WTF Just Happened To Your Retirement Accounts?!
In a Nutshell
Most Americans are financially unprepared for retirement: the median 401k balance is only $44,000, 40% have no retirement savings at all, and median checking/savings is just $8,000. Hardship withdrawals and 401k loans are surging as inflation outpaces wages, pushing the personal savings rate to a 16-year low of 2.6%. While participation rates have improved, the typical worker nearing retirement will have just $3,800 annually from their 401k at a 4% withdrawal rate—far below what's needed.
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A record number of Americans are now carrying credit card debt that they can't pay down. More Americans are tapping into their 401ks for emergencies. Costs are high. Americans are struggling. Inflation is outpacing folks' paychecks. A family of four now needs nearly $140,000 a year just to survive.
Vanguard released a new report that tracks the retirement accounts of nearly 5 million people. The average person now has $167,000 stashed away in retirement. The typical American, the person right in the center, has just $44,000. One in four people have less than $10,000. One in 10 have zero or negative net worth.
Vanguard analyzes the real accounts of 5 million Americans annually. 25 years ago, only 65% of workers participated in their 401k. Today, that number hit a record 86%. The savings rate of those people has just hit an all-time high of 12.1%.
The average 401k balance of $167,000 is skewed by a small number of multi-millionaires. The median person had less than a third of the average at just $44,000.
Roughly 70% of people are in a professionally managed allocation. About 61% of people are in a single target date index fund, with nearly two out of every $3 being invested this way.
For people aged 55 to 64, the median 401k balance is only around $95,000. A 4% withdrawal rate gives $3,800 a year in spending, or $317 a month to spend in retirement after working for 40 years.
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