This Is the Average 401(k) Balance for Retirees Age 65 and Older

Saving for retirement is a necessary thing. But it can also be a huge drag.

It's really hard to part with money in the form of IRA or 401(k) contributions when you're itching to take a vacation, or when you could really use new furniture to replace your aging table and couch.

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But it's important to prioritize retirement savings so you have enough money to live comfortably once you stop working. Social Security only pays the average retired worker today a little more than $2,000 a month. If you don't like the idea of potentially having to live on roughly $24,000 a year, then you'll need to make a point to set aside plenty of money in a retirement account.

The good news is that if you have a 401(k) plan through work, you may find the process of building a retirement nest egg pretty seamless. All you have to do is sign up, and your employer will deduct 401(k) contributions from your pay automatically so you stay on track.

You may be curious as to how much money older Americans have saved in their 401(k) plans so you know what sort of balance to aim for. But you should know that the typical American aged 65 and over does not have a lot of money saved in a 401(k) at all.

What the average older American has saved in a 401(k)

Each year, Vanguard compiles data on 401(k) savings rate. In its most recent report, it found that the average 401(k) balance among Americans age 65 and older is $299,442. But there's more to the story than that.

Vanguard also reports that the median 401(k) balance for Americans 65 and older is $95,425. And when you have a median that's much lower than an average, it tends to indicate that the median is the more representative number.

But even if we take that average $299,442, it's not a whole lot of money. Let's round it to $300,000 to make life easier and apply the 4% rule to that balance. That results in an annual income of just $12,000.

Granted, that's on top of Social Security. But we just learned that the typical retiree today gets about $24,000 a year. If a $36,000 annual income doesn't sound great to you, then you'll want to aim to save more in your 401(k) than the typical older American.

How to save way more than the average older American today

You might think that an almost $300,000 401(k) balance is fantastic. In reality, it may leave you short of your annual retirement income goals. The good news, though, is that with the right approach, you can set yourself up to retire with a much larger 401(k) balance.

First, begin funding your retirement plan immediately. The younger you are, the more time you'll give your money to grow.

Next, make sure to claim your workplace match in full every year. If need be, push yourself to take on a side hustle so you're able to contribute enough money to snag every dollar your employer is willing to give you.

Finally, invest your 401(k) aggressively while you're in the process of building it up. You can take a more conservative approach when you're within a few years of tapping it. But if retirement isn't right around the corner, go heavy on stocks. You may specifically want to put your money into a low-cost S&P 500 index fund, which could give you strong returns and instant diversification.

Retiring with a modest amount of money in a 401(k) is far better than retiring with no savings at all. But the reality is that the average 401(k) balance today among older Americans may not go very far.

With the right approach, your 401(k) might do a lot better. And that could lead to the retirement of your dreams.

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