To save money for retirement, Americans must plan and choose the best investment option for them. Most people invest in defined contribution plans, such as 401k, but it is not always clear if their plan is healthy. Here are some statistics to help and give you a benchmark of your 401k performance.
401K Fees & Rates
- While fees and expenses vary for each plan the average expense ratio range is from 0.3% to 2%. (Investopedia, 2019)
- The average all-in fee is 2.22%, but it can range from 0.2% to 5%. (Smartasset, 2019)
- The compound annual average growth rate of 401k plans is 14.2%. (U.S. News, 2019)
- The total savings 401k contribution rate and the employer’s 401k match for 2018 were 13.2%. (Business Wire, 2018)
- According to a report by Fidelity, the average 401k balance reached a record high of $123,900 in Q4 of 2020. (Fidelity, 2021)
- Individuals can now contribute $22,500 rather than the previous $20,500 limit to their 401(k) plans in 2023. (IRS, 2023)
- The total 401(k) investment cost dropped by 0.02%-0.05% from last year. The average decrease is 0.03%. (ASPPA, 2023)
401k Assets
- The number of millionaires is increasing, 157,000 people had at least $1 million in their 401k account at the end of Q1 2018. (Business Wire, 2018)
- 401k is the most popular method for saving money for retirement (98%), with the second option being saving in a savings account (61%). (Schwab, 2018)
- The largest source of income in retirement for 62% of participants will be their 401k. (Schwab, 2018)
- Government bonds on average give a 5.5% return annually, large-cap stocks returned 10.2% compounded annually, while small-cap stocks returned 12.1%. (Morningstar, 2018)
- U.S. retirement assets (29.2 trillion) now account for one-third of all household financial assets. (ThinkAdvisor, 2018)
- At the end of 2021, 56% of Vanguard plans had automatic enrolment. (Vanguard, 2022)
- 64% of participants in their 401k plans were confident in their ability to retire comfortably. (EBRI, 2023)
- Compared to about nine out of ten firms with 100 to 499 workers (89%) and 500+ employees (92%), just 46% of employers with less than 100 employees provide a 401(k) or similar plan. (TCRS, 2022)
- Employers’ main excuses for not offering a plan and not likely to do so in the next two years are that their business isn’t big enough (79%) and expense concerns (31%). (TCRS, 2022)
Employee Investment Mindset
- Two-thirds of participants (64%) in 401k plans view themselves as savers, not investors. (Schwab, 2019)
- 64% of participants check their accounts at least once every pay period. (Betterment, 2018)
- 77% of participants are extremely confident in their ability to make the right financial decisions with the help of a financial advisor. (Careerbuilder, 2017)
- Almost one in three workers have made an early withdrawal from their retirement funds. (TransamericaCenter, 2019)
- The number of sponsors that are actively looking to switch advisors has significantly dropped to only 18%. (NAPA, 2019)
- 92% of American workers with 401k plans have reported that having a pay-roll deduction helps them save. (AmericanBenefitsCouncil, 2019)
- The top five methods for investing for retirement are saving in a savings account (61%), saving in HAS (39%), investing in an IRA (33%), investing in a brokerage account (29%), and investing in cryptocurrency (25%). (Charles Schwab, 2022)
- 78% of younger participants are interested in personalized investment advice for their 401(k). (Charles Schwab, 2022)
- 38% of workers are confident in making 401(k) investment decisions. The confidence increases to 55% with the help of a professional. (Charles Schwab, 2022)
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401k Participation
- More than 4 in 5 employees (84.9%) participate in their 401k plans. (PIonline, 2018)
- More than 90% of employees are eligible to apply for their employer’s defined contribution plan. (AmericanBenefitsCouncil, 2019)
- According to Vanguard, 97% of their participants belong to target-date funds (TDFs), and 52% are invested in a single target-date fund. (Vanguard, 2019)
- 51% of private industry workers have access to defined contribution retirement plans. (Bureau of Labor Statistics, 2018)
- Only about 45% of part-time workers are offered a 401k or similar savings plan. (TransamericaCenter, 2019)
- 40% of employers who do not offer auto-enrollment have said that they do not plan to change. (TransamericaCenter, 2019)
- In 2022, half of private industry employees participated in a retirement plan. 48% of them participated in a defined contribution plan. (EBRI, 2023)
- 80% of 401k participants continued to contribute to their retirement accounts during the pandemic, and 88% of those who made changes to their accounts did so for positive reasons, such as increasing contributions or adjusting investments. (Vanguard, 2022)
Generational Differences in Savings & 401k
- Only about 25% of Baby Boomers believe their savings will be enough to last them for retirement. (Global Atlantic, 2018)
- Despite low salaries and high debt loads, millennials have a surprisingly high participation rate in 401k plans (82%). (AmericanBenefitsCouncil, 2019)
- Monthly guaranteed income is the most important trait that Boomers are looking for in a retirement investment. (Global Atlantic, 2018)
- About 70% of Boomers have said that having a saving account that is guaranteed for life is particularly important to them. (Global Atlantic, 2018)
- One in four millennials reported that out of the general benefits category having a 401k plan ranks as extremely important. (Pentegra, 2018)
- The top retirement investment method among all generations is savings in a savings account. However, apart from that, Gen Zs and Millennials are more likely to invest in cryptocurrencies, whereas Boomers are more likely to invest in an IRA or a brokerage account. (Charles Schwab, 2022)
- Only 37% of Gen Zs have started investing in a 401(k), compared to 54% of Millennials, 61% of Gen X, and 61% of Boomers. (Charles Schwab, 2022)
- Younger generations are also more open to online financial wellness tools to help them save for retirement. (Charles Schwab, 2022)
- 83% of Baby Boomers, 81% of Gen X, 76% of Millennials, and 76% of Gen Zs are saving for retirement either outside their jobs or through employer-sponsored 401(k) or similar plans. (TCRS, 2022)
401k Balances & Contributions
- The average annual employee 401(k) contribution was $6,940. (MarketWatch, 2019)
- The average annual employer 401(k) contribution was $4,040. (Nerdwallet, 2019)
- The average number of investment options is 10. (MarketWatch, 2019)
- The average 401k balance is $103,700, while the median is just $24,500. (Nerdwallet, 2020)
- 23% of organisations increased their 401(k) match to help employees manage financial stress. (Charles Schwab, 2022)
- Boomer participants in 401(k) or other similar plans make a 10% (median) contribution from their annual salary. Their estimated median amount saved in household retirement accounts is $162,000, yet the median amount saved for emergencies is only $15,000. (TCRS, 2022)
- The median percentage of yearly earnings contributed by Gen Xers in 401(k) or comparable plans is 10%. Their projected total retirement savings is $87,000, while their estimated median emergency savings is barely $5,000. (TCRS, 2022)
- The median contribution made by millennials in 401(k) or other comparable plans is 15% of their yearly salary. While millennial workers have saved an estimated median of $50,000 in household retirement accounts, they have only saved an estimated median of $3,000 in emergency savings. (TCRS, 2022)
- Gen Z employees contribute 20% (median) of their annual salaries in a 401(k) or comparable plan. In their household retirement accounts, they have saved $33,000 (estimated median), but just $2,000 (median) has been set aside for emergencies. (TCRS, 2022)
The popularity of the 401k plan is undoubtedly on the rise. Choosing the right plan for your future is more important now than ever, and the statistics shown above should help and give you a clearer image of what your ideal 401k plan should look like.
