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Title: The Typical 401(k) Savings for Individuals Aged 55 to 64
Retirement can be an expensive endeavor, and with Social Security potentially falling short, many individuals may need to rely heavily on their savings to make ends meet. According to a 2024 survey by Charles Schwab, the average worker anticipates requiring around $1.8 million to live comfortably during retirement. However, the reality is that most Americans aren't on track to attain this goal.
The average 401(k) balance among those aged 55 to 64 stands at $244,750, as per Vanguard's 2024 report on "How America Saves." However, the median balance, which more accurately represents the typical worker's savings, is only $87,571. This figure, while low, is concerning given that individuals in this age group are nearing retirement age.
One simple yet effective way to significantly increase your savings is by maximizing your 401(k) company match. A company match effectively doubles your contributions up to their limit with zero additional effort from your end. For instance, if your employer matches 50% of your contributions up to 6% of your salary, contributing $12,000 would result in a $6,000 employer match.
This strategy can lead to substantial savings over time. For example, contributing $2,000 per year at an average annual rate of return of 10% could accumulate to nearly $115,000 after 20 years. So, it's essential to calculate your specific retirement savings target instead of solely comparing your 401(k) balance to the average.
Small, consistent steps like maximizing your company match can make a significant difference in your retirement savings. While you may not be able to save $1.8 million, taking advantage of employer matches can help bridge the gap between your current savings and your retirement goal.
Incorporating a company match into your 401(k) contributions can help boost your retirement savings significantly, as it effectively doubles your contributions up to a certain limit. Given that many Americans are falling short of their retirement savings goal, maximizing this benefit can be a crucial finance strategy in closing the gap.
With Social Security potentially not providing enough income in retirement and individuals' average 401(k) balances being significantly lower than the anticipated $1.8 million needed for a comfortable retirement, effectively managing money and saving as much as possible becomes essential in finance planning for retirement.