Investment giant Vanguard\u2019s annual \u201cHow America Saves\u201d report paints a bleak picture of how Americans are saving and preparing for retirement.<\/p>\n<\/p>\n
Based on the analysis of nearly 5 million defined contribution (DC) plan participants in 2024, most Americans are not saving enough, there\u2019s a wide gap between different age groups and even seniors who are approaching retirement are struggling to meet conventional targets.<\/p>\n
In other words, if you think you\u2019re falling behind you\u2019re probably not alone. The other piece of bad news is that hardship withdrawal activity increased<\/a>, as 4.8% of participants initiated one, up from 3.6% in 2023.<\/p>\n Here\u2019s a closer look at this snapshot to help you benchmark your own savings progress.<\/p>\n Unsurprisingly, the youngest Americans have the smallest average account balances, according to Vanguard\u2019s report.<\/p>\n Participants between the ages of 25 and 34 had an average balance of just $42,640 while those aged 35-44 had an average balance of $103,552. Median balances were even lower, at $16,255 and $39,958, respectively for these cohorts.<\/p>\n These numbers barely cover a single year\u2019s worth of living expenses, let alone a full retirement. However, younger Americans haven\u2019t had the luxury of time to build up savings, benefit from compounding growth in assets and boost their earnings with relevant skills and experience.<\/p>\n Nevertheless, if you\u2019re between the ages 35 and 44 and already have more than $40,000 in your 401(k) plan, you\u2019re doing better than at least half the people your age with such retirement accounts.<\/p>\n Your 40s and 50s are probably the best years to boost your retirement savings. By this age, you\u2019ve probably established a successful career, which allows you to generate excess income. You\u2019ve also had plenty of time to invest this excess cash in assets that appreciate or generate income over decades.<\/p>\n Unfortunately, most middle-aged Americans seem to be struggling to take advantage of this window of opportunity. Americans aged 45 to 54 have an average balance of $188,643, but the median savings is just $67,796 \u2014 highlighting a sharp gap in retirement readiness.<\/p>\n Story Continues <\/p>\n For those between 55 and 64, the average rises to $271,320, yet the median remains a modest $95,642, underscoring that even those closest to retirement are often underprepared.<\/p>\n If you\u2019re under the age of 64 and have around $300,000, for instance, you\u2019re probably outperforming most of your peers. But that doesn\u2019t mean you\u2019re prepared for retirement.<\/p>\n Based on the 4% rule<\/a>, you could safely withdraw just $12,000 a year from this nest egg, which is woefully inadequate for any comfortable retirement.<\/p>\n Meanwhile, the \u201cmagic number\u201d for a comfortable retirement sits at roughly $1.26 million as of 2025, according to a Northwestern Mutual study<\/a>.<\/p>\n Read more: Nervous about the stock market in 2025? Find out how you can access this $1B private real estate fund (with as little as $10)<\/a><\/strong><\/p>\n Given that the average age of retirement in the U.S. is 62, according to a 2024 Mass Mutual survey<\/a>, we can assume most Americans over the age of 65 are already retired or within striking distance of it. Many have probably begun withdrawing money from their retirement nest egg.<\/p>\n The average 401(k) balance for someone over the age of 65 is just $299,442, barely higher than the 55-64 age cohort. Median balance is $95,425, slightly lower than the 55-64 age cohort.<\/p>\n To be fair, many retired Americans may have financial assets beyond their 401(k) plan and real estate which they could rely on to sustain their living expenses. But 40% of baby boomers believe it is likely that they could outlive all their savings, according to Northwestern Mutual.<\/p>\n Put simply, a significant number of seniors could be in an unsustainable retirement.<\/p>\n The first step is understanding how much you should have saved by a certain age.<\/p>\n