The Average 401(k) Balance Today May Surprise You

There's a reason so many people end up financially stressed in retirement. Many workers close out their careers with little to no savings, falling back on Social Security instead.

That's a big problem. Social Security will only replace about 40% of your pre-retirement income if you earn an average wage. Most retirees, however, can't afford a 60% pay cut. So it's important to do what you can to build a retirement nest egg.

Image source: Getty Images.

If you have access to a 401(k) plan through your job, signing up for it could be an easy way to save for retirement. That way, your contributions are deducted from your pay automatically.

You may be wondering what the typical American has saved in a 401(k). And Vanguard has an answer that may surprise you.

What the typical American has saved in a 401(k) today

Before we dive into Vanguard's data, let's get one thing of the way. While Vanguard is a huge provider of 401(k) plans, its data doesn't capture the total retirement savings among Americans. So it's important to take Vanguard's numbers in context.

That said, based on its most recent report, Vanguard puts the average 401(k) balance among savers today at $148,153. The median 401(k) balance, however, is only $38,176.

When a median in a data set is considerably lower than the average, it typically tells you that the median is a more representative number. In this case, what's likely happening is that a small percentage of people with large 401(k) balances are bringing up the average. So if want to know what the typical American has in their 401(k), you may want to look at the median $38,176 balance.

Of course, what all of this means is that while some savers may be doing a great job of growing their 401(k)s, others may have work to do. A $38,176 balance is very respectable for people in their 20s or early 30s. For someone in their 50s, though, it should probably sound an alarm.

How to catch up on 401(k) savings

Whether your 401(k) balance is comparable to the typical American's today or not, it's important to figure out whether you're happy with it based on where you are in your savings journey. If you have $102,000 saved at age 45, you may be feeling a lot more confident than someone with that same balance at age 57.

If you're looking to boost your 401(k), there are a few strategies you can employ. First, figure out what your employer match looks like, and aim to contribute enough to your retirement savings to snag it in full.

Next, if you're 50 or older, it means you're eligible to make catch-up contributions in your 401(k). Now if you haven't come close to maxing out in recent years, you may not be in a position where you can think about catch-up contributions. But if you've been boosting your savings rate in recent years, and/or you've recently gotten a sizable raise, it's something to think about.

Otherwise, a good strategy is to aim to incrementally increase your 401(k) contributions year after year. That could mean saving your raise annually, or raising your contribution rate by a small amount, like 1% to 2%.

It's also important to take a close look at how your 401(k) is invested. Some mutual funds might charge hefty fees, known as expense ratios, that eat away at your returns. It could pay to see if there are low-cost index funds you can choose instead.

And be wary if you've put your 401(k) into a target date fund. Though these funds are certainly an easy way to invest for a far-off milestone like retirement, they tend to err on the side of being too conservative. That could stunt your 401(k)'s growth, leading to a lower balance.

It's always interesting to find out how Americans are doing on the retirement savings front. But your best bet is to come up with a savings goal that's unique to you. From there, you can adopt different strategies to grow your 401(k) so that you're able to enjoy the comfortable retirement you deserve.

The Motley Fool has a disclosure policy.