Retirement is an exciting achievement, but it's also incredibly expensive. While Social Security and other sources of income can help cover costs, most retirees will need to lean heavily on their personal savings to make ends meet.
Exactly how much you need to retire will depend on many factors, such as the cost of living in your area, how much healthcare you need, and whether you plan to travel or pick up other expensive hobbies in retirement.
Although everyone's goals will be different, it can be helpful to see how your savings stack up to those of the average American your age. Here's what the average 401(k) balance looks like for those aged 55 to 64 -- as well as a few tips to boost your savings.
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How do you compare to the average?
Every year, Vanguard releases its How America Save s report to provide a snapshot of retirement planning in the U.S. Included in the data is the average Vanguard holder's 401(k) balance across various age groups, which can be helpful in seeing where Americans stand on savings.
In the most recent report released in 2023, Vanguard revealed that the average 401(k) balance among those aged 55 to 64 is $207,874. However, the median balance may be more telling than the average figure.
The average balance can be skewed by extremely high-earning outliers who perhaps have millions in their accounts. The median may better represent the majority of Americans, and among those aged 55 to 64, the median 401(k) balance is just $71,168.
The average worker may not be on track for a secure retirement
Again, everyone will have different goals and needs in retirement to live comfortably. But you may need to save more than you think.
The average retired worker collects just over $1,900 per month in Social Security benefits, as of May 2024. And with benefit cuts potentially looming , you may not be able to rely on your monthly checks as much in the future.
Healthcare costs can also take a major bite out of your savings. The average 65-year-old couple retiring in 2023 can expect to spend around $315,000 on out-of-pocket healthcare expenses throughout retirement, a report from Fidelity Investments found. If you develop health issues later in life, these costs could easily drain your retirement fund -- even with health insurance or Medicare coverage .
Building a stronger financial future
If you're in your late 50s or early 60s, it can be tough to boost your retirement savings. But even if you don't have many years to save, you can still build a stronger nest egg.
One of the simplest ways to save more is to take full advantage of employer matching contributions , if your 401(k) plan offers them. With the company match, you can instantly double your savings with next to no effort on your part.
The average 401(k) match is 50% of an employee's contributions up to 6% of their wages, according to Vanguard's report. If you're earning, say, $70,000 per year, that amounts to around $2,100 per year in matching contributions alone. Coupled with your own contributions, that can add up to tens of thousands of dollars in less than a decade.
If you can't afford to save more right now, you could also consider delaying filing for Social Security . Waiting until age 70 to begin claiming will earn you a boost of between 24% and 32% per month on top of your full benefit. This can amount to hundreds of dollars more per month, which can go a long way if your savings are falling short.
Saving for retirement isn't easy, especially as it becomes more costly to retire comfortably. But small steps can make a big difference, setting you up for a more financially secure future.
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