The amount of money you’ll need to retire comfortably depends on several factors, such as where you plan to live and how much you plan to spend. But experts say it’s important to save for the future now — especially because one of the main advantages of 401(k) workplace retirement plans is that your money benefits from compound returns, growing via the financial markets over time.

“The sooner 401(k) participants start to save, the more realistic their retirement goals will become,” says Marshall Nelson, wealth advisor at Crewe Advisors.

To make sure you’re on track to a secure and enjoyable retirement, it can be helpful to see how your savings stack up to the average 401(k) balance by age.

Retirement balance rules of thumb

The amount of money you should have saved for retirement at a given age will be different for every person, depending on their unique financial situation, time horizon and goals, says Carla Adams, a financial advisor and founder of Ametrine Wealth. For example, someone with a pension will need a different amount of money in their 401(k) than someone without a pension. One person may want to retire at age 65, while another wants to retire earlier.

However, the general rule of thumb, according to Fidelity Investments, is that you should aim to save at least the equivalent of your salary by age 30, three times your salary by age 40, six times by age 50, eight times by 60 and 10 times by 67.

“If you’ve recently had a major increase in pay, you may be a bit behind these guidelines and that’s okay,” Adams says. “Give yourself a few years to catch up.”

Average and median 401(k) balances by age

Vanguard, which like Fidelity is one of the top 401(k) providers in the United States, releases an annual report detailing the savings behavior of participants in its defined contribution plans, including 401(k)s.

The company’s “How America Saves 2023” report provides data on the average and median 401(k) account balances by age, among other insights.

The firm found the following:

Average and median 401(k) balances by job tenure

As you move through your career and, ideally, bump up your income, the amount of money you contribute to your 401(k) should increase, too. Adams recommends trying to increase your retirement contributions by 1% each year until you hit 15%.

Vanguard explains that “the longer an employee’s tenure with a firm, the more likely they are to earn a higher salary, participate in the plan, and contribute at higher levels. Longer-tenured participants also have higher balances because they have been contributing to their employer’s plan for a longer period.”

And the data bear this out:

Average 401(k) contribution rates

The amount of money you should contribute to your 401(k) each year depends on your specific financial situation and goals. Ideally, you should contribute at least 10% to 15% of your pay towards retirement accounts, including what your employer contributes on your behalf, starting at age 25, Adams says.

Because of factors like student loans, you may not be able to save that much early on, meaning you may have to contribute more than 15% later in life, Adams says.

But the average total contribution rate, including both participants’ and employers’ contributions, in 2022 was just 11.3%, according to Vanguard’s data. The median was 10.6%.

Here again, these figures vary by age and job tenure:

Average 401(k) match

In addition to what you contribute to a 401(k), you’ll typically get a match from your employer as well. For example, if you contribute 3% and your employer matches up to 3%, you’ll double your contribution. (If you contribute 10% but your employer only matches up to 3%, you’ll still just get the 3% contribution from your employer.)

“It’s so important to take advantage of employer matches and to try to contribute at least enough to get the maximum employer match,” Adams says. “Otherwise you are leaving free money on the table.”

The amount that a company will match varies by company, so she recommends speaking with your human resources department or reading the fine print of your benefits package when you accept a new job to determine exactly what the percentage is.

“The most common 401(k) match formula on plans at Fidelity is a dollar-for-dollar match on the first 3% and then 50 cents on the dollar on the next 2%,” according to the firm. The overall average employer contribution is 4.8%, Fidelity finds.

But the average amount that employers put in per employee, including non-matching (profit-sharing) contributions, also varies by age:

“Employer matches make it much easier for you to hit the 10-15% ideal savings amount,” Adams says. “For example, if your employer matches up to 3% and you’re contributing 7%, then you’re already at the minimum 10% goal.”

What is a 401(k)?

A 401(k) is an employer-sponsored retirement savings account that companies often offer as part of a benefits package.

These retirement savings accounts come with a big tax advantage. Money that you invest into traditional 401(k)s is pre-tax, meaning that the money grows tax-deferred until you take it out in retirement, at which point you have to pay taxes on those withdrawals. Roth 401(k)s work oppositely: You fund the account with after-tax dollars and make withdrawals tax-free.

There are contribution limits for 401(k)s, which are $23,000 in 2024, up from $22,500 in 2023, plus an additional $7,500 “catch-up” contribution if you’re over age 50.

What happens when you’re behind on 401(k) contributions?

Putting money into a 401(k) isn’t the same as putting it into a savings account. Money in a 401(k) is invested in the financial markets, meaning your balance has the potential to grow over time.

But the more contributions you add, the more capital gains, dividends and interest on those contributions can compound, and the more you’ll have to live comfortably off of in your golden years. If you fall behind on your contributions, you’re missing out on the potential for those dollars you could have invested to generate higher returns over the long term.

How much do you need to retire?

The amount you need to retire depends on your personal situation, including where you plan to live in retirement, your lifestyle and your sources of income outside of your 401(k). However, one widely accepted guideline is that you’ll need around 80% of your pre-retirement income in retirement.

Meanwhile, according to an August 2023 survey from financial services firm Charles Schwab of 1,000 401(k) plan participants in the US: “Workers now believe they’ll need to save an average of $1.8 million for retirement, compared to $1.7 million last year.”

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