Key Points
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Mutual fund company and retirement plan administrator Vanguard recently published a statistical snapshot of its customers’ retirement account balances.
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The wide variations in these amounts are made even wider by factors like age.
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Investors should focus more on their own needs, goals, and process, and worry less about incomplete looks at other people’s finances.
How much does the typical American have saved up for retirement? It’s a simple question — but there’s not a simple answer. The mathematical average of everyone’s retirement account values may seem like a fair way to come up with a figure. How — and how widely — all of the underlying numbers used in the calculation of this average are dispersed, however, leads to a misleading result. Namely, it’s much, much more than the majority of Americans actually have tucked away. Never even mind that older Americans should (and broadly speaking, do) have more saved than younger people. They’ve had more time to accumulate and grow their nest eggs, after all.
That’s why when Vanguard published its “How America Saves 2025” report in June, it offered two different benchmark figures for a range of ages. One is the mathematical average, or mean, while the other is the median, or midpoint amount.
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But which (if either) should you personally worry about the most?
The difference between the two numbers
Vanguard operates a wide family of mutual funds, and also serves as the administrator for a huge number of corporate retirement plans. It’s not the only company of its kind: Fidelity and Schwab do the same things, for instance. But, Vanguard’s review of the 4.8 million retirement plan accounts that it administers does provide a pretty good representation of how all of America saves, and its findings will likely be in line with the retirement accounts collectively held by other custodians.
So just how much do Americans have saved up for their retirements? As of the end of last year, the average workplace retirement account’s value stood at $148,153, but the median was a much more modest $38,176.
As a refresher, an average is the sum total of all the numbers in a data set that’s then divided by the number of distinct data inputs used to come up with the sum. That usually makes it a meaningful big-picture snapshot.
This is different than a median. The median is simply the value of the number found at the very middle or midpoint of a size-sequenced/ranked series of numbers. In other words, in the case of the set made up of Vanguard’s workplace retirement accounts, half of them had more money in them than the mean of $38,176, while the other half had less.
This raises the question: How is the average so much bigger than the median number? The answer is that a relatively small number of these retirement accounts have unusually large amounts of money in them, which skews the average upward. Although Vanguard doesn’t offer a great deal of detail on this dynamic, it does note that only 16% of its retirement plan accounts are worth more than $250,000, while 28% are worth less than $10,000.
Which figures should matter to you?
The bigger question remains, though: Which of the two numbers means the most to you?
The answer is neither.
Comparing yourself as an investor to other investors is a tricky business. There’s always more to the story. There may be a significant inheritance on someone else’s radar (or yours), for example. Some of these investors may have more than one retirement account, and not all of those may be in Vanguard’s care. Some people have been lucky enough to work for unusually generous employers that contribute more to their workers’ 401(k) accounts than the employees do themselves. Comparing their situations to yours isn’t fair or meaningful.
Then there are the age differences among all the workers that Vanguard’s 2025 savings study is considering. While the overall average may be $148,153, for the 25-to-34-year-olds in this pool, the mean is a mere $42,650. For the 65-and-up crowd, the average is just under $300,000. Meanwhile, the median numbers for these two groups at opposite ends of the adult age spectrum are $16,255 and $95,425, respectively.
Image source: Getty Images.
So how do you know how you’re doing for you? Well, that’s just it — you don’t. Your personal yardstick could be anywhere in between these figures, although realistically speaking, almost everyone arguably will need significantly more than any of these amounts to secure a comfortable retirement. Insurer Northwestern Mutual reports that Americans believe they will need an average of $1.26 million in their nest eggs when they reach retirement to live comfortably though their golden years. Given what we know about Social Security, and the amount of annual income a person could reasonably withdraw from a stash of this size over 30 years or so without completely depleting it, that number is arguably in the right ballpark.
Most people, of course, never get anywhere close to this amount. And that’s OK. You can still enjoy your retirement with less.
Focus on the process at least as much as you focus on the numbers
The irony? While most people are worrying about the collective-but-misleading numbers, they’re not focused enough on the important things they can control… like the process of saving itself.
Don’t misunderstand. Any goal is better than no goal at all. People with clear goals tend to achieve better results than people without them. And once you’ve set a goal for a specific target date — say, retiring when you turn 67 — you can then work your way backwards from it and figure out how much you need to save between now and then, and determine how much your retirement portfolio needs to grow in the meantime.
Taking deliberate and decisive actions in the meantime, even without a specific goal in mind, will also help you achieve a worthy result. For example, if you habitually and reliably invest 15% of your annual salary into a market-tracking index fund for at least 30 years, you will likely be able to maintain your standard of living after you retire.
Yes, that may require some serious scrimping and saving, and you can’t know for sure how big your nest egg will be at the end of that time frame. You can at least control the process, though, even if you can’t precisely control the outcome. So, focus on the process and trust that the stock market’s future over the long haul will look something like its history.
All the same, though, you might want to aim to do better than any of Vanguard’s median and average retirement savings figures for your particular age bracket. None of those numbers put you on track to fund the sort of retirement you’re likely dreaming of.
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Charles Schwab is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab and recommends the following options: short September 2025 $92.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.
