Retirement Savings in America: A Deep Dive into 401k Statistics

401k statistics in america
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In my experience there are two primary ways that people arrive at retirement. 1) The first path is a casual path. Doing what you can, when you think of it, and never really making saving a priority. Trust me, I get it! Life is full of everyday problems and it can be hard to set aside money that you can easily find things to spend money on! Life is expensive for everyone! Things break and go wrong on every income! That’s called life. 

2) The second path is called wisdom, education and discipline. This is the retirement saver dedicated and determined to do as much as they can now (even if it’s still just smaller, consistent, contributions) without getting bogged down by what they could spend money on. This person absorbs information where they can, they ask questions, they budget and try to lead with prudence around all financial decisions.

Which one are you? What are you setting up for yourself? Be with those questions!

This article will give you access into some helpful education that will help you better understand and utilize your 401k in retirement savings. The 401(k) retirement plan has emerged as a fundamental element of America’s retirement systems. It is one of the more basic tools that Americans can access to build their retirement savings and reduce the amount of income hitting your adjusted gross income line of your tax return. (Please note that a 401k ((may be)) one of many qualified accounts types you should look at and review. Often, there are other account types available for consideration instead of, or in addition to a 401k plan; consult a financial or tax professional to understand what is allowable for you). 

A 401(k) is a tax-advantaged savings plan sponsored by employers, allowing employees to set aside a portion of their pre-tax wages for retirement. These contributions can be invested in various options, enabling the funds to grow. 

What makes the 401(k) plan particularly valuable is the sense of control it affords workers over their retirement savings. Rather than simply stashing away funds, employees actively shape their financial journey by making informed investment decisions aligned with their long-term goals.

This comprehensive blog will analyze prominent 401(k) statistics you should know about.

What These 401(k) Statistics Say About American Retirement Savings

Let’s discuss some of the most noteworthy figures concerning retirement savings in America that encapsulate its state of affairs.

Employees have more access, but not all are participating

Despite the increasing accessibility of 401(k) plans for employees, a significant number do not participate in these arrangements.

In 2022, a study uncovered that 69% of industry workers had access to retirement plans, indicating a positive trend. Unfortunately, the 401(k) participation rate remained at 52%, similar to 2020 figures, when 67% were eligible for the program. 

You can attribute this disparity to various factors, such as a lack of awareness about participation benefits or financial constraints that constitute prioritizing other, more immediate obligations. 

Automatic enrollment has emerged as a potential solution to address this issue. Research reveals that plans with automatic enrollment boasted 80% or higher participation rates in 93% of cases, compared to only 50% for plans relying on voluntary registration.

Many Americans do not have enough saved up for retirement

According to surveys, 67% of Americans express concern about a retirement crisis, showing widespread recognition of the challenges ahead. Furthermore, 56% fear they cannot achieve a financially secure retirement. These retirement savings statistics highlight the urgent need for improved financial preparedness.

For reference, here is a table that breaks down the balance of the average contributions in 401(k) based on age:

Age Range

Average 401(k) Balance Median 401(k) Balance
25–30 $16,371 $6,164
30–35 $33,135 $12,169
35–40 $59,399 $19,964
40–45 $90,774 $26,989
45–50 $123,686 $33,605
50–55 $161,869 $43,395
55–60 $199,743 $55,464
60–65 $198,194 $53,300
65–70 $185,858 $43,152

Several factors contribute to this situation, including stagnant wage growth, rising healthcare costs, and inadequate savings rates. The impact of the recent economic downturns and disruptions caused by the COVID-19 pandemic has only exacerbated these concerns. 

At this current rate, experts project that 65% of individuals may have to work after retirement to accumulate enough for their post-working funds. Addressing this savings gap requires a multi-faceted approach that promotes financial literacy and creates a structure that supports long-term financial stability.

They fail to maximize retirement accounts

An average 401(k) contribution of 7.3%, or only 1.2% more than the default rate, suggests that Americans may not set aside enough income to fund their retirement. Consistently contributing the maximum allowable amount is often challenging, primarily due to financial constraints and competing priorities. 

For reference, only an estimated 14% of participants reach the 402(g) ($19,500 in 2019, from the data set; $22,500 for 2023) limit per year. 

Fortunately, a higher savings rate between 10 to 15% can help ensure a more robust retirement fund. This range considers factors such as inflation, investment returns, and the desired income replacement ratio in retirement. Saving more income can accumulate a larger nest egg to support your retirement lifestyle.

Many Americans leave money on the table

One striking trend in retirement savings is that many Americans fail to maximize the employer-matching contributions available, potentially missing out on money. Per the most commonly cited matching formula, the standard employer match amount to $0.50 per dollar on the first 6% of pay. 

From the employee’s perspective, failing to capitalize on the employer’s matching offer means missing out on essentially free money! This is a critical point, so please allow me to say that another way. If your employer is offering a match, you have an enormous financial incentive to fund your 401k! Check the vesting schedule and be aware of that! However, if you have a match option within your 401k please spend adequate time understanding what is available to you. If you elect to not participate in a match, you better have a damn good reason you are not participating!

Employers also have a vested interest in promoting contribution matching. It is an attractive benefit to bolster employee retention and morale and demonstrate an organization’s commitment to its employees’ long-term financial well-being. 

Additionally, entrepreneurs can benefit from tax advantages. Matched contributions can be deducted as business expenses, creating a favorable tax situation for employers and employees.

Some forget about their retirement accounts

Recent estimates indicate that as of May 2023, there are approximately 29.2 million abandoned or forgotten 401(k) accounts. Collectively, they hold an astonishing $1.65 trillion in assets. These accounts comprise 25% of all 401(k) plan assets, an increase of 5% from May 2021

This is a concerning increase from 2021 numbers that showed 24.3 million abandoned accounts amounting to $1.35 trillion.

One possible reason for this oversight is job transitions. When changing jobs, individuals may become focused on the immediate tasks of starting a new position, leaving their retirement account from the previous employer behind.

If you have any plans on resigning anytime soon, you can consider rolling over your 401(k) account into an Individual Retirement Account (IRA). A rollover will allow you to consolidate your retirement funds into a single account, providing greater control and more accessible management. 

Moreover, transferring funds to an IRA will allow you to grow your savings more effectively with the account’s many tax advantages.

The Real State of Retirement Saving in America

If you live long enough, retirement age comes for everyone. You can’t work your entire life. What age you are when you retire and how much you can spend during your retirement years is all pre-determined before you hit retirement. To say that another way, you are going to reap what you sow. Go into tomorrow knowing it’s your responsibility to set yourself up for success during retirement. No one is coming to bail you out! If this is coming across harshly, know it is only because we have spoken to a lot of people who arrive at retirement with deep regret. It is our commitment to offer education and insight that will help you make wise decisions – that will help awaken you to your sense of duty and responsibility when it comes to retirement savings. We are cheering you on and hoping for great financial success for you and those you care about. You can do this, there are many wise vehicles to help!

Consider working with a professional wealth coach to ensure your finances are in good hands. At Tencap, we specialize in working with high-net-worth individuals and families to help with their financial endeavors, such as estate planning, financial planning and tax strategy to gain a distinct understanding of your financial picture and future. 

Our mission is to foster confident investors through empowered financial planning and education. Schedule a consultation today to know more!

Photo of Joe Griffin
Joe Griffin
CEO Tencap Wealth Coaching

Joe has been building and managing financial planning firms for the past 13 years. He loves the financial planning space and is very proud of the success and growth that has come from his proprietary marketing and leadership. Joe spent years being involved with the bright minds of the investment committee at Utah’s 529 college savings plan – a plan managing over 20 billion. Joe only works with firms that are stated fiduciaries on a client relationship. Joe is committed to leading a financial planning firm with ethics and integrity.  The money management philosophy that Tencap subscribes to is built on strong academics and is supported by a highly impressive academic board. We can't wait to coach you on the excellence that Tencap stands for.

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