Here's How Much the Average American Is Contributing to a 401(k)

A workplace 401(k) is one of the most popular ways to save for retirement. You can sign up for this account with your employer, or you may be auto-enrolled. Money is taken directly out of your paycheck to invest and you invest with pre-tax funds, which makes saving easier because your contributions don’t reduce take-home pay as much thanks to the reduction in your tax bill. 

Unfortunately, while many people use a 401(k) to save for their future, most Americans aren’t really putting enough into this retirement savings account. In fact, a recent survey from Schwab showed the average annual contributions of plan participants totaled just $ 8,788. While this may seem like a lot of money, it’s sadly not likely to leave you with the funds you’ll need to be financially secure in your later years. 

Smiling woman putting money into piggy bank.

Image source: Getty Images.

How much money will you end up with if you make average contributions?

The amount of money you’ll end up with if you contribute this average amount can vary depending upon how old you are when you start saving.

The table below shows what you could expect to end up with if you contribute $ 8,788 per year and earn a 7% return on your investment. It also shows how much annual income this retirement investment account could produce for you if you follow the 4% rule and retire at 66. 

Age you start investing

Amount you’ll have at 66

Income if you follow the 4% rule


$ 1,890,000

$ 75,600


$ 1,310,000

$ 52,400


$ 897,017

$ 35,881


$ 603,528

$ 24,141


$ 394,275

$ 15,771


$ 245,080

$ 9,803

Table calculations: Author

Of course, most people don’t contribute the exact same amount each year. You may start out by contributing less when you’re just getting your career off the ground and increase contributions as you age. Still, the data makes clear that if you stick with the average contribution, you’re likely to end up with too little saved unless you start investing very early.

And, unfortunately, the chart actually paints a rosier picture for those with a long time to retirement as it doesn’t take inflation into account. For that 25-year-old, the inflation-adjusted value of that $ 1.89 million retirement account is just $ 540,978. 

How to increase the amount you’re contributing to your 401(k)

If you’re contributing the average amount or less and are concerned this won’t be enough to provide for you in your later years, it’s important to increase the amount of money you’re investing.

The easiest way to do this is to put all your raises to work for you. Every time you get a salary bump, increase your 401(k) contributions before you ever get a single larger paycheck. If you do this, lifestyle inflation won’t cause you to count on the extra money and you won’t miss it.

Of course, many people don’t get big raises often enough for this to make a difference. If you don’t want to count on income bumps to ensure you have a secure retirement, you’ll need to find room in your budget to increase your 401(k) contributions on your current income. Do this by tracking spending, looking for places to cut, and then making a budget that prioritizes savings as a must-pay bill and limiting your spending on other things. 

After you identify things to cut and see how much you can increase your savings, ask your 401(k) administrator to adjust your contributions so this extra money is automatically invested for you. 

Make sure you have enough saved for your future

Sacrificing more money to increase the amount you save could make a huge difference in the size of your retirement nest egg. You don’t want to run out of money as a senior when it’s impossible for you to work, so it’s far better to cut back now or find ways to earn extra income when you’re young. While it may seem difficult, it’s a lot better than trying to live on too little money in your 70s, 80s, or 90s.