I've been in this retirement planning business for 32 years now.
And if there's one question I get more than any other it's
how do I compare to my neighbor?
Right.
Well, in this video, I'm going to share with you what the average 401k
balance is for those who are at age 65 and really a more important question,
which is why is that important?
But before I get there, let's subscribe to my channel and hit
the notification bell so you're alerted to when we post new videos.
I get kidded by my friends all the time, because my mantra always is enjoy the
journey, and I believe you've worked hard for it, retirement, and I want
you to enjoy it, but the definition of joy is different for everybody.
And everybody leads a little bit different lifestyle.
So before we get to the numbers, I want to talk to, if you will,
the importance of understanding a little bit about perspective.
And what goes into enjoying the journey.
I really do believe our industry has done a lousy job of informing
you how to truly enjoy the journey.
The focus has been so much on making sure that you accumulate.
A big nest egg for retirement, ignoring the fact that everybody has
a different set of retirement goals and dreams, a different lifestyle I
would lead than my neighbor would lead.
And we oftentimes don't take that into account when we benchmark how
we're doing against our neighbors.
Let me give you a couple of stories.
I have one particular client.
They have about $300,000 in investment assets.
They are very happy in retirement.
One of the reasons is that they don't really have a big need or desire to
go and do and travel and buy stuff.
They just want to be around their family and they're local.
He gets a pension, they get social security.
They don't have to rely on income from their portfolio and they don't have a
big cash flow need on a monthly basis.
So they feel very comfortable in their journey now and pursuing the things
that are really important to them.
Every time I talk to them, I really smile.
Now I have another client who has about $3,000,000 of assets.
And you know, if you look, try to gauge the book by its
cover, you go ooh, $3 million.
They must be doing really well.
And the folks with $300,000 they must not be doing very well.
In this particular case, the folks with the $3 million are
not truly being fulfilled.
And we have conversations all the time about how they're going to fill the time
that they have, because not only is one of the big fears that people have running out
of money, but the other big fear is, well, what am I going to do the rest of my life?
How do I get rewarded?
How do I get fulfilled?
And at the $3 million level.
This particular couple is really not enjoying this next chapter of life.
So remember a number is just a number and you have to figure
out how important it is to you.
So I'm going to give you the average 401k balance for those who are at 65
and just a couple of minutes, but I really want to sort of set the stage
and put this in proper perspective cause I come from a planning perspective and
what we have to do is take a look at the totality, the whole picture, right?
So there are a number of questions that you have to answer or figure out as you
now go into retirement that will help you to understand what your journey
is going to be in, what your dreams and goals are so one of the things is,
I mean, do you live in the Northeast where, you know, uh, cost of living
is very high or do you live in the Southwest where it may not be as high?
Um, do you have kids who live far away and they have the grandkids, right?
And you want to go travel or do you have a desire to travel overseas?
Some do some don't, some like expensive toys, some just like to stay home.
I actually have one client.
He is so fulfilled in retirement and he does nothing.
He lives in Florida and all he wants to do 24/7 is just sit on the beach.
He had a very busy life during this first chapter of his working years and now that
he's in his next chapter of retirement, he just wants it to be very blissful if
you will, he doesn't want to do anything.
And for him, that's important.
When I give you the number for the average 401k balance, you also have to
remember what other assets do you have?
What social security do you have?
Um, what do you, are you going to go for a part-time job?
Are you volunteering?
What are some of the other things that you can bring to bear in addition to the
401k asset, and for some that asset may be the only retirement asset they have
and they have to work with that, but for others, they may have other pieces.
So when I give you this, I want you to remember as you benchmark
yourself or compare yourself to your neighbor, everyone is different.
And I want you to keep that in mind.
I also want you to find out, this is very important, what stage of
retirement preparedness are you in?
Are you ready for this next chapter of life?
And I want you to go to our banner, invest.
We're talking about investments, right?
Invest two minutes in a quiz that I'll score for you, which of the three stages
of retirement preparedness you're in.
And I'll also get for you the first chapter of my new book, "don't outlive
your money in retirement", along with a couple of worksheets that will help give
you a little bit more clarity in terms of where you are and what you need to do.
So let's dive into the numbers.
And what's interesting here is that less than half of the people who are eligible
to contribute to the 401k retirement plan offered by their employer actually do.
And again, this is part of what I believe is a lousy educational
job on our industry part.
We need to be telling you, making it urgent, compelling you to put that money
away and share with you the stories.
AARP recently did a study that said a majority of people facing their
normal retirement age, call it sixty five, sixty six, sixty seven
were deferring their retirement.
And the number one reason?
They didn't have enough money.
So you really need to grasp this.
I mean, now that you're looking at it in your closing and maybe on your sixties,
you know, maybe it's a little late to think about, but we need to be sharing
that lesson with our kids and telling them to start saving earlier right?
So I'm going to share with you the numbers.
Okay.
And here's a little bit of terminology if you will.
So the mean is the average of all the numbers and this can be skewed.
Okay.
You could have people who have, you know, billions of dollars that are
going to skew the number higher, cause it's the average of all the balances.
Whereas the median is that person that literally is right in the middle.
Exactly.
Let's call it half of the people have less and half of the people have more
and you get a sense of the difference when I'm going to give you this number.
And all this number is driven by a study that was done by Vanguard for
2020 and the data was accumulated compiled for 5 million 401k accounts.
Okay.
So it's a significant piece of information.
And here are your numbers.
So the average 401k balance at the age of 65 is $216,720.
But the median, the person was in the middle.
Okay.
Half less than, half more than is $64,548.
Wow, what a difference.
Right?
But the reality is that so many of those who may be even contributing to
the 401k don't have a lot and cannot necessarily rely upon that asset.
What a shame?
Right?
It's been available for so long and we really needed to do a better
job of helping you understand how important it is to put that money away.
Now, another interesting statistic was that of all the 401k accounts,
the 5 million that were looked at by Vanguard, 1.6 of those had accumulated
a million dollars or more just right.
But what does it all mean?
That we need to take a look at what we have.
We need to make sure that that number for some, it may only be 20, 30, 40, 50,000.
For some, it could be upwards of a million or more.
But when you now go to retire, you need to make sure that you're managing it properly
so it can provide whatever the lifestyle is that you wish to pursue in retirement.
So you can truly enjoy the retirement journey and to learn more about 401ks.
Take a look at our video on costly 401k mistakes.