30 Fascinating 401k Stats to Boost Your Nest Egg in 2024
December 27, 2020
A few decades ago, many retirees in the US could rely on traditional pensions and enjoy a financially stable life. Times have changed, however. 401k stats tell us that today most Americans invest in defined contribution plans to save enough to retire.
But before you start hatching saving plans, take a look at the helpful stats and facts we put together. Hopefully, they will help you make an informed decision and choose the best plan for you.
A Quick Overview of the Key 401k Statistics
- The average 401k balance was $109,600 in Q3 2020.
- 401k plans held around $6.5 trillion in assets as of September 30, 2020.
- More people are investing both in an IRA and a 401k.
- As many as 43% of workers participate in a retirement savings plan.
- In 2021, you were allowed to contribute up to $19,500 if you're were under 50.
- A whopping 1.2 million individuals went for a CARES act 401k withdrawal from their retirement savings account.
- The average 401k contribution by the employer is 4.3% of salary.
- An astounding 95% of employees provided matching or non-matching contributions in 2018.
- Only 7.8% of Boomers use a workplace managed account option, which could stop them from getting a good rate of return on their 401k plans.
- As many as 80% of workers who are offered a 401k or similar plan decided to participate in one.
2020 401k Plan Statistics
This section will cover the state of 401k plans in 2020. Let’s take a look at where average account balances, savings rates, and contributions stood.
1. The average 401k balance was $109,600 in Q3 2020.
(Fidelity)
All retirement accounts saw a slight increase in the third quarter of 2020, including IRA and 401k. Stats show that the average account balance in 2020 was $109,600, up by 5% from the second quarter and 4% from 2019, when the average balance stood at $105,200.
2. The total 401k savings rate was 13.5% at the end of Q3 2020.
(Fidelity)
The total savings rate for 401k investors includes both employee’s contribution 401k rates and an employer’s 401k match. According to stats, 89% of individuals hadn’t changed their contribution rate in the third quarter of 2020.
3. 401k plans held around $6.5 trillion in assets as of September 30, 2020.
(ICI)
401k plans accounted for one-fifth of the entire US retirement market, which is worth $33.1 trillion. Other retirement savings plans include individual retirement accounts (IRAs), 403(b), 457(b), and annuities.
4. The average 401k balances by age and contribution rates vary.
(Fidelity)
According to Fidelity, the average 401k balance by age is as follows:
- For 20- to 29-year-olds, the average balance is $10,500, and the average contribution rate is 7%,
- The average balance is $38,400 and the average contribution rate is 8% for 30- to 39-year-olds.
- For 40- to 49-year-olds, the average balance is $93,400, and the average contribution rate is 8%.
- The average balance is $160,000 and the average contribution rate is 10% for 50- to 59-year-olds.
- For 60- to 69-year-olds, the average balance is $182,100, and the average contribution rate is 11%.
- The average balance is $171,400 and the average contribution rate is 12% for 70- to 79-year-olds.
As you can see, 401k balance by age varies greatly. To find out the average balance for your age, try Fidelity’s calculator. This tool lets you factor in your zip code, as well as your age.
5. 401k stats point to more people investing both in an IRA and a 401k.
(Fidelity)
More workers are choosing to invest in an IRA in addition to the workplace retirement strategy. Today over 2 million people on the Fidelity platform contribute to both plans—12.5% more than in the third quarter of 2019.
General 401k Statistics and Facts
Now that we’ve looked at the situation in 2020, it’s time to check out some general stats and facts on this retirement savings plan.
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6. When it comes to the average 401k balance by state, Connecticut is taking the lead.
(Personal Capital)
In 2020, Connecticut saw the highest balance of $471,719. Other states in the top-5 include Alaska ($460,571), New Jersey ($457,156), New Hampshire ($455,477), and Virginia ($431,288). The states that witnessed the lowest 401k balance are Wyoming ($318,466), the District of Columbia ($305,410), and Utah ($280,214).
7. As many as 43% of workers participate in a retirement savings plan.
(The Pension Rights Center)
To put it differently, 43% of the 139 million full- and part-time workers across all sectors participated in a retirement savings plan in 2019. Now, let’s break down the percent of the population with 401k or other savings plan enrolment by sectors. We will get that 47% of private-sector employees and only 17% of state and local government employees contribute to a savings plan of some sort.
8. Only 59% of Americans have access to a 401k plan.
(Personal Capital)
401k is hands down one of the best retirement savings strategies for most Americans. However, the U.S. Census Bureau data shows that the percentage of Americans with 401k was somewhat low in 2017—only 32%.
9. An impressive 45% of surveyed millennials said they invest in an IRA or 401k.
(Business Insider)
On top of that, a third actively contribute to their retirement savings plan. Only half of Gen Xers, on the other hand, have a retirement account, while 36% are actively contributing to it. Since Gen Xers are closer to retirement than millennials, the current figures are not that encouraging.
10. Interestingly, 441,000 IRA or 401k accounts managed by Fidelity had a balance of $1 million in 2019.
(CNBC)
It may seem like an impressive number and the highest 401k balance one can reach. However, the reality is that only 1.6% of all the accounts that Fidelity manages have a million-dollar balance. There is good news, though. A third of participants upped the amount they were saving by 3% — an encouraging stat for all future retirees.
11. In 2021, you were allowed to contribute up to $19,500 if you were under 50.
(Nasdaq)
If you were 50 or over, you could have contributed up to $26,000, 401k stats for 2021 indicate. The more you put into your savings plan, the more you’ll have when you retire. More money in your retirement savings account also protects you against a reduction in Social Security benefits.
12. Only 21% of US workers max out their 401k plan.
(Personal Capital)
In other words, just 21% were able to contribute the maximum amount to their retirement plans. Not everyone is in a position to max out their contribution, however. It depends on various factors, from the average 401k contributions and an employer’s match to your income.
13. Over 60% of 401k plan assets were invested in mutual funds.
(ICI)
At the end of September 2020, more than half of assets were invested in mutual funds. The rest of the assets include company stock, individual stocks and bonds, as well as bank collective trusts. Finally, life insurance accounts count here as well.
401k Facts on Withdrawals
How much do retirees withdraw from their retirement saving plan, and what is the average sum they take out? Let’s find out.
14. The average 401k withdrawal amount in Q3 2020 was $9,000.
(Fidelity)
The median withdrawal amount, on the other hand, was $2,400. Because many employees opted for a 401k coronavirus withdrawal, the number of workers taking out a traditional 401k loan declined to 1.9%. At the same time, the overall percentage of loans reduced to 18.7%.
15. 401k stats show that 13% of plan participants have made an early withdrawal.
(Transamerica Center for Retirement Studies)
As many as 23% of workers participating in a plan have taken a loan or opted for an early withdrawal from their account. Large company employees are more likely to take out a loan or go for an early withdrawal (25%). In comparison, 22% of small non-micro company workers and 17% of micro company workers consider the options above. Early withdrawals, as well as loans from retirement plans, can considerably reduce your retirement nest egg.
16. 1.2 million individuals went for a CARES act 401k withdrawal from their retirement savings account.
(Fidelity)
According to 2020 401k trends and stats, it translates to 4.6% of eligible employees on Fidelity’s platform. Now, the CARES Act, or the Coronavirus Aid, Relief, and Economic Security Act was enforced at the end of March 2020. In a nutshell, the Act is a response to the economic consequences of the pandemic.
17. Only 18% of retirees said they plan to withdraw money from their retirement account.
(Transamerica Center for Retirement Studies)
More retirees are taking money out of their 401k benefits plan when faced with the economic fallout of the COVID-19 pandemic. For starters, 18% of them planned on relying on retirement accounts and personal savings. Before the pandemic, 7% (of the 18% defined above) cited withdrawing money from a 401k or IRA as the primary source of income.
401k Stats From the Employer’s Perspective
Next, we’ll look into the average employer’s contribution. Join us to discover the number of companies that offer 401k plans and learn the strategies in place.
18. The average 401k contribution by an employer is 4.3% of the worker’s salary.
(Investopedia)
The average contribution might be 4.3% of the worker’s pay; however, the most common match is 50 cents on the dollar or 6% of salary. It means that for every dollar an employee contributes, an employer will contribute 50 cents. Around 71% of companies opt for this strategy.
19. Total contributions by employer and employee can’t exceed $58,000.
(Forbes)
Let’s break down these statistics on the 401k growth rate. The employer’s 401k match doesn’t count as part of the maximum contribution workers can make. That said, total contribution limits restrict it. Thus, total contributions (by employer and employee) cannot exceed $58,000 for workers under 50. If an employee is 50 or over, then the total contribution must be under $64,500.
19. Total contributions by employer and employee cannot exceed $58,000.
(Forbes)
Let’s break down these statistics on the 401k growth rate. The employer’s 401k match doesn’t count as part of the maximum contribution workers can make. That said, total contribution limits restrict it. Thus, total contributions (by employer and employee) cannot exceed $58,000 for workers under 50. If an employee is 50 or over, then the total contribution must be under $64,500.
21. Data on average 401k match by industry reveals that the manufacturing sector is number one.
(ADP)
Manufacturing is the leader, with 67.1% of companies providing retirement plans for their employees. On the other side of the spectrum is the leisure and hospitality sector. Only 23% of companies in this sector offer retirement savings plans. That is not surprising, however, for an industry with a large number of seasonal and part-time workers.
22. Around 41% of large companies offer automatic enrolment, 401k stats show.
(Transamerica Center for Retirement Studies)
Automatic enrolment enables employees to start contributing to the plan automatically. Therefore, they don’t have to take any steps unless they want to opt out. Almost half of the large companies provide automatic enrolment. In comparison, 28% of small non-micro companies and 18% of micro-companies offer this type of enrolment.
23. Seven in ten employers offered Roth features within 401k plans.
(CNBC)
It is up from 54% in 2014, 401k plan statistics and surveys by Willis Towers Watson show. A Roth 401k is different from the traditional 401k in the sense that a 401k plan is financed with pre-tax money, meaning that withdrawals are taxed. With a Roth 401k, withdrawals are tax-free, making this plan more suitable for people in a higher tax bracket when they retire.
24. Half of the employers cite cost as the main reason for not offering a retirement plan, 401k facts show.
(Transamerica Center for Retirement Studies)
Other employers believe that their company is not big enough (58%), while some say that their employees are not interested (32%). Finally, 27% of employers say that the company or management is not interested in offering a retirement savings plan.
401k Plan Statistics: The Worker’s Attitude
Finally, we’ll read up on workers’ attitudes and opinions regarding their 401k savings plan.
25. An astounding 90% of American workers with 401k plans said that payroll deduction helps them save.
(ICI)
Stats show that workers are satisfied with 401k plans and their features as they make it easier for them to save money for retirement. What’s more, 90% said that it helps them think about the future rather than their needs at the moment. Besides, 82% believe that saving money with every paycheck makes them less anxious about investment performance.
26. According to 401k statistics, 58% of 401k participants see themselves as savers.
(Schwab)
Interestingly, the remaining 42% of 401k plan participants think of themselves as investors. What’s more, 72% believe it’s more important to save now so you could have a comfortable retirement. These attitudes show a changing dynamic towards savings. Hopefully, it will prompt more Americans to choose a retirement plan as soon as possible.
27. Only 7.8% of Boomers use a workplace managed account option.
(Fidelity)
Unfortunately, such low participance could stop them from getting a good rate of return on their 401k plans. In a nutshell, this option helps savers develop a customized plan and manage asset allocation. It also helps assess risks with the help of professional investment management. The option is available to 33.7% of 401k plans. That said, even though half of the Boomers on Fidelity’s 401k platform have access to this service, less than 8% are actually using it.
28. As many as 82% of Boomers believe that their savings will last them through retirement.
(USA Today)
A whopping 84% of respondents expect to have a better quality of life in retirement compared to their parents. Interestingly, 80% think their retired life will be better than their children’s. This belief is prevalent despite changes to the average retirement age.
29. Four in ten millennials consider 401k retirement savings extremely important when looking for a job.
(Pentegra) (Milliman)
Surprisingly, almost 40% of these job seekers find this benefit more important than health insurance and pension plans. This generation, a more recent survey shows, is also more likely to contribute to a pension plan. As many as 75% of millennials who were offered a Roth feature from their employer decided to use it.
30. An impressive 80% of workers who are offered a 401k or similar plan decided to participate in one.
(Transamerica Center for Retirement Studies)
In other words, 401k participation rates of workers from micro and large companies stand at 83% and 80%, respectively. These figures are much higher compared to small non-micro companies — 73%. On the other hand, workers from large companies had a participation rate of 80%.
Bottom Line
The older we become, the more money we are likely to spend on our health. It goes without saying that taking care of one’s physical and mental state is rather expensive. From purchasing the best orthopedic mattresses for sound sleep to investing in quality supplements—retirees are often in dire need of additional finances.
Following this, 401k plans have increased in popularity as more and more Americans rely on this type of saving for a comfortable retirement. That prompted our team to collect as many action-inducing 401k stats as possible. Hopefully, they will give you a clearer picture of the benefits of this plan, as well as the risks it entails.
FAQs
What is a 401k plan, and how does it work?
A 401k is an employer-sponsored retirement account. It allows an employee to contribute a percentage of their pre-tax salary to the account. The funds are invested in stocks, bonds, cash, mutual funds, and other ways.
Plans vary greatly. You can opt for a tax-free withdrawal plan—a Roth 401k. You can also have your employer match the contributions or go for a non-matching plan. For the latter, the workers don’t make any contributions, only the employer.
What percentage of Americans have a 401k?
In 2018, 58 million US employees were active participants in a 401k savings plan, resulting in over 580,000 401k plans that year.
What is a good rate of return on 401k?
The average 401k rate of return in 2019 from a typical portfolio provided a 5% to 8% annual return. A typical portfolio is usually one that consists of 60% stocks and 40% fixed-income vehicles and cash. Return rates depend on market conditions, contributions, asset allocation, and other factors.
What is the 401k interest rate?
For starters, a 401k loan is a great option when you need cash for a serious short-term liquidity need—be it paying for college tuition, purchasing a med alert system, or addressing any other serious issue that asks for a monetary investment.
The 401k interest rate for loans is usually a point or two higher than the prime rate. Generally speaking, the advantages of a 401k loan include the receipt of the interest paid and the overall convenience. However, a significant drawback here is the loss of tax-sheltered status if you happen to lose a job.
How much should I have in my 401k?
Deciding how much you should have in your savings account can be a tricky business. The general rule is to add one year of salary for every five years. It means that at 30 you should save one year’s salary, at 35 years of age two year’s salary, and so on.
What is the average 401k balance at age 60?
For 60-year-olds, the average balance is $182,100. For people this age, this is the last chance to start saving. According to 401k stats, the average contribution rate for 60-year-olds and over is 11%. That’s provided that many of them continue to work and thus have some time to get their savings in order.
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