When it comes to assessing your retirement readiness, many people turn to comparing their 401(k) balances to those of others to see if they are on the right track. Recent data from Fidelity reveals that the average 401(k) balance for investors on their platform was $125,900 in the first quarter. However, looking at age breakdowns, we see that baby boomers had an average balance of $241,200, Gen Xers had $178,500, millennials had $59,800, and Gen Z had only $11,300 saved up. While these numbers provide some insight, it might be more beneficial to compare your balance with others in your industry rather than just focusing on age group averages.
Instead of solely looking at age group averages, comparing 401(k) balances by industry could give a more accurate picture of how your savings stack up against your peers. Fidelity compiled industry data to help companies on their platform understand their employees’ savings behaviors. Mike Shamrell, vice president of thought leadership for workplace investing at Fidelity, emphasized that the average 401(k) balance tends to be higher in industries where salaries are more substantial. For instance, legal services topped the list with an average balance of $306,400, followed by the petrochemical industry at $255,500, and energy production/distribution at $214,400. On the flip side, retail trade had the lowest average balance at $51,200, with health care (excluding physicians) at $66,600, and real estate at $70,700.
While 401(k) balances provide some insight into retirement preparedness, experts argue that focusing on total savings rate is a better metric to gauge success. Fidelity suggests that workers should aim to save around 15% of their pre-tax income, including both employee and employer contributions. Overall, Fidelity’s 401(k) participants had an average total savings rate of 14.2%, which is very close to the recommended rate. In industries like pharmaceuticals, petrochemicals, and airlines, the total savings rate was significantly higher. On the other hand, retail trade, health care, and construction had some of the lowest total savings rates.
Having generous employer contributions can greatly impact an individual’s total savings rate. Fidelity reports that the overall average employer contribution rate is 4.8%, with industries like petrochemicals, pharmaceuticals, and airlines leading the pack with higher contribution rates. It is essential to consider the impact of employer contributions on your retirement savings journey.
As you assess your retirement preparedness, remember that taking out a 401(k) loan can significantly impact your progress. According to Fidelity, 17.8% of plan participants have taken out a loan, which can hinder their long-term savings goals. To ensure you are on the right track for retirement, focus on maintaining a high total savings rate and consider industry benchmarks when evaluating your progress. By critically analyzing your retirement savings strategy and adjusting as needed, you can work towards a financially secure future.