A lot of folks really want to save for retirement, but, you know, life can really get in the way sometimes.
When you’re in your 20s, earning an entry-level salary, it’s pretty easy to push those retirement savings to the back burner. And then, as you hit your 30s, plans to save might be derailed by mortgage expenses and childcare responsibilities.
Then, as you move into your 40s, home repairs can start to take a sizable bite out of your budget. By the time you’re in your 50s, college tuition for your kids may command much of your funds.
So, it’s not shocking that many people find themselves in their mid-50s to 60s with not much saved up for retirement. Still, what the typical American aged 55-64 has saved in their 401(k) might surprise you.
Average 401(k) Savings for Americans Aged 55-64
Every year, Vanguard takes a closer look at 401(k) participation and trends. Their latest report includes details on average savings balances broken down by age.
For Americans aged 55 to 64, the average 401(k) balance sits at around $244,750. That doesn’t sound too shabby, right?
Yet, Vanguard points out that the median balance for the same age group is much lower, around $87,571. When you see such a difference, medians often give a better picture of the typical savings situation.
This snapshot can be a bit concerning. Those aged 55 to 64 are nearing retirement, and while mid-50s individuals might have a bit more time to save, even they have only about a decade left to build up their funds.
Thus, it becomes crucial for people in this age bracket to bolster their savings and explore options to increase their contributions if needed.
Ways to Boost Your 401(k) Balance Before Retirement
If retirement is around the corner and your 401(k) balance isn’t as high as you’d like, there are definitely steps you can take. First off, it’s vital to claim any available employer match on your account. If you’re behind in saving, don’t leave that free money on the table.
Starting at age 50, you can also make catch-up contributions to your 401(k) of $7,500. This means, for 2025, if you combine it with the regular limit of $23,500, you could contribute a total of $31,000. Who knows, that limit might go up in the future and allow for even more savings.
On top of that, there’s a special catch-up provision for those aged 60-63, allowing you to contribute $11,250 instead of $7,500, potentially totaling $34,750 this year.
Of course, if your 401(k) balance is closer to the median for those aged 55-64, coming up with $31,000 or $34,750 might feel a bit daunting this year. However, there are possibly creative ideas to boost your savings, like taking on side gigs or tapping into the gig economy for extra income.
As you approach the later part of your 50s or into your early 60s, you might also be wrapping up mortgage payments. That could free up some cash to funnel into your 401(k). And if your children are becoming independent and moving out, that could allow you to trim your expenses and increase your savings potential.
If you’re managing to keep your pre-retirement savings modest, it’s important to remember that all isn’t lost. By being frugal, you can make do with a smaller nest egg, or consider delaying Social Security to secure higher monthly benefits.
Ultimately, as retirement looms, it’s a valuable time to assess your 401(k) and figure out what actions can improve your long-term financial outlook.
