Money expert Clark Howard says one of the best ways to save for retirement is to take advantage of an employer-sponsored 401(k) account.
No matter your age, you may wonder whether you're on track for a comfortable retirement based on what you and your employer have contributed to your 401(k) so far. Clark says you shouldn't feel bad about what you've been able to save or not save based on your age and circumstances.
“You save what you save and start when you start, and do what you can to increase what you’re doing,” Clark says. “People shame themselves and they feel guilt – ‘I should have done this. I should have done that’ – nuh-uh,” he says.
Vanguard's How America Saves 2024 report indicates that automatic enrollment has been a boon for American investors and that older Americans have been able to cash in.
“Not only does income, on average, tend to rise somewhat with age, making saving more affordable, but older participants generally save at higher rates,” the report says. “Also, the longer an employee’s tenure with a firm, the more likely they are to earn a higher salary, participate in the plan, and contribute at higher levels.”
Here are some highlights from the report.
- 77% of Vanguard plans with at least 1,000 participants adopted automatic enrollment in 2023.
- The average value of the employer contribution matches was 4.6% of pay. Among plans with a non-matching employer contribution, the average contribution was equivalent to 5.4% of pay.
- In 2023, the average account balance for Vanguard participants was $134,128, a 19%-increase compared to the previous year.
- 15% of participants had an account balance of $250,000. Nearly three in 10 participants had a balance of less than $10,000, while another three in 10 had a balance of more than $100,000.
| Age | Average |
|---|---|
| Under 25 | $7,351 |
| 25-34 | $37,557 |
| 35-44 | $91,281 |
| 45-54 | $168,646 |
| 55-64 | $244,750 |
| 65 and Over | $272,588 |
Read the full report from Vanguard.
So now that you see where different age brackets are with their retirement savings, you may feel disappointed about your contributions — don’t go there, Clark says. The key is to catch up.
Need More Money for Your 401(k)? Play Catch-Up (if You Can)
“Catch-up is a provision that allows you every year to put additional money into your 401(k) or Roth IRA,” Clark says.
Catch Up on Your Retirement Account Contributions
For 2024, the Internal Revenue Service (IRS) allows 401(k) participants over age 50 to make catch-up contributions of $7,500 in addition to what they'll pay to the plan throughout the year. For Roth IRAs, those over 50 can contribute up to $8,000 (including a $1,000 catch-up contribution).
See our 401(k) Calculator and our Roth IRA growth calculator to help you see the impact of these contribution limits.
Catch Up by Working Longer
Although many Americans opt to take their Social Security as soon as they're eligible, Clark says you can help your bottom line by working longer and by extension, waiting until age 70 to start taking your Social Security benefits. That's what he's planning to do.
“Every year that you wait, you get an additional 8% in your check. And once you start taking it, every [cost of living] increase is based on the base that you started at,” Clark says. “So you end up with a lot more money to live on later in life if you wait to take Social Security.”
Catch Up by Doing Some Side Gigs
We've been in the "gig economy" for several years now, as it becomes easier for Americans to earn extra money from things like driving for DoorDash.
Read our guide on easy side hustle ideas to earn extra money.
Final Thoughts
If you haven’t earned what you think you need for retirement, Clark says not to fret.
“We are part of the era we grew up in,” he says. “It [saving money] was never talked about to people in Gen X. Never discussed.”
The good news is that opportunities to catch up are out there.
“Catch-up is your friend, Additional years of work may be your friend. Side gigs could be your friend,” Clark says.
Read our comprehensive guide on how to earn extra money.
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