The average worker had about $18,000 in a 401(k) at the end of 2014, and that number doesn’t reflect the range of incomes and career stage.
“Some 40 percent of 401(k) participants have less than $10,000, while 20 percent have more than $100,000,”
reports Emily Brandon at U.S. News and World Report, citing data from the Employee Benefit Research Institute.
She provides advice on how to get the most out of a retirement account by income level:
Average 401(k) Balance by Income Level
- $20,000 to $40,000: “There's an extra tax perk for people with a relatively low income who contribute to a retirement account,” Brandon writes. “Individuals whose adjusted gross income is less than $30,750 will qualify for the saver's credit in 2016 if they save in a 401(k) plan. The tax credit is worth between 10 and 50 percent of the 401(k) deposit up to $2,000 for individuals, with bigger credits going to people with lower incomes.”
- $40,000 to $60,000: “Employees earning between $40,000 and $60,000 are likely to have a little more room in their budget to save for retirement,” says Brandon. “The median 401(k) balance ranges from $16,502 among 20-somethings to $113,504 for workers in their 50s.” Some workers may want to consider opening a Roth IRA with after-tax dollars. A Roth IRA provides tax-free income at retirement age.
- $60,000 to $80,000: “Workers in this income range who have a 401(k) at work may lose the ability to claim another tax deduction for an IRA contribution,” Brandon writes. “The IRA tax deduction is phased out for individuals with a modified adjusted gross income between $61,000 and $71,000 in 2016.”
- $80,000 to $100,000: “If you are fortunate enough to make it to this income bracket, resist the temptation to inflate your lifestyle until your retirement plan is on track,” Brandon says. “Many people earning this amount still aren't putting enough into their retirement account to maintain this type of income in retirement.”
- $100,000 or more: “The downside of a large salary is that some types of retirement savings tax perks are aimed at savers with lower incomes,” according to Brandon. “For example, many high earners lose the ability to save for retirement in a Roth IRA.”
Conventional investment advice says to gradually shift money from stocks to less risky bonds as retirement age approaches.
Not so fast, says Eric D. Nelson, an investment adviser and founder of Servo Wealth Management.
“For an individual or family who is about to retire or is already in retirement and who needs a rising income stream over several decades, putting most of your money in a diversified portfolio of stocks represents your best chance for success,”
he writes in a Seeking Alpha blog that compares the “lost decade” for the S&P 500, whose value fell from 2000 to 2009, with diversified asset allocations.
The key to growing a retirement portfolio is to look beyond the biggest U.S.-listed companies that make up the S&P 500, he says. Stock holdings need to be diversified to include smaller-cap companies and foreign equities.
“The decision of not only how much you allocate to stocks but also what stocks you own has never been more important,” he says. “Start with a portfolio that emphasizes equities, diversify them broadly, stick with your plan and you just might avoid seeing a lost decade destroy your retirement.”
© 2025 Newsmax Finance. All rights reserved.