Some people figure they’ll manage just fine in retirement on Social Security alone. Those same people often get a rude awakening.
The reality is that Social Security will only replace about 40% of your pre-retirement income if you’re an average wage earner, but most seniors need about twice that much money to live comfortably. And that 40% figure doesn’t account for Social Security cuts, which are, at this point, very much on the table.
That’s why it’s so important to build savings ahead of retirement. And if you have the option to participate in a 401(k) plan, you may want to jump on it.
5% of Americans save in a 401(k): But is that the best retirement account for you?
The great thing about 401(k)s is that they offer much higher annual contribution limits than IRAs. Plus, many companies that sponsor 401(k)s also offer matching incentives, which means free money for your account that can lead to more retirement wealth.
But signing up for a 401(k) won’t do the trick in helping you attain financial security in retirement. Rather, you’ll need to fund that plan consistently. And if you’ve been doing so for many years, you may be curious as to how your savings balance compares to that of the average American.
To that end, Vanguard has an answer. And it might inspire you to ramp up your savings or pat yourself on the back for a job well done.
How does your 401(k) balance stack up?
In 2021, the average 401(k) balance for Vanguard plan participants was $141,542, according to Vanguard’s…