If you're taking advantage of your employer's 401(k) retirement savings plan at work, how does your balance compare with the median and the average amount that other Americans have saved from their incomes?
Budgets Are Sexy's J. Money recently had a great personal finance article on that topic, featuring the findings of a recent NerdWallet/NBC News poll that presented the average and median 401(k) balance for American workers by age.
But there's a problem with that polled information. 401(k) retirement savings accounts are tied to employers, where when workers change jobs, they often close those accounts and roll over their saved balances into other types of retirement savings vehicles, such as a Rollover Individual Retirement Account, which exist just for that purpose!
That's no small deal. According to the U.S. Bureau of Labor Statistics, the median American can hold an average of 9 jobs from Age 25 until they retire, changing jobs frequently when they're young, but holding jobs for longer periods as they age. Frequent job changes when Americans are young prevent their 401(k) balances from growing very much, which means that the NerdWallet/NBC News figures will skew very much to the low side for those Americans who take advantage of these tax-deferred retirement savings vehicles.
We wondered how the median 401(k) balance might actually be if it were transferred into a Rollover IRA whenever a median American might change employers. The following table shows the results of that math....
| Median and Average 401(k) Balance with Equivalent IRA Rollover Balance by Age | |||||
|---|---|---|---|---|---|
| Age Range | Median 401(k) Balance | Median Years of Tenure with Single Employer | Estimated Number of Employers [and 401(k) Accounts] | Cumulative Rollover IRA Balance* | Average 401(k) Balance |
| 20-29 | $4,000 | 2.8 | 3.6 | $14,286 | $11,600 |
| 30-39 | $16,500 | 4.9 | 2.0 | $47,959 | $43,600 |
| 40-49 | $36,900 | 7.6 | 1.3 | $96,512 | $106,200 |
| 50-59 | $62,700 | 10.1 | 1.0 | $158,591 | $179,100 |
| 60-69 | $63,000 | 10.2 | 1.0 | $220,356 | $198,600 |
| * If Median 401(k) Balance is moved to Rollover IRA After Each Change in Employer | |||||
What we find is that the median 401(k) balance, if accumulated in a traditional Rollover IRA at every job change, and assuming no gaps in employment, is pretty comparable to what NerdWallet/NBC News found to be the average 401(k) balance for each age group in their survey.
On the whole, these median and average 401(k) balances still fall on the low side of what experts recommend people save to either replace their income or to support their anticipated spending in retirement.
Labels: investing, personal finance
Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:
ironman at politicalcalculations
Thanks in advance!
Closing values for previous trading day.
This site is primarily powered by:
CSS Validation
RSS Site Feed
JavaScript
The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.
Other Cool Resources
Blog Roll
