What Is the Average 401k Balance by Age?

A 401(k) plan serves as an employer-sponsored retirement savings vehicle, designed to help individuals accumulate funds for their post-working years. These plans offer various tax advantages, making them an attractive option for long-term savings. Contributions made to a 401(k) can reduce current taxable income in a traditional plan, or allow for tax-free withdrawals in retirement with a Roth 401(k). Understanding how these plans function and what typical savings look like can provide valuable context for personal financial planning.

Understanding 401k Averages

When examining 401(k) balances, it is important to differentiate between average (mean) and median figures, as both offer distinct insights into savings trends. The average balance is calculated by summing all balances and dividing by the total number of participants, which can be significantly skewed by a small number of very high balances. In contrast, the median balance represents the middle value, where half of the participants have more and half have less, often providing a more representative picture for the typical saver. For instance, the overall average 401(k) plan balance was $148,153 in 2024, but the median balance was considerably lower.

Data from major financial institutions like Vanguard and Fidelity, which administer millions of 401(k) accounts, provide these insights. For those under 25, the average 401(k) balance was approximately $6,899, with a median of $1,948 in 2024. As individuals progress, balances tend to increase; for the 25-34 age group, the average reached $42,640 and the median was $16,255. By ages 35-44, the average balance stood at $103,552, while the median was $39,958.

Further along the career path, individuals aged 45-54 held an average of $188,643, with a median balance of $67,796. Approaching retirement, the 55-64 age group showed an average of $271,320 and a median of $95,642. For participants aged 65 and older, the average balance was $299,442, with a median of $95,425. These figures illustrate how high earners or those with consistent, long-term contributions can significantly elevate the average, making the median a more relatable benchmark for many.

Employee contributions typically range between 7% and 10% of their pay, with an average of 7.1% reported in 2023. Employers also contribute to 401(k)s, often through matching programs. The average employer match in 2025 is typically between 4% and 6% of compensation, with a common structure being a 50% partial match on employee contributions up to 6% of salary.

Key Factors Shaping 401k Balances

Several factors influence 401(k) account growth and balance. The length of time an individual participates in the plan, as compounding returns allow investments to grow substantially over decades. Starting contributions younger provides a longer time horizon for assets to accumulate value, even with smaller initial contributions.

Income level also shapes 401(k) balances. Higher earnings generally enable greater contribution amounts, as employees can allocate a larger percentage or dollar amount of their salary to their retirement accounts without impacting their current living expenses. This translates to a larger principal balance, benefiting from investment growth.

Contribution rates and employer contributions directly impact the account’s size. Consistent contributions ensure a steady flow of funds, and employer matching contributions can significantly accelerate account growth.

Investment performance is another factor. While contributions build the base, investment growth through market appreciation, dividends, and interest accounts for a substantial portion of the total balance. Market conditions and investment selections directly affect this growth, emphasizing the importance of choices within the plan’s offerings.

Consistent contributions and avoiding early withdrawals or loans are important for balance accumulation. Sporadic contributions or loans disrupt compounding and reduce the total amount available at retirement. Withdrawals before age 59½, unless an exception applies, may be subject to ordinary income tax and an additional 10% federal tax penalty, diminishing the account balance.

How a 401k Accumulates Value

A 401(k) account accumulates value through contributions and investment growth within a tax-advantaged framework. Employees contribute a portion of their gross salary, choosing between traditional pre-tax or Roth contributions. Traditional 401(k) contributions reduce current taxable income, while Roth contributions allow for tax-free withdrawals in retirement, provided certain conditions are met. The IRS sets annual contribution limits, with higher “catch-up” contributions permitted for those aged 50 and older.

Employers enhance savings through various contributions. The most common is a matching contribution, where the employer contributes a percentage of the employee’s contribution, often up to a certain salary percentage. For example, an employer might match 50 cents on the dollar for the first 6% of pay contributed. Some plans also feature profit-sharing contributions, which are discretionary and not tied to employee deferrals.

Vesting determines when an employee gains full ownership of employer contributions. While employee contributions are always 100% vested immediately, employer contributions may be subject to a vesting schedule, such as “cliff vesting” (full ownership after a specific period, typically three years) or “graded vesting” (ownership increases gradually over several years, often two to six years). If an employee leaves before being fully vested, they may forfeit some or all unvested employer contributions.

Contributions are invested in various options selected by the participant from the plan’s menu, typically including mutual funds, index funds, and target-date funds. Account value grows through investment returns, including capital appreciation, dividends, and interest. This growth is amplified by compounding, where investment earnings begin to earn returns, accelerating wealth accumulation.

A key advantage of 401(k) plans is tax-deferred growth for traditional accounts. Investment earnings are not taxed annually, but taxes are deferred until withdrawal in retirement. Roth 401(k)s offer tax-free growth and qualified withdrawals, meaning contributions and earnings can be withdrawn free of federal income tax in retirement, provided the account has been open for at least five years and the participant is at least 59½ years old.