Finding enough money for retirement savings can be challenging, but that's only part of the issue. Nobody can be sure they're saving enough because they don't know how long they'll live, what their future expenses will be, or how quickly their investments will grow. People do their best to make accurate assumptions, but sometimes, everyone could use reassurance that they're on the right track.
One way people often find this reassurance is by comparing themselves to others. But this strategy has limitations you ought to be aware of.
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The average 401(k) savings rate is over 14%
Popular retirement advice says it's a good idea to aim to save at least 15% of your annual income each year, and one recent Fidelity study suggests the typical saver is pretty close to meeting this mark. It evaluated 24 million participants in over 26,100 corporate 401(k) plans and found that the average savings rate was 14.1%. This rate has remained pretty steady over the last year or so and is up about 0.6% since 2019.
The same survey found that the average employee contribution amount was $2,560 in the second quarter of 2024. If you apply this average to the whole year, you'll have an annual contribution of $10,240. But about 4 out of 5 of those surveyed reported they also received an employer matching contribution. The average match was around 4.8%, with the remaining 9.4% coming from employee contributions.
But there's a lot of variance. Older workers were more likely to set aside larger sums and receive larger employer matches. Baby boomers fared the best, with a 17% overall contribution rate, including employee and employer contributions, compared to just 11% from Gen Z.
What the data doesn't tell you
You could use the above information as a benchmark to compare how your savings rate stacks up to other Americans. But there are a few things to bear in mind before doing this.
First, this study looked at 401(k) plan participants. It doesn't take into account workers who don't have access to a 401(k) or choose to save outside of one. It also doesn't appear to account for those who are eligible for a 401(k) but can't afford to participate in one. When these individuals are factored in, it would likely decrease the average savings rate.
Second, it doesn't tell you a lot about a person's retirement readiness. A 17% contribution rate might be excellent for a baby boomer who was able to save regularly throughout their career. But it could be woefully inadequate for someone who wasn't able to begin saving until their mid-50s. Without more data on an individual's financial situation, it's difficult to say whether it's an appropriate savings target.
That also means it's not all that useful to measure your own progress toward retirement. You're better off building a custom retirement plan where you work toward your own savings goal. Measuring your progress toward this will give you a better idea of how you're doing than comparing yourself to others who may have very different goals and timelines.
