. Some are more aggressive than others. Some have additional fees versus cheaper fees. So go check it out.

The three biggest providers is that tar? You know, if you look at Vanguard, Fidelity Investments and Charles Schwab, but a lot of fun companies are jumping on the bandwagon and understanding if you can just figure out how much you can save when you need it, that's an easier way to do money while you're starting out. So let's talk about some of the basics around 401k. Some of the things that you need to know. The very first is the limit.

Bo Hanson
Did you know that inside of your 401k this year in 2024, you can defer $23,000 of your salary into a 401k? That means you can say, hey, if I make up a number, if I make $100,000, I can choose some of my wages a little bit of today, and I can put it into my four hundred one k to grow for me for the future. If I happen to be someone who's over 50, I can actually save $30,500 into my 401k in 2025. I figured you'd let me say that part since I actually kind of resembled some of that. But then the other thing, you know, they increased how much you can put in from all sources.

Brian Preston
If you look at from the employer, the employee salary deferrals, they went up to $69,000 now. And if you get that catch up contribution, it actually increases it up to $76,500. So when you think about wealth building, there is a lot of opportunity to build wealth inside of these plans. So let's talk about what are some things that we need to know about? Because we've talked about.

Bo Hanson
One of the reasons why we love 401 ks is because you're not the only one who gets to put money in this. I mean, we think so much of the 401K matches and the employer money. There's a reason. Step two of our financial order of operations, if you go to moneyguy.com resources, you too can download this. But step two is employer match.

Brian Preston
And the reason that's so powerful is that think about this. Every dollar that your employer gives you whether it's $0.50 on the dollar or dollar for dollar is like a 50% or a hundred percent guaranteed rate of return. Now, in the past, historically, these contributions always had to go in pre tax, even if you were contributing on the Roth side. But it is important to note, with Secure Act 2.0, employers can now actually offer matching contributions on the Roth side, you will have to pay tax. But it is something to know about a new law that's recently changed.

Bo Hanson
So matching contributions are one type of employer contribution that can go into your plan. There's another type of contribution that you ought to know about that's called a non elective contribution. This is where the employer will put money into your 401k, whether you put money in or not. So a lot of times you'll see it structured where even if I put in $0, my employer is going to put 3% of my compensation into my 401k every single year. So even if you're not saving for your future, there's a chance your employer might be saving for your future.

Brian Preston
And then, of course, the third basket is profit sharing. It's not uncommon for your employer at the end of the year, and that's why this typically is funded the year after. So be careful with this, is they will take a portion of their profit and put it into their retirement plan. Now, one of the things that they do is the government says, okay, if employers are going to put money into the plan on your behalf, we might allow the employer some flexibility into the strings or into the handcuffs they put on this. So a lot of times they put vesting conditions on employer contributions.

Bo Hanson
Now, it's important to note that whenever you put money into a 401K, whenever you say, I'm going to do a salary deferral, I'm going to put money into this account. Your money is always 100% vested. Any money that you put into the account, even if you were to leave that employer tomorrow, the next day, next year, you get to take those dollars with you. However, there's a chance that if the employer's putting money into your account on your behalf, there might be some strings attached that you need to know about. And often it's in terms of vesting.

So the very first one we'll talk about are safe harbor contributions. Safe harbor contributions most often are usually 100% immediately invested. So if you put money in and your employer is doing either a safe harbor match or they're doing a non elective safe harbor, there's a really good chance that you are immediately vested in those dollars. Now, there are some circumstances where that's not the case, but in most cases, that money is yours the day it goes into the account. I think if I'm a person, I'm like, what the safe harbor?

Brian Preston
And why would an employer put money in that's 100% vested from day one? I think it's important for you to understand the context of why these things exist. The government has tried to incentivize employers to take the strings off of this matching money so that you get to keep more of it. And the carrot that they put out to employers to encourage us is they say, hey, if you will offer this safe harbor, we won't require as much testing and all this other compliance stuff in the background, so take advantage of. That's a great thing.

Not only is your contribution 100% invested, those safe harbor contributions will also be 100% vested right from get go. Now, another type of vesting that you need to know about is cliff vesting. And this is where the contributions your employer puts in are 100% vested after you've been employed for some certain period of time. So it's not uncommon to say, okay, once you've worked here for three years, then all of your employer contributions are vested. Or if you happen to be in a plan that has vesting on safe harbor, there's often a two year cliff vesting for that safe harbor.

Bo Hanson
But as soon as you've worked there for at least that amount of time, you are then 100% vested in those dollars, which means if you change employment, if you leave jobs, if you want to roll it over, you get to take all that money with you. Well, think about this, because, like the cliff vesting, the government is basically, when they put out guidelines or the way they allow companies to design these retirement plans, they say, yeah, if you wanna, you can go from nothing to all at once. But that's gotta be a shorter period of time. And that's why you will see a lot of plans. Take this third one, which is more of the graded vesting, which is saying, hey, okay, after two years, we'll give you 20%.

Brian Preston
After three years, 40%, and you carry on until it gets to 100% after five, six years. That is what you see with a lot of employers. But here's something that I think is important, bo, and I'll let you clarify this. You might actually have a mix of this, where some stuff is 100% immediately, and then some of this stuff has that great investing. How do you balance that?

Bo Hanson
One of the great things you can do with most 401K websites, you can go in and you can look at your sources. You can see how much do I have in employee contributions? How much do I have in safe harbor, how much do I have in profit sharing? And most 401K statements and most 401K websites will show you how vested you are in those. So if you are someone who's thinking about a job change or thinking about a career change, this should be one of the things that you look at, because we love when you do not leave money on the table.

You would hate to leave just a few weeks earlier, just a few months early from your current job and leave money behind that you could have taken with you as you go to your next endeavor. Well, we kind of alluded to this at the beginning, but let's talk about contribution types, because this is going to be another big decision that anybody who starts their 401k, they're going to have to make a decision. They're going to say, hey, do I want to do pre tax where I take the tax deduction? Now, that's considered traditional because that's when these things first came on the scene in the eighties. That's the only option you had.

Brian Preston
But then fast forward, there's also now what's considered a Roth option. And most plans do offer Roth options. That's where you put the money in. You don't get a tax deduction now, but you get tax free growth into the future that can be extremely powerful. How do you, how do you balance all these things?

Bo Hanson
Bo yeah, and then another thing about the Roth that's really unique when it comes to 401 ks is if you're familiar with Roth Iras, you know, they actually have income limits. If you make over a certain amount of income, you cannot contribute to a Roth IRA. With Roth 401 ks, that is not the case. Even if you make a million dollars a year, you could still choose to put money into your Roth. So what you want to do is you want to look at your current tax situation and say, okay, do I think the tax rates are higher now and going to be lower in the future?

Do I think my tax rate is lower now and going to be higher in the future? And depending on how you answer that question, will dictate, should I do pre tax contributions or should I do Roth contributions? But for a small segment of the population, there is actually a third contribution type inside of your four hundred one k. And it's called an after tax 401k contribution. Yeah, after tax allows the mega backdoor Roth.

Brian Preston
And that's got a but, bo, it's got some complications to it. It gets kind of sophisticated. What should people look for to know if they should do it or not? Yeah. So what you want to make sure of is if I'm going to take advantage of after tax, I get to put money into the.

Bo Hanson
These contributions are not capped at the $23,000 salary deferral. I can actually contribute to the after tax bucket all the way up to the section 415 limit, all the way up to $69,000 a year in this bucket. But I want to make sure if I'm doing that, and I'm trying to take advantage of the mega backdoor Roth that my employer either allows for in service Roth conversions or in service distributions, where I can do the after tax contribution and then push that money out to a Roth IRA. If I'm doing that, it allows me to maximize the amount of dollars I have going into Roth. So it's not uncommon for higher income individuals to max out the pre tax salary deferral and then put the rest of the bucket availability they have into the after tax contribution to do mega backdoor Roth.

It's a way to supercharge your retirement savings. So I love, we just talked about the mega backdoor Roth IRA contribution, but their other unique 401K provisions that we need to make everybody aware of Bo kick us off with self directed brokerage accounts. So we've all, if we've ever participated in a 401K, we know there's usually a list of investment options we can choose from, and there's somebody out there like our firm that will choose the investment options available inside the plan. And you might have access to ten options or 20 or 30 options, but basically to love the one you're with, you're limited to the options that some investment committee has chosen to put in there. Well, with some 401K plans, they say, hey, if you don't just like the options that are available in the plan, you can open a self directed brokerage account where we can actually open a brokerage account inside of your 401K, where you have unrestricted access to the entire investment universe.

Fidelity has a popular version of this called the brokerage link option, and Schwab has a popular version called the PCRA, the personal choice Retirement account, where it's actually an option you select in the 401K, where then you can invest in any number of mutual funds, ETF's, stocks, bonds. That allows you to really customize your allocation and create some unique tax planning opportunities for folks who need to be able to take advantage of that benefit. There are some unique things. Like if you look at your four hundred one k and go man, where are all these index funds that I hear these guys talk about that are so beneficial? I don't see any index funds in my plan.

Brian Preston
This might be your ability to add that to your portfolio. The other thing is what happens when you build enough success that you're like, I'd like to go beyond just stocks, bonds and cash. I'd like to have real estate and other things in my portfolio. This is the type of thing that opens it up. I will tell you.

Pay attention to what are the limitations though? Are there any restrictions? Because there will be costs, potentially costs. There could potentially be restrictions. Like we've even seen these self directed to have limits on what percentage of the portfolio.

The third opportunity that I think this also creates, maybe you reach the level of success and complication where you're like, yes, I'd like to add more diversification, but I also like to get away from index target retirement funds because I'd like to start doing pay attention to tax location. This is an opportunity sometimes to work with a professional advisor because the advisor can have access to these self directed accounts, even get download access and other things. It's a really slick opportunity. So that's a unique provision to be aware of another one that you want to know about. But I hope that you never actually have to use are 401K loans.

Bo Hanson
In our opinion, you should avoid borrowing money from your four hundred one k at all costs. It should be like a break glass in case of an emergency, last ditch thing that you reach into. But a lot of plans do allow for them where basically you go into your 401K, you borrow money from yourself and you pay that money back to yourself. Now you may think that sounds great. I get to be my own bank and I'm paying my own self interest.

Where's the downside? Where the downside is you're taking soldiers out of your army of dollar bills, so those dollars are no longer working for you into the future. Just because you're paying an interest rate doesn't mean that you're truly making that rate of return because it's an amortizing loan over a fixed amount of time. So 401K loans, while they sound good in theory, they are actually incredibly costly when it comes to your long term well being. And by the way, if you have an outstanding 401K loan and you're laid off or you change jobs, you have to pay that loan back immediately or it's going to be deemed to have been a taxable distribution to you, which is not something you want to have happen, especially if you're under age 59 and a half.

Brian Preston
Another unique thing is if you're talking about access, cause you just talked about 401K loans, there's also hardship withdrawals. And here's the thing, and these things are very noble in their purpose. Think about medical expenses, a disability, you owe money to the IR's. Isn't that ironic that the tax code will let you go to pay a tax bill and then even for provisions like for first time homebuyers. Um, I will tell you post pandemic, you know, one of the things as part of, you know, a lot of the relief, the Secure act and all those other things is they created a lot of hardship access to retirement plans.

I think there's going to be a concerning legacy that too many people broke that and went into it. Now look, there's obviously was a need for a lot of people and I'm not, I'm not getting on those people, but I want, I want to challenge. I think a lot of people use this no different than when you change jobs. You see a lot of people that will go access those assets not for retirement, but to get out of debt or do something else. Be careful of these hardship withdrawals because guys, we have a problem in America where people get to a retirement age and they just don't have assets for retirement.

It's because we have too many leaky retirement accounts. So please, please heed our advice. Try not to use the loans. Try not to use these hardship provisions. That money is too important and needs to be saved for retirement.

Bo Hanson
Another unique 401K provision we want you to know about is the rule of 55 and what this states is that for most retirement accounts, most 401 ks, most iras, you can't actually access those dollars penalty free until you get past age 59 and a half. However, if you retire from your current employer in the year in which you turn 55, you can then access those four hundred one k dollars without having to pay a penalty. So if they're roth dollars, they'll be tax free. If they're pre tax dollars, they'll only be subject to ordinary income tax rates. For someone who is retiring early or someone who's thinking about checking out of the workforce in their fifties, this is a huge benefit.

But you have to be employed in the year that you turn 55 in order to be able to take advantage of this provision. All right, we giving them all the nerdy stuff. Let's talk about why we actually love. I mean, love 401 ks. The first thing, free money.

It's a big one. Free money. I mean, boop, boop, boop, boop, boop. There's a reason this is before even high interest debt. If you can make 50% to 100% guaranteed rate of return, don't leave that on the table.

Listen to the statistic. 92%, 92% of employers with 401K plans match their employees to some degree. So almost 100% adoption across 401K plans. And yet we already covered this. 22% of people don't get that free match.

22% of people say, hey, you know what, boss? I don't want the free money. You just keep it. If you are one of those folks, change that right now, today, because you cannot do better than free money. Don't let another day go by that you're not taking advantage of it.

Brian Preston
The second reason that we love 401 ks is because of the way these things are structured. They actually make people millionaires. We see more people become millionaires, reach seven figure status through their employer plans than anywhere else. Yeah. There was a study done by Ramsey Solutions and in their national study of millionaires that found 80% of millionaires invested in their company's four hundred one k and asked, what was the first account to hit seven figure status.

Bo Hanson
It was often inside of the 401k where that happened. So the folks that are building and growing their wealth are utilizing this tool. So why on earth would you not utilize this tool? But it's not just Ramsay solutions, not just their resource. We actually have internal resources.

That's just the same. Yeah. We do our own internal millionaire study every year. We ask our clients, how did they get to their wealth building? And I think a lot, if you ask the public, a lot of people would think it falls into that virtuoso, meaning somebody's just so good at something.

Brian Preston
Think of all your athletes and musicians, people who can do things, you know, actors and so forth, entrepreneurs. Everybody would think, oh, they just invented something. Yes. And there are people that reach there or there. Maybe it's that big fat cat, you know, that's a senior executive.

No. Our research shows 70% of our millionaire clients attribute being a saver and an investor is how they got into seven figure status. That's pretty incredible. What I love about that is it's attainable to every. Not everyone can be a senior executive or a virtuoso or go start their business, but everybody can save and invest.

Bo Hanson
And we know that 92% of employers make available 401k. So this account is there and available and ready for you. So let me talk about the third reason why we love 401K plans. They are one of the best ways to legally, legally, legally, legally, legally hide money from the government. Nobody, nobody likes paying taxes.

Well, one of the great things that 401 ks let you do is they let you legally avoid paying taxes. Now you get to choose, do I want to avoid paying taxes today and do pre tax contributions and let my money grow tax deferred, or do I want to avoid paying taxes in the future? I can do Roth contributions today, let my money grow tax deferred, and then when I take qualified withdrawals, it'll be completely tax free. 401 ks are one of the absolute best mechanisms to lower your tax bill, either now or in the future. So you should certainly take advantage of that number four.

Brian Preston
Cause I think I said legally way too much then, just like you did. But it creates automatic, always be buying opportunities. Here's the thing I need people to understand. Why I love 401 ks is because if you can understand, let's make the good habits as easy as possible and make the bad habits super hard. How you fix that is through automatic behaviors, is because it doesn't matter what's going on in the stock market.

It doesn't matter what's going on in the economic or political world. If you're always buying, it creates an inevitable path towards your future success. It's incredible. Awesome thing. It allows that to happen even when you don't think it's possible, even when you think that the sky is falling.

Bo Hanson
If you don't believe us, look at this illustration. We said, all right, let's look at the S and P 500 from October of 2007 all the way out till October of 2013. Right? So nearly a five and a half year period that we're looking at. Well, the S and P started that period at about 1565, and it closed that period at about 1563.

So you would argue this was a flat market over a five and a half year period. And the visual shows that. That's one of the things I know there's a lot of podcast listeners, too. I've had a listener who put a comment said, please, I've come on YouTube to give you this comment. Remember, a lot of us just listen to the podcast.

Brian Preston
So visually, this looks like you invested for six years. Or you look at the chart and you're like, why would anybody invest? The chart went down, and then it's completely flat for six years. However, Bo is about to flip the switch on the chart and you're gonna see, wait a minute, that chart is the exact same period. It starts in October 27, 2007, goes all the way to October 2012.

Why do I not see that down to sideways part of the chart? Bo, explain the rest of the picture. So what if, what if you or this person, this market, you said, I'm just gonna put $500 every month into my 401k account. I'm just gonna do that. Well, if you behaved that way over that five and a half year period, you will have saved $33,000.

Bo Hanson
But that $33,000 will have grown because you were always buying to $46,327. That's a return of 11.9% annualized, almost a 12% rate of return in a five and a half year period where the market was flat. So if you can make your behavior automatic and always be buying, more often than not, the market is going up and your contributions are going to be working for you. If you can set it up that way. Brian says it all the time, you are on your path to inevitable wealth.

Brian Preston
Well, I think it's so amazing. People ask, what should I be doing when markets are doing bad things? You know, where's the financial mutant opportunity? And that's why I say, if you are a person who's actually every month buying, always be buying, baby. You know, no matter what's going on, you see the chart completely changes structure.

If you look from 2007 all the way out for that six year period, there's not a period here where it looks like it's just getting trashed or going sideways like the previous chart. It actually just looks like a walk up the mountain. You're walking up the steps. That's every month. You're putting the contribution in.

It creates that walk up the mountain with the yo yo. Yes, it's going up and down on the daily, but over the long term, you're getting to a higher and higher point. It is one of the most powerful tools to fight volatility and also protect you from making bad habits. Make the good habits easy, bad habits hard. If you want to know even more about 401 ks, more than we laid out here, we've spent a lot of time actually building out the website to be a resource for you.

Bo Hanson
So if you go to moneyguide.com and just search 401K guide, all things 401K on our 401K hub will pop up for you. This is your one stop shop to educate yourself on everything that you need to know so that you can start utilizing this tool to your benefit to help you do money better. All right, let's put some meat on that bone of understanding what each age group, where they should, where they actually are, but also some context on what they need to be aspiring to reach. All right, so let's think about those folks in our twenties. If we look at the average 401K balance for someone in their twenties, and all this data is from Fidelity and Vanguard, average 401K balance for someone in their twenties is about $13,124.

Now, you may be thinking, oh, for a 20 year old, that sounds great, and you would be right. But remember, this is the average for the whole decade. So this takes the people just starting out at the beginning as well as people have been doing it for a while. So at 13,000, I don't know how I feel about that when we look at their savings rate. Savings rate right now.

Two a, Brian, thumbs up. Thumbs down on that. Well, come on, man. We need a little more context. That 11.3% has a lot going on.

Brian Preston
That's not only the employees contribution, that is. Remember that free money opportunity from your employer? So that 11.3 consists of both the employee and the employer. I think it's a really powerful thing, especially for somebody in their twenties. We say we want you to be saving and investing 25% of your gross income.

And if you make less than $200,000 as a household, if you're a single individual, it's $100,000. You can count your employer match. We are seeing that just this one tool, the 401k, can get you almost halfway there just by having the employer and your contribution rate. But I noticed I said halfway there. And if you're in your twenties watching this, man, if you can aspire and try to get there to 25%, even counting your employer match, man, you are to the moon and beyond with your opportunity.

Bo Hanson
And again, if you want to kind of assess, okay, where am I? How have I been building? By the time you get to the end of this decade, by the time that you get to age 30 or to age 29, according to the studies, they say you should have about 1.2 times your income saved up. So that gives you a spot check. Whatever your salary is, multiply it by 1.2, and that'll tell you about where you should be.

Now, Brian, you said, okay, I like the 11% because in your twenties, it can do a lot. Well, we have a great resource. If you want to go out there, go to moneyguide.com resources and check out our how much should you save? Deliverable, we call this. You know, what can 25% do for you?

You can see for someone who's 20, or even someone who's 25. Even if you're only saving 15%, even if you're only saving 20%, those savings rates can be incredibly remarkable. And there's a really good chance, if you can start that behavior early, you're going to set yourself up, that you get to define what your future looks like. There's a really good chance early retirement might be on the horizon or doing what you want to do the way you want to do it, why you want to do it when you want to do it is something that will be in your grasp in the next couple of days. Yeah, I would encourage everybody, especially if you're in your twenties, go check out this chart.

Brian Preston
Go to moneyguy.com resources because here's what's amazing me. I look at the 25 year old who's just doing 15%. We just showed you 11% is the average. Using the employer and the employee, that's getting you already close to 100%. Retirement replacement ratio of income.

That's. That's pretty powerful stuff. A lot of green, lot of blue sky. Opportunity for all my 20 somethings. Get motivated.

Make something happen today. All right, Brian, let's talk about the thirties. By the time that you were in your thirties, if you want to know where the average 401k balance for someone in the thirties from age 30 to 39, it's about $51,000, which again, okay, so we've grown from our twenties, but also a lot of time has passed. Well, by our thirties, we are now aging and we're getting more mature and we're making better choices and we're growing up. So surely the savings rate would reflect that.

Bo Hanson
When we look at the average savings rate across both contribution types, two, four, one ks is 12.7. So it is a smidge better than the twenties, but it's not at 25%. Brian. Yeah, this is the part. Look, and I'm going to be sympathetic.

Brian Preston
The thirties is where the messy middle is probably the most prevalent because you're short on time, you're short on money, because you got a lot of life commitments between your family, your kids, your job, there's a lot of things pulling on you, both financially as well as responsibility wise. However, I am disappointed because you're going to see in a minute we're going to lay up what 25% savings can do for you. And it was great. It was so awesome. It didn't matter, really what you did in your twenties, as long as you just did something.

Thirties is more of that period where I want you to be very purposeful. I want you, instead of being aspirational, about reaching 25% of your gross income and thirties, I need you to make it happen in your thirties, because you still have so much time on your side. There's kind of a incremental decision, a fork in the road moment, where you can create tremendous success without a lot of sacrifice. But it needs to be very purposeful in your thirties if you want to. Spot check where you are by the end of this decade.

Bo Hanson
According to Fidelity and Vanguard, they say that you should have about 2.6 times your annual salary, your household income saved by the time that you get to 40. So you should have saved up two and a half times what you are making annually. But I'm going to argue, Brian, for someone who's started in their twenties, and if they're carrying this through their thirties, and they're not the average, but they are the financial mutant, I think they're going to blow this number out of the water by the time they get to 40. Because even in your thirties, savings rates that are a touch lower, but certainly savings rates that are on the mark can be unbelievably valuable. Well, think about it.

Brian Preston
We just showed that the average value was 50,000. And then we showed that people are only saving 12.7%. That's about half of what we're recommending with this current slide, which is 25%. That means, because we know once you reach $100,000, you get your assets to $100,000. That's kind of the hardest, because you're going to see that you've now pushed that pebble that's turned into a rock and then it turned into a boulder.

This thing is taking speed at this point where it's starting to build upon itself. And that's why there's still so much opportunity for the 30 something year old. If you look at even a 35 year old, if you can save 25%, it's going to replace 84% of your current income. That's still tremendous opportunity just waiting for you to make something happen. Realistically, if you can get serious at this decade, in this stage of life, I would still contend that you're going to have the opportunity to take control of your future.

Bo Hanson
So if you are thinking about early retirement or defining I want to live the life that I want to live, and you've done nothing until your thirties, but you just get laser focused and super serious in your thirties. I think that it can still be done. If you want to know more, go check this out. Moneyguy.com resources all right, Brian, let's talk about the forties. When we look at the forties average 401K balance by age from someone who's aged 40 to 49, we finally hit six figure status.

We are now above $100,000. The average 401k balance is about $106,000. But when we look at the savings rate again, it's only marginally improved. The average total contribution rate across 401 ks for those in their forties is about 14%. Well, look, I think that now we've had the things have shifted.

Brian Preston
You know, I'm very grace filled and I, and I try to be very motivating for the 20 and 30 something year old because it just a little goes so far and they don't have to make a lot of sacrifice. But I think a little context would help the 40 something realize this is the decade most millionaires cross seven figure status in their forties around 48 years of age. After 28 years of saving and investing, that's when they cross into seven figure status. To see that the average 401K is only 105,000, we'll just go ahead and round it up to $106,000. That is a long way from reaching seven figure status.

Get serious and we're going to show you in a minute. You've got to probably not just think 25%. If you're behind and started at zero in your forties, you probably need to go beyond 25% savings rates, which is hard, but that's what happens. Procrastination has now created more. The responsibility falls on your shoulders.

Bo Hanson
All right, bro, let's talk about a spot check if you want to know. Okay, am I where I should be? At least according to Fidelity and Vanguard, by the end of your forties decade, by the time you get to age 50, you should have accumulated inside of your retirement account about 4.8 times your annual income. So you're at about five times your annual income by the time that you get to 40. Well, if you're not there, you might need to make up ground.

And if you haven't started at all, you are going to have to make some pretty tough, tough decisions. Cause we have a deliverable if you go to moneyguide.com resources, you can download this. It will show in your forties. If you're just starting out, what will different savings rates be able to do for you? Yeah, guys, get motivated by this.

Brian Preston
This is the part where, like I said, if you're waiting until your forties, there is a good chance your savings rate is going to have to go beyond 25%. So I'd encourage you, please go moneyguy.com resources to get this deliverable to know what you need to do. All right, Brian, let's talk about folks in their fifties and sixties. If we look across these pre to early retirees, the average 401K balance is only about $190,000. And I feel bad saying only, but I think for someone who is getting close and preparing for retirement, I just don't know that that's gonna be a 401K balance that they need to have to be able to live the life that they wanna live.

Well, I think there's also some clarity coming realizing, hey man, I got retirement right above the horizon there. It's coming up and you see that in the savings rate now it's getting close to 16%. But I would, I would say our research shows that still likely is not enough. So you need to be in full on catch up mode. So if you wanna do a spot check, according to Fidelity and Vanguard, by the time that you get to age 60, you should have about 8.1 times your annual income saved.

Bo Hanson
But I would say that according to the money guy show, you should do our know your number course. You should go to learn dot moneyguy.com to check that out. Because instead of using a metric like eight times your annual income, we want you to know what is my number that I need to be able to live the life that I want to live on my terms. Well, once you know what that number is, then you can assess for yourself. Am I ahead of the curve?

Am I behind the curve? And what decisions do I need to make now to begin moving myself in the right direction? Well, and also, this is probably a stage where you get scared. So go calm down, go look and see what Social Security is going to provide, because I think somebody who's in their fifties and sixties will receive a benefit. And then also try to take a footprint of what is your actual expenditures so you can back into what you need to do and then take advantage.

Brian Preston
The government gave you a path with catch up contributions so you can, in a tax, incentivize ways, save and even catch up for your future. Better self. 401 ks are amazing savings vehicles. If you have access to one at your job, make sure that you educate yourself so that you can start taking advantage of it so that you can do money better. Abundance is wealth combined with money and purpose.

Don't let your money take control of your future. Be the field general of your army of dollars. I'm your host, Brian Preston. Bo Hanson Money Guy team out the. Money Guy show is hosted by Brian Preston.

C
Abound Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission in accordance and compliance with the securities laws and regulations abound wealth management does not render or offer to render personalized investment or tax advice through the money guy show. The information provided is for informational purposes only and does not constitute financial, tax, investment or legal advice.

Average 401(k) Balance by Age (2024 Edition)

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1: Introduction to 401(k) Basics

2: Maximizing Employer Contributions

3: Investment Strategies within 401(k)

4: Legal and Financial Aspects

5: Long-term Financial Planning

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