America is Saving for Retirement – But is it Enough?

America is Saving for Retirement – But is it Enough?


Vanguard has released their 2018 report on how America saves. The report is based on 401(k) and other retirement plans that it administers. It shows that the average retirement account has almost $104,000. However, because of disproportionately large accounts being a part of the calculations, that number is somewhat deceptive. The median is actually closer to $26,000. That is a little more concerning.

 How much of their income are people saving?

According to the report, Americans put approximately 7% of their income into 401(k) savings on average. However, income and age are factors when it comes to what percentage an individual is actually putting into their 401(k). 

People who are older tend to put more in, and the same goes for those with a higher level of income. Someone under the age of 25 may only be contributing 4.7% according to the figures, while an individual over the age of 55 is likely to contribute 8.4%. As for income, those who are earning less than $30,000 per year are contributing approximately 4.5%, while those making over $100,000 annually may be putting 8% of their income into their 401(k).

There are also people who put even more into their 401(k) savings, with 20% of participants contributing more than 10% of their salary. Thirteen percent have actually met the contribution maximum of $18,000 for 2017. Those who met the maximum were usually older, had been with their employer longer, and had a higher income.

How are people losing out?

At Forbes, they suggest taking advantage of the mega backdoor Roth IRA strategy if you can. The technique lets you save as much as an additional $36,000 via after-tax contributions that are withdrawn to a Roth IRA or converted to a Roth 401(k). Only 17% of Vanguard’s plans allow for this, with 7% contributing on an after-tax basis. The number of people who are going for the full $36,000 is much smaller than that.

While it may not be possible for many people to put that much aside, it is worth looking into contributing more to a 401(k) than you may be presently. Your future self will be grateful. 

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Catherine Marucci
Catherine Marucci

A dedicated writer of health, technology, and internet phenomenon news.

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