How Does Your 401(k) Compare to Average?

More than 97 million Americans have access to an employer-sponsored retirement plan. If your retirement savings is a portion of the $5.3 trillion invested in 401(k)s, you may have wondered how your company’s plan — and the investment choices you have within it — stacks up to the competition. Let’s take a look.

Average employee contribution: $6,940

The average annual employee 401(k) contribution was $6,940 during the 12 months ending March 2019, according to Fidelity, which is one of the largest retirement-account record keepers. The IRS sets the bar for contributions pretty high: The 401(k) contribution limit for employees is currently $19,000 per year, with those 50 or over allowed to save $25,000.

Average employer contribution: $4,040

Probably the best feature of 401(k) plans is the employer contribution — aka free money — typically provided by matching a portion of what employees save. Employers contribute $4,040 per year on average, according to Fidelity’s data.

If you add the average employee contribution to the average employer contribution, the combined total of $10,980 represents an average savings rate of 13.5% of salary.

That’s right on target, considering experts recommend saving 10% to 15% of your salary for retirement.

Average 401(k) match: 4.2%

There’s a dizzying array of formulas companies use to determine how much of your contributions they’ll match. The most common formula, according to Vanguard’s 2018 How America Saves report, is 50% of every dollar an employee contributes, up to 6% of salary.

The more telling number is the value of the match. That figure — according to Vanguard — is 4.2% of pay on average.

Number of investment choices: 8 to 12

The average 401(k) plan includes between eight and 12 investment options, most commonly mutual funds that offer exposure to domestic and international stocks, bonds and money market funds.

About two-thirds of the 401(k) plans jointly analyzed by the Investment Company Institute and the Employee Benefit Research Institute offer target-date mutual funds. Known as a “set it and forget it” retirement investment, target-date funds include a mix of investments that automatically rebalance as you get closer to retirement. More than half of 401(k) participants are invested in target-date funds, according to the ICI and EBRI.

Average annual 401(k) return: 10.2%

Many variables determine a 401(k)’s return, including the investments you choose, stock market performance and 401(k) fees.

Those variables make it hard to land on an average 401(k) return, but Vanguard gives us a general snapshot based on the five years ending December 2017: Thanks to both strong stock market returns and plan contributions, the average annual return for those enrolled all five years was 10.2%.

Average 401(k) fees: 0.20%-5%

In a TD Ameritrade survey, 96% of investors knew how much they paid for streaming services like Netflix, Hulu and Spotify — yet only a quarter knew how much they paid in 401(k) fees. One-third believed they paid no fees at all.

Let’s set the record straight: You are definitely paying 401(k) fees — between 0.20% and 5% of your balance, according to 401(k) analytics firm BrightScope, which says the larger the plan, the lower the fees. Although employers frequently cover a portion of the administrative costs, Callan’s research found that in 32% of plans, participants are on the hook for all fees.

Your plan is required to send you a quarterly fee disclosure statement. If you don’t like what you see, consider investing just enough money in your 401(k) to get the company match for the year. Then contribute any additional retirement savings to an IRA, where you have much more control over costs and investment choices.

Average 401(k) balance: $103,700

You skipped all that stuff above to scroll down to this number, didn’t you? We don’t blame you: Financial rubbernecking is a beloved pastime.

Without further ado, the average 401(k) balance as of the end of March 2019 was $103,700, according to Fidelity. (Get your voyeur on with our breakdown of the average 401(k) balance by age.)

But averages are misleading if you don’t take into account participant age and length of time on the job: The average 401(k) balance of participants in their 40s with two years or less of tenure at their employer was roughly $20,000 at year-end 2016, according to the ICI and EBRI research. Those who had been on the job between five and 10 years had an average of nearly $70,000, and folks with between 20 and 30 years at the same company had an average of nearly $167,000.

Portion of plans that offer a Roth 401(k): 85%

The Roth 401(k) is a mashup of a 401(k) and a Roth IRA, an individual retirement account you fund with post-tax dollars in exchange for tax-free investment growth and withdrawals in retirement.

Nearly 85% of plans now offer a Roth 401(k), according to data from Callan Institute’s 2019 Defined Contribution Trends survey.

Though you don’t get a tax deduction on your contributions as you do in a traditional 401(k), there’s a lot to like about a Roth 401(k), including the fact that it’s a convenient workaround for those who earn too much to contribute to a Roth IRA, which has income limits for eligibility.

Get more out of your retirement savings

All of this 401(k) gawking is only worthwhile if it inspires you to look more closely at your own retirement savings. Ultimately, it’s all about answering one key question: Am I saving enough, and in the right accounts? (See how to choose between an IRA vs. 401(k).)

A retirement calculator will crunch your numbers and provide a personalized recommendation for how much you’ll need for retirement and how much to save each month to achieve that goal.