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What Is the Average 401k Balance by Age?

No matter how far away retirement feels, having a 401k is a great investment vehicle people from all ages take advantage of. This employer-sponsored plan allows employees to save for retirement in a tax advantaged way.

But, how much should a 401k balance be depending on one’s age? This article dives into the basics of retirement planning and how much the averages balance is by each age group.

How Does a 401k Work?

This employee-sponsored investment vehicle takes its contributions through an employee’s salary and invests it into a chosen fund. A 401k plan is composed of four main components: employee-sponsorship, account type, account limits, and withdrawal process. 

Employer Offered Retirement Plan 

A 401k is an employee offered retirement plan for those looking to invest into their future. Meaning, if one is unemployed, they do not have access to this plan. However, if one is self-employed they are able to open up their own 401k plan. 

Traditional 401k vs. Roth 401k 

The main difference between the traditional and Roth 401k is if the contributions are made before or after taxes. In the traditional 401k, since the contributions are going out of your paycheck, they are with pre-tax dollars.

Whether Roth 401k contributions are made after tax is applied. Even though with the traditional 401k you will be paying tax on the contributions when withdrawn, you could lower your taxable income now by making these contributions. 

Making Contributions and Contribution Limits

Depending on the salary, year, and age, these contribution limits fluctuate. In 2019, the contribution limit was $19,000 whether as now the limit is $19,500.

However, if an employee is 50 and over this contribution limit is $26,000. Lastly, the salary cap for employee and employer tax-qualified plans is exactly $290,000 per year. 

How To Withdraw From Your 401k 

When an employee turns 59 ½ (or 55 depending on the plan) they can withdraw money without having to bear a tax penalty. In order to go through with this withdrawal the employee must contact the administrator of their account or make an online request in order to fulfill this process.

Usually this withdrawal process takes around 3 to 10 days to complete. 

More: 401k Early Withdrawal Calculator

Factors That Affect Your 401k Balance 

There are a couple of factors that affect your 401k balance, they consist of: age, contributions and income, and employer contributions. 


After graduating college or starting off in the labor market, retirement planning may not be in the front of your mind. Especially if an employee is dealing with student loan debt.

However, the older you get, the closer retirement is and depending on your age how aggressively you save is a determining factor.  

Contributions and Income

Additionally, depending on your annual income, it can affect how much you can realistically contribute to your 401k. Once one moves up the ladder from entry level positions, they have more financial freedom to delegate some of their income to their 401k without feeling as if it is a financial burden. 

Employer Contributions

In some jobs, employers will match your 401k contributions to encourage retirement planning. Typically, these employers will match a certain percentage of the employee’s contribution.

This percentage directly correlates to the employee’s annual salary. 

Average 401k Balance by Age 

Here we have gathered the average 401k balance by age as a guide for those looking to start retirement planning. This will show one if they are above or below the average, and what they can do to put themselves in a better position for retirement. 

Age Average BalanceMedian Balance 
Source: How America Saves 2020

Advantages of a 401k

There are a couple of advantages when it comes to having a 401k. They include:

  • Lowering your current taxable income
  • Having a financial safeguard for retirement 
  • Automatic employee enrollment
  • Employer match (free money!) 
  • Having the contributions compound

These advantages set an employee up for success when they decide to retire. 

Disadvantages of a 401k 

Even though this plan can help assist those for retirement, a 401k plan does come with downsides. They include:

  • Fees associated with the 401k plan 
  • Limited investment vehicle options
  • Restrictions on when you can withdraw your money 
  • Taxes on withdrawals

These are some of the main disadvantages of utilizing a 401k plan. 

401k vs. IRA

The main difference between a 401k and an IRA is that an IRA account does not need to be set up by an employer. Since a 401k is made by an organization or employer, those who are unemployed can not set up an account.

However, with IRA’s it does not matter whether someone is employed or not. In addition, IRA contributions are made with after-tax meaning that they are not subjected to taxes when withdrawn. Lastly, an IRA has a lower contribution limit of $6,000 per year (if you are under the age of 50) and $7,000 per year (if you are 50 or over).

More: What Are the Best Traditional IRA Accounts?

Why You Should Start Contributing to a 401k Today

Having a 401k is a great way to start planning and safeguarding yourself for the future. Additionally, the power of compounding will allow you to be in a comfortable position when retirement does come around. Despite your age, retirement is something that should be on your mind.

Personal Capital can help assist you in our retirement planning journey and find a plan that is best suited for your financial needs. Learn more about how to get on the right track today by planning for your retirement today.

Personal Capital Advisors Corporation (“PCAC”) compensates Investmentfirms for new leads. Investmentfirms is not an investment client of PCAC.

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Personal Capital has award winning financial planning software. Users with 100k or more in assets will get access to a full range of tools providing deep insights into you or your clients finances.

Automated Financial Planning

Personal Capital has award winning financial planning software. Users with 100k or more in assets will get access to a full range of tools providing deep insights into you or your clients finances.