Only the Top 15% of Americans Have Saved $250K for Retirement. See How to Join Them
Vanguard is one of the biggest brokerages that helps Americans save and invest for retirement. Each year, Vanguard publishes a report called “How America Saves” that shows the latest data on how Vanguard clients are investing, and how their investment accounts are performing.
If you want to save more for retirement and invest more successfully, the Vanguard report can be a useful indicator of how everyday investors are building wealth for the future.
Let’s look at a few surprising highlights from Vanguard’s 2024 report.
Most Vanguard retirement savers are not millionaires
You don’t have to be a millionaire to retire, and most Americans don’t have massive amounts of money in their 401(k) plans or other retirement accounts. Based on Vanguard’s 401(k) customer data, only a small percentage of savers have built up enough wealth to be in the range of 401(k) millionaire status.
According to Vanguard’s breakdown of defined contribution plan account balances:
- Only 15% of Vanguard accounts have $250,000 or more of investment assets
- 30% of Vanguard accounts have $100,000 or more
- The median (typical) Vanguard account had $35,286
What does this mean for your retirement planning? If you’re struggling to save for retirement, you’re not alone. But if you have built up a decent balance in your 401(k), traditional IRA, Roth IRA, or other retirement accounts, you might be in better shape for retirement than you think — based on your age, you might not be “behind” on retirement savings after all.
How much the typical retirement account can grow
If you still have 10, 20, or 30 years until retirement age, time is on your side. You still have lots of time for your retirement savings to grow with the power of compound interest — even if you never save another dollar.
For example, here’s how much each of these investment account balances could grow after certain timeframes, based on average annual returns of 8%:
Balance | 10 Years | 20 Years | 30 Years |
---|---|---|---|
$35,286 (median Vanguard account) |
$76,179 | $164,466 | $355,070 |
$100,000 (top 30% Vanguard account) |
$215,892 | $466,095 | $1,006,265 |
$250,000 (top 15% Vanguard account) |
$539,731 | $1,165,239 | $2,515,664 |
Data source: Author’s calculations, Investor.gov
If you’re anywhere near those numbers, based on your age, you might be in great shape to have a healthy retirement nest egg. For example, if you’re 40 years old and have saved $250,000 for retirement, you are likely to have over $1 million in retirement savings — even if you stop saving for retirement today, and just let your investments grow.
How to boost your retirement savings
The best way to save for retirement is to do it automatically with every paycheck from a workplace retirement plan like a 401(k), especially if you get an employer match. Vanguard recommends that people save 12%-15% of their income for retirement — including employer-matching contributions.
But in reality, most people struggle to commit a big percentage of their paychecks to retirement savings. Vanguard’s survey shows that the actual average retirement contribution percentage in 2023 was about 11.7% of income (including employer matches).
If you’re not already saving 11% (or more) of your income for retirement, here’s what to do:
Save enough to get your full employer match
For example, if your employer matches 50% of the first 5% of your salary that you save for retirement in your 401(k), do that. Then you’ll be saving 7.5% of your income, or $3,750 per year on a $50,000 salary. Don’t leave that money on the table.
Boost your retirement contributions by 1% per year
Every year, or when you get a pay raise, change your 401(k) contribution settings and raise the percentage of your salary that you save for retirement. If you do just an extra 1% per year, you might not feel a big difference in your take-home cash on payday, but your retirement account balance will benefit for years to come.
Invest for the long term
If you’re investing for retirement, unless you’re already in your 60s and your Social Security age is approaching, you probably have lots of time for your investments to grow. A longer time horizon means you can afford to take appropriate investment risks by investing mostly in stocks.
Vanguard’s customers mostly buy stocks: Every age group of Vanguard 401(k) investors had at least 50% of their money in stocks, except for people aged 70 and over. Vanguard customers in their 20s and 30s owned typical stock allocations of 88%-89% of their portfolios.
Even if the stock market goes down on any given day, month, or year, if you’re a long-term investor, you can afford to wait out the ups and downs. In the long run, a diversified portfolio of stocks is likely to go up and help you build wealth.
Bottom line
Even if you don’t have much money saved for retirement, if you still have 10, 20, or 30 years (or more) to work and invest, you likely have time to build up a healthy nest egg.
The Vanguard “How America Saves” report has valuable insights on what it takes to save for retirement — starting with automatic contributions of at least 10% of every paycheck, and investing in a diversified portfolio of mostly stocks.