Average 401(k) Balance by Age (2025 Edition)

Introduction: Why We Love 401(k)s (0:00)

Brian: Average 401(k) by age, 2025.

Bo: Brian, I am so excited. This is one of our favorite shows that we get to do every single year because if we’re going to be honest, we love 401(k)s.

Brian: Well, I mean, there’s so much to love about 401(k)s. We think about millionaires—you can’t—I got to tell you, the majority of millionaires I meet, they have very large 401(k)s despite what social media says. But there’s actually some benefits that are tangible on 401(k)s that we should cover.

Benefits of 401(k)s (0:38)

Bo: That’s exactly right. Some of the benefits are number one, they are tax-advantaged meaning that when you put money into your 401(k), you can either save money on your taxes today or you can save money on your taxes in the future. It’s one of the legally best ways to hide money from Uncle Sam.

Brian: And number two, get that free money! Woo!

Bo: I love it. It’s not just this kind of stuff, but it’s also the behavioral stuff that people love about 401(k)s. Brian, you say this all the time. One of the best ways that someone can set themselves up for success with their 401(k) is just by doing it. Because as soon as you enroll, as soon as you opt in, you automate your financial life to start building for the future.

Brian: Well, I mean, and don’t sleep on the 50 to 100% guaranteed rate of return. And I like the automation because it actually makes the good habits that much easier. Automatic for the people. If you can already just set up every month without you thinking about it, you’re going to be putting money towards the future. How do you go wrong when things like that are set up?

Pay Yourself First (1:37)

Bo: And when you do this, when you’re doing in your 401(k), it naturally puts you in the position to pay yourself first. If you are saying “okay, out of every single paycheck, I just want X dollars or X percent to go into my financial future,” it’s really, really, really hard to screw that up.

Buy and Hold Behavior (1:51)

Brian: And then the last thing—you know, we just want to make a point on buy and hold. I mean, if you typically look at the behavior of the average investor, people are such emotional creatures that they jump in and out with market volatility. Well, here we are with a 401(k) which already restricts your access until you reach retirement age—or should restrict it. It’s going to be a kind of a volatility shock absorber. It’s going to allow you to actually buy into these volatile markets, have the incentive to stay consistent, and it’s going to help you with that buy and hold behavior that creates success.

The Earlier You Start, The Easier It Gets (2:25)

Bo: Now, what I love about it is most people have access to this when they start their very first job, when they start out at the very beginning of their career. And what’s beautiful is that the earlier you start, the younger you are when you begin this, the easier the work of building wealth becomes, the less that you actually have to save on your path to financial independence. If you think about this, a 20-year-old that wants to be a millionaire only has to save $95 a month to do that. But if you wait until you’re 50 before you start taking it seriously and you want to be a millionaire by the time that you retire, you have to save over $3,100 a month just to get to that same million.

Brian: Well, the thing that I love is if when you look at this visually is that for the 20-year-old who starts saving and investing, by the time they reach retirement, there’s a good chance that 95% of their account value will be your army of dollar bills doing all the heavy lift, meaning the growth and the income of the account. If you’re a person who starts in your 30s, it’s okay. You’re still 86% of the account value is likely the growth and income. Even for somebody who starts out and says “well, you know what? I’m just now finding The Money Guy Show. I’m in my 40s. What does that mean for me?” A 40-year-old can start out from zero and still by retirement 68% can be coming from the growth of your assets and your investments. So don’t sleep on that. We tell you time is going to be the powerful component that maximizes all the compounding growth that is coming your way to let your money work harder than you can with your back, your brain, and even your hands.

What If I Don’t Have a 401(k)? (3:58)

Bo: You might be saying, “Okay, guys, guys, guys, I hear you and I love this, but I don’t actually have access technically to a 401(k).” Well, that’s okay. Everything we’re going to talk about today is going to be translatable across additional retirement accounts. If you’re someone who potentially is like a teacher or in the medical field or a governmental worker, you might have access to maybe like a 403(b) or maybe you might even have access to a 457 or you might be a government employee and you get to participate in the TSP, the Thrift Savings Plan. So everything we’re going to talk about today, if you have access to one of those types of plans, these facts also apply. But it’s not just for folks who only have employers, Brian.

Solo 401(k)s for Self-Employed (4:45)

Brian: Yeah. Well, I mean, every one of those plans you just laid out—the 403(b), 457, TSP—they still kind of are structured where they let you save at lump sum. But in the past, self-employed individuals, Bo, had to go a different track. And the government had set up where you could do like SEP IRAs, SIMPLE IRAs, and you always felt like a second-class savings citizen if you were self-employed. You’re like “I wish I had more of the tools that corporate America has, what they’re using for saving for their employees.” Guess what? At some point—I mean, it hasn’t been around that long, but it’s been around long enough—that the solo 401(k) allows entrepreneurs and anybody who’s got side hustle income or self-employment income, you now have the opportunity to create something that’s actually better than the corporate structure. And the fact that the government has structured this where all that annual compliance testing and tax filing until your account gets to a certain size, it’s out of here.

Bo: That’s right. You don’t have to do it. So solo 401(k)s are great retirement vehicles too.

The Numbers: Fidelity’s Study (5:43)

Brian: All right. So we love 401(k)s and we love how powerful they are. We’ve already laid out the advantages that exist there. Now let’s shift, Bo. Let’s start talking about the numbers. Let’s start talking about okay, how does the average American use this tool and where are they at? And what’s wonderful is Fidelity did a huge study and they’re one of the largest 401(k) providers in the world. So when we think about who has access to data and access to information, Fidelity would be that group. And what’s amazing is they went and looked at all the different plans they managed and all the different 401(k)s that they have access to and they were able to break it out by age—what’s the average 401(k) balance for a participant inside of a Fidelity 401(k) plan.

Average 401(k) Balances in Your 20s (6:22)

Bo: And this is what we found. For 20-year-olds, those who are 20 years of age, average 401(k) balance right now is about $4,400. For 25-year-olds, the average 401(k) balance a little over $15,600. And for 30-year-olds, the average 401(k) balance about $35,000. Brian, are these numbers impressive, not impressive? Do you like these? How do you feel about this?

Brian: I mean look, this is the decade to get serious about this because your 20s is the decade you should be investing in building assets, not liabilities. Because I got to tell you, it troubles me that you’re a billionaire of time at this age. And yet people are not even reaching a savings rate.

Half of Americans Never Invest Outside Their 401(k) (7:10)

Brian: And here’s a stat that will freak you out. I put this in conjunction with when we get data from the government that shows that really people only have assets in two places—their home and then now it’s starting to make me think only in their employer-provided 401(k)—because we find out that half of Americans report never having invested outside of their 401(k). Meaning that this is it. You know, you basically got your house and then you probably—because you didn’t want to miss out on that free money from your employer—we want you to go beyond that. And that’s why I love that we get to do content that gets you outside of that so you can maximize every dollar that comes into your army of dollar bills.

Bo: Yeah, we know if you’re a financial mutant and you’ve been following the Financial Order of Operations, not only are you going to take advantage of your 401(k), but you’re also going to be using HSAs and Roth IRAs and other types of investment vehicles. So what we want to compare for you is where should you be? Where should your liquid net worth be when you look at all of your investments, not just your 401(k)? And we want to compare that to the 50% of Americans who only have access to a 401(k).

Where Should You Be? Money Guy Mile Markers (8:16)

Bo: And so you may be asking the question “well, how much do I need?” And ultimately, the answer is it depends. It depends on your unique situation. But what we want to do is we want to give you some mile markers, some posts to kind of walk you through where you should be on your journey. And we know we’ve shared this on the show a ton that by the time that you’re 30 years old, we say that we want you to have about one times your annual salary saved up. And I think that’s pretty common knowledge. I think Fidelity agrees with that. We agree with that. I think it’s not an incredibly difficult thing for most folks to do by the time they get to age 30.

The Gap at Age 30 (8:54)

Brian: So with that, if you put that context in there, we showed that the Fidelity data was around $30,000—a little over $30,000. And we know the median income is over $50,000. There seems to be somewhat of a disconnect there.

Bo: So we know if we want to start at age 30 with about one times our salary, and ultimately if we’re trying to work towards age 65—a traditional retirement—we want to be able to replace 80% of our pre-retirement income with a 4% withdrawal rate. Our goal by the time that we get to financial independence, we get to retirement, would probably be somewhere around 20 times our annual salary. So we got to figure out how do we go from one times our salary at age 30 to 20 times our salary at age 65. What are the mile markers? What are the marks we ought to hit?

20s Benchmarks (9:40)

Bo: So if we think about folks in their 20s, we know that right now the median income for someone in their 20s is about $54,000—almost $55,000 a year. Well, if you remember, the average 401(k) for someone who’s 20 is about $4,400. At 25, it’s about $15,600. Brian, you just alluded to this. The average 401(k) balance is about $35,000. If you’re going to be a financial mutant, you want to hit the Money Guy mile marker, we actually want your total investable net worth to equal one times your annual income. And if you’re just a median income earner in this country, that means that you should have about $55,000 in savings and investments by the time you get to age 30.

Focus on Behavior in Your 20s (10:25)

Brian: Well, and that’s what I want 20-year-olds to know. It’s okay if you’re aspirational. You know, we tell you we love for your savings rate to be 25%. But we understand when you’re just starting out, it’s okay if you’re just doing 5% initially just so you get that employer match or 6% to get loaded up on the employer match from your 401(k). Just do something. That’s right. Because a little is going to go a long way. And that’s why we wanted to bring it back to—if 20-year-olds are feeling like they watch this content, they feel like they’re a little behind, how can they catch up? We ought to give them what they can focus on.

Bo: Yeah. So what are the things that really ought to consume your attention? Well, in your 20s, we really think it’s mostly about behavior. Are you beginning to build and establish the good habits that are going to carry you through the rest of your financial life? And the first one seems so common sense, and yet so many people miss this. Are you living below your means? Are you making sure that whatever you have coming in is more than you have going out? If you’re not at least doing that, you’re missing out on the very first ingredient of wealth creation.

Discipline is Key (11:26)

Brian: Well, it’s discipline. I mean, that’s one of the things—if you can—I’ll go ahead and tell you when we work with clients, prospects come our way and we work with clients, you see an abundance of people who have made really good disciplined decisions throughout their entire financial life. If you’re constantly running up credit card debt, if you’re constantly just making minimum payments, you’re never ever going to get ahead. So I just want to give you that stark honest truth so that you can start living that disciplined life and figure out how do you create margin in your life so your money can actually start working and giving it that third component which is the time to build upon itself.

Don’t Accumulate Debt (11:54)

Bo: Now I love it—you just said it. So most people, they don’t live below their means. They do exactly what you said. They start getting in debt. So if you’re in your 20s and you’re trying to think about what are the things I should focus on, number one is don’t allow your debt to begin accumulating. A lot of folks have to graduate with student loan debt. It’s a new reality for our graduates coming out. What we don’t want you to do is come out of school and start your career and have student loan debt and then you start adding the auto debt and then you start adding the credit card debt and then you start adding the consumer debt. And all of a sudden you recognize in this decade when you should have been building assets, all you were doing was digging a hole that got deeper and deeper and deeper. So in your 20s, you want to make sure you’re not falling into that trap.

Measure Twice on Large Purchases (12:41)

Brian: And that leads right into measure twice on large purchases. This is because you don’t want to make a mistake on—I see it all the time. You know, you graduate with college, you feel like, you know, maybe you grew up in humble beginnings, you reward yourself with that brand new car payment. We see average Americans now doing close to 66 months on financing, payments over $700. Guys, don’t go fall into that consumption trap. Measure twice on those large purchases because you do not want to be driving your wealth around. You want to have it in the net worth statement.

Start Saving and Investing (13:13)

Bo: Yeah. In your 20s, we said, “Okay, don’t live beyond your means. Don’t go into debt. Don’t screw up the large purchases.” How about one do? Here’s a big do to focus on in your 20s. Do start saving and investing. Even if it’s small, even if it seems insignificant. What’s amazing about your 20s is that even small, insignificant numbers when applied through time can become incredibly significant.

The Wealth Multiplier (13:34)

Brian: Because it’s wild, Bo. We even came up with this idea, this concept called the wealth multiplier. If you think about it, for a 20-year-old, every dollar that comes into your control has the opportunity to become $88 by retirement. But here’s the thing, that excitement, it can also be something that cuts the other way. By 30, you see every dollar has potential to be $23. Still really exciting stuff. But notice by the time you’re 40—seven. So a sevenfold increase is still important. But by the time you get to my age, now you’re getting below $3. This is why time can be your friend or it can be your foe. Make sure you go download moneyguy.com/resources, our wealth multiplier, to make sure you’re on the right side of this.

Understanding Your 401(k) in Your 20s (14:19)

Bo: All right, so we’re talking about the 401(k) and how powerful it can be. So for those in your 20s, what are the things as it relates to your 401(k) that you should really be familiar with, that you should really understand? And we think that there’s three of them. Number one is your match. Number two is your contributions or what you’re putting into the plan. And number three is your investments.

The Match: Free Money! (14:43)

Bo: So let’s talk about the first one first, Brian. Let’s talk about the match because this is one I know that gets you super super excited.

Brian: Yeah, and I’ve already alluded to it. I even—my excitement got too much and overwhelmed me in the fact that I burst out with “you have to love the free money!” Yes, your employer is incentivized to give you matching or profit sharing or even just—you don’t even have to put money in. They just put money into your plan so they get to do even more options with their plan for themselves. Don’t sleep on the free money. That is so powerful. That’s why it’s number two in our Financial Order of Operations. And would you believe that right now the average employer contribution is 4.7%? So if you’re someone who’s just taking advantage of the match, just putting money into your plan, there’s a good chance that your employer is putting nearly 5% in there on your behalf.

Bo: And this is often structured as like a dollar-for-dollar match. If you put in $1, your employer will put in $1. Maybe it’s a 50% match that if you put in 6% of your salary, they’ll put in 3%. And either way, you can think about this like a 50% or 100% rate of return on your dollar. So if you’re not taking advantage of—if you’re leaving money on the table, you are literally walking away from free money.

Types of Employer Contributions (16:00)

Bo: You already alluded to this, Brian. There’s a few different types of ways that your employer can put money into the account. We just talked about this one. It’s matching. It’s where you have some skin in the game and your employer says “okay, if you’ve got skin in the game, I’ll put money in also.” But that’s not the only type of contribution.

Brian: Yeah. We also have non-elective. A lot of people are—you know, if you think about it, it’s not uncommon to see safe harbor 401(k)s. Well, safe harbors give really big flexibility to your employer if they just load you up with the money very early on. Some plans you have to put nothing in. So you can do non-elective contributions. It means that even if you don’t contribute, they’ll put money into your plan.

Bo: And then there’s also profit sharing contributions where the employer says “okay, in addition to the matching or in addition to the safe harbor, maybe the firm, the company, the enterprise is doing well, so we want you to share in a portion of that. So we’re going to put in additional contributions on your behalf.” We have one plan, Brian, that is so generous that if you as a participant put in 5% of your pay, you actually get a total of 15% going in on your behalf across the matching contributions and profit sharing. So you need to understand all the different ways that your employer can put money into the plan. But then you also need to understand how do you put money into the plan? What do your contributions look like? And this is generally broken down into two different pieces. Number one, how much do you contribute? Number two, where does my contribution actually go? What part of the plan do I actually put my dollars into?

Average Contribution Rate (17:32)

Brian: Now, this next one, I got excited and I’ll just go ahead and reveal it for you. We looked into it because Fidelity once again was tracking all this data. The average contribution across all ages for 401(k)s according to Fidelity is 14.1%.

Bo: Amazing. We’re almost 10% off of our 25% goal.

Brian: But stop. You can’t have a celebration on this because remember we showed you just a few slides ago, employers are putting in close to 5%. So if you actually—and by the way, this number 14.1% does include the employer contribution. That means the typical American is actually putting in less than 10%. Now, yet we all want a retirement. We all want to own our time, but yet we’re not willing to put in the effort of actually going beyond that 9%. We can do better than that.

39% Increased Their Savings Rate (18:17)

Bo: And there is some silver lining here. We actually know that 39% of people increased their contribution rate over the past year. So folks are getting better at saving and we want you to do that. But remember, we don’t want you to get your order out of line. Brian, can you hold the thing up again? If you have high interest debt, we don’t want you focusing on the 401(k) yet. If you have not fully built an emergency fund, we don’t want you focusing on the 401(k). If you’ve not fully maxed out your Roth IRAs, your HSAs, we don’t want you focusing on the 401(k). But if you are in step six and you are following the Financial Order of Operations, this is the great time for you to begin thinking about “okay, how can I start contributing? How can I get better? Maybe I can’t do 25% right out of the gate, but maybe I can start at 10% and next year I can go to 11% and the next year I can go to 12%, and I can slowly through time increase it and ultimately work towards that 25% goal.”

Increase With Pay Raises (19:17)

Brian: Yeah. I mean, it’s okay if you start with just your employer match. It’s just as you get pay raises, as your income goes up, try to do more. I mean, that’s the thing—I encourage people as life happens, as you have more success, make sure that you’re also updating those 401(k) contributions so that it is expanding as well. So you’re just not stuck at that original 5 to 6% that you set up once you lined up your first 401(k).

Pre-Tax vs. Roth (19:42)

Bo: So that’s your contributions in terms of how much you contribute. The other thing you have to think about is which account do I contribute to? Which side of the equation? Because 401(k)s generally come in two varieties. You can do a pre-tax 401(k) where you put money in today and you get a tax benefit today and when you pull it out in retirement you pay taxes. Or you can put it in on the Roth side. I don’t get a current year tax benefit but the dollars will grow tax-deferred and then if I pull them out for qualified reasons or qualified circumstances later on in retirement, I can actually pull them out completely tax-free. So the question becomes—how do I decide? How do I know if I do pre-tax or Roth?

Tax Bracket Guidelines (20:19)

Brian: There’s several things that go into this. Obviously, your age—I will tell you the younger you are and the more time you can let your money work, that is going to lean towards becoming tax-free growth, like a Roth account. But we also put an income component to it as well because if you’re starting out and you’re not in your peak earning years, more than likely your tax rate is under 25%. Under 25% tax rate lends itself to being Roth-friendly, meaning that wouldn’t it be great if you could pay really low taxes right now, let that money compound completely tax-free to take advantage of it. I should probably get in and enjoy and maximize that.

Brian: However, if you’re somebody and your income starts going up and your marginal rate—both your federal as well as your local state that you pay income taxes—if you add up what the next dollar tax for each one of those, that’s your marginal tax rate. And if it’s between 25% and 30%, that’s where those other elements like your age and your goals are definitely going to start leaning into—because like for a 25-year-old who’s in the 26% bracket, you probably—that’s going to—you might want to go into Roth because you’re young. But if you’re somebody who’s 60 years of age, you might want to lean towards more of the traditional because you’ll have opportunities once you quit working to do Roth conversions or something. And then if you’re in the high income situation and your combined marginal rate is greater than 30%, we think that there’s potential down the road for you to take the tax deduction now and then later on once you lose all your earned income, have an opportunity to do Roth conversions or even at least have the opportunity to pay a lower tax rate. So it makes more sense—take advantage of the arbitrage of “take the tax deduction now and then we’ll figure it out once you get closer to retirement.”

Your Investments: Don’t Default to Cash (22:06)

Bo: All right, so we’re thinking, we’re talking about the things you need to know about 401(k)s. We covered that you need to know about your match, you need to know about your contributions. The other thing we want you to know is about your investments. A lot of times, and it’s super sad when we see this, someone won’t take an active role in at least making the election in their 401(k). So if you’re someone in your 20s or your 30s and you’re just letting your plan default to the cash option or the stable value option, there’s a really good chance that you are missing out on a huge opportunity. Remember, we’ve already shared the wealth multiplier would suggest that for a 20-year-old, $1 has the ability to turn into $88. Well, that assumes that that $1 is invested, that that $1 is working for you. If you have it sitting in a money market or a cash equivalent, that $1 is not going to turn into $88. So you don’t have to make this more complicated than it is. A lot of plans have really good low-cost target retirement index funds. All you have to do is decide two things. How much can I save? When do I want to retire? When do I think I’m going to need this money? If you can just answer those two questions, you can set it and forget it and let your dollars start growing through time.

Be Aggressive in Your 20s (23:15)

Brian: Yeah. In your 20s, I want you—because you’re not supposed to touch this money for decades in the future—we want you to be more aggressive. Don’t let the volatility or the news media scare you into being super conservative or going cash only. Consider looking at what the long-term investment opportunity is and be somewhat aggressive with it.

The 30s: Average Balances and Goals (23:30)

Bo: All right, Brian. Now let’s talk about the 30s. Again, Fidelity did this huge survey looking at average 401(k) balances broken down by age. And according to Fidelity, for those that are 30, the average 401(k) balance is just under about $35,000 a year. By the time that you get to age 35, the average 401(k) balance in this country is about $59,000 per year. And for the average 40-year-old right now, the average 401(k) balance is about $91,000 per year. And so the question becomes—if I’m in my 30s, if I might be in that messy middle stage, is that how much I should have or where should I be or what should my numbers look like?

Money Guy Mile Markers for the 30s (24:15)

Brian: Yeah, let’s—you know, it’s great that we actually have pulled up and we have a great guidance here because we shared earlier that when you’re 30 years of age, you know, we say it, Fidelity says it, one times your earnings is probably a good aspirational goal to shoot for. By the time you enter into becoming a 40-year-old, you know, as you’re graduating from 39 to 40, we’d like it to be three times your income. There is a transition. So your money starts growing and building. So we could actually put numbers if we knew what the median income was for typical workers. So what you’re thinking here is “okay, I got to go from one times to three times. I got to triple—what’s going on?”

Bo: So if we know that the median income for someone in their 30s right now is about $86,000, what are those Money Guy markers? What are those mile markers that we ought to be hitting? Well remember we said that the average 30-year-old 401(k) balance is about $35,000. But we think that your total investable net worth should be closer to $55,000. That was the median income for a 30-year-old. Well, by the time that you get to 35, we think that your total invested assets should be about $146,000. And by the time you end your 30s, you should have an average liquid net worth—your liquid net worth should be about three times your annual income. And if we’re just going to use the median income of Americans in their 30s of $85,000, that means that your investment portfolio should be a little over a quarter of a million, right at $257,000. So average Americans are not quite aligning with our financial needs.

The Power of Compounding Growth (25:46)

Brian: Well, I think people are going to see this and they’re going to immediately yell at the screen, “this is where you lost me” because they see us go from $55,000 for a 30-year-old to somehow $257,000 by the time you reach 40. Guys, I’ll go and tell you this is the power of compounding growth. You don’t have to do this alone. This is not only you putting the money in there. This is about your army of dollars actually putting some money in and growing upon itself over time. We have a great case study or example to show you this might be a lot easier so that you’re not stuck like the typical American avoiding and sticking your head in the sand. You’re actually getting in there, getting the money working, and letting your compounding army of dollar bills do all the heavy lift as well.

Bo: Yeah, if you think about that nearly $55,000 that you would have had at the end of your 20s, if you just let that grow at 8.5% without adding another dollar to it, just letting those dollars grow, it would grow from $55,000 at age 30 all the way to $128,000 by age 40. What you’ve done is you are halfway to where you’re supposed to be just the dollars that you saved in your 20s got you halfway there. That means that you would only need to have about a 10% savings rate in order to save that additional 50%. Now, we’re not suggesting that you drop your savings rate. What we are showing is that if you do the hard work early on, you let your army of dollar bills start working for you, the path gets easier and easier and easier.

The Messy Middle (27:14)

Bo: Now, likely in your 30s, we talk about it all the time. This is the messy middle. This is when life begins to pull you in a thousand different directions. That’s why we want you shooting for 25%. But if you did what you were supposed to do before you got to the messy middle, there’s a good chance you’re going to have freedom and flexibility to navigate the messy middle differently than your peers.

Average American Doesn’t Start Until 33 (27:35)

Brian: But we’ve looked into the data and the research shows that the typical American doesn’t start saving and investing until age 33. That’s right. So we’ve just shown you if you could come into this whole investment at age 30 with this sum of money, it has the chance to double upon itself over the decade. This is not going to get easier if you stick your head in the sand and defer this. I would encourage you—if you’re like the typical American and you’re 33 years of age, you’re just now discovering this—you can still do it. Your compounding opportunity is massive, but it’s not going to get easier. Every day you delay, this is going to get harder and harder. So make sure you start putting money to work. Go beyond the American 9%. Let’s get it up to the 25% that we talk about all the time on The Money Guy Show. There’s a reason we want to help you reach your success.

What to Focus On in Your 30s (28:24)

Bo: So what are the things that we ought to focus on in our 30s? Well, the first one is we really ought to focus on optimizing. And one of the number one most powerful, most impactful, most important things that you can optimize in your 30s is actually reaching that 25% savings rate. Maybe you don’t start there at 30, maybe you’re only at 15%, maybe you’re only at 18%, but if you can focus on the optimization and focus on getting to 25% as quickly as you can, you will be amazed how powerful those dollars can be for you.

Reassess Roth vs. Traditional (28:59)

Brian: It’s also important—this is the age you’ve probably gotten a few promotions, your income’s going up. You know, we shared in the 20s that this is where you might be in a lower tax bracket. It makes sense for Roth. Don’t sleep on the fact that you probably need to reassess the Roth versus traditional as your income tax rates go up, as your earnings go up. Make sure you’re staying on top of all that.

Understand Vesting Schedules (29:20)

Bo: And then the third thing that we want you to focus on, and this is specifically as it relates to your 401(k), is we want you to understand your vesting schedule. Now, there’s a good chance a lot of people change jobs in their 20s and even in your early 30s. There’s a chance that you still might change jobs, change career paths, but you’ve likely been working and building and you’ve likely got some dollars that your employer has put into your 401(k) on your behalf. And you want to make sure before you make a job change, you weigh the cost—the all-in costs—of making that decision. And one of the things that employers are able to do in order to incentivize you to stay with them is they can add a vesting schedule to contributions that they put into the plan. Which means that it might not all be yours day one.

Types of Vesting Schedules (29:51)

Brian: There are a few different types of vesting schedules that we see. Now Brian, you mentioned earlier you talked about safe harbor contributions. These are contributions that the employer puts in automatically oftentimes whether you put money in or don’t put money in. Most of the time these are 100% vested. Now, not every time. You’ll want to check your plan document because these can have a vesting schedule over a certain amount of time, but most often these contributions are 100% vested. So that’s important. Pay attention. You’ll like the word safe harbor. The next thing is cliff vesting. This means that you basically go from 0% to 100% but over a certain period of time and it’s a shorter period of time. That’s why people will do cliff vesting if after two years you go from zero to 100%. But what’s more popular is what’s called graded vesting and this is where you’ll see every year you pick up an additional 20% more vesting. So typically after five years of being there—you know, six years—you’re fully vested in the funding from your employer. Understand this verbiage, understand how this impacts you because it’s going to be very important to know how much money you get to keep, but also your career and employment decisions to see if you don’t make a bad decision in that decision matrix.

Bo: Yeah. When you change jobs, there are other costs associated than just the salary that you’re losing. So you want to make sure again you measure twice, cut once when it comes to making those decisions.

The 40s: Approaching the Finish Line (31:34)

Bo: All right. So now let’s talk about the 40s, Brian.

Brian: Yeah, 40s are important because if you’re—you’re either going to be bitter because you’ve missed out on what compounding growth, or this is going to be where you start celebrating that your money is starting to grow upon itself exponentially, making the work less hard for you in the future.

Average 401(k) Balances in Your 40s (31:57)

Bo: So when we think about average 401(k) balances—again, this is a study done by Fidelity Investments in the fourth quarter of 2024—the average 401(k) balance for a 40-year-old in this country right now is about $91,000. For a 45-year-old, the average 401(k) balance is about $131,000. And by the end of the 40s, by age 50, the average 401(k) balance for an American in this country is about $176,000. So Brian, as you’re thinking about this—approaching 50, is approaching that mile marker—do you think $176,000 is where most people probably should be?

Brian: No, I mean because—retirement’s right around the corner at this point. And you’re hoping that you can replace not months but literally years of your life. Your money needs to work harder than you can. And people are quickly—I mean you’re celebrating that you’re six figures because you’re like “yeah, that would be a nice car. That’d be a nice house.” But no, you need to be thinking “no, I need an enterprise value of assets that’s going to replace my labor.” I don’t know that that gets it done.

Money Guy Mile Markers for the 40s (33:00)

Bo: So when you’re thinking about your Money Guy mile markers, we know that at age 30, we wanted to have one times our annual salary. At age 40, we want to have three times. And we’re ultimately working towards 20 times our annual salary for financial independence. If you’re looking for the mile marker where you ought to be at age 50 across all of your investable liquid wealth, we want you to be at 6.4 times your annual salary. So if we take the median salary for those in their 40s in this country right now, it’s about $101,000. So by that metric, if you are the median income earner, where the average American has about $91,000 in their 401(k) at age 40, we said to have three times the median income at age 30, you want to have about $257,000. So now as we get into our 40s, we work through our 40s, the average 45-year-old has a 401(k) balance of about $130,000. If you’re following the Money Guy mile markers, we actually want your total portfolio to be worth about $445,000. And by the time you get to age 50, where the average 50-year-old in this country has a 401(k) with about $176,000 in it, we think that you should be shooting for about 6.4 times your income, which for the median income earner would be about $650,000.

The Fork in the Road (34:20)

Brian: Well, you can see how this separation—remember earlier I said it’s a fork in the road moment. Think about for our financial mutants. You come into your 40s with $257,000 or maybe more if you’ve really thrown it out there and you’re like “watch what happens when this money grows upon itself.” Because when I see a number of—we’re trying to go from $257,000 to $648,000 in a decade, that’s wild growth. But then when I back into and have the context of understanding that if I just had the $257,000 by the time I get to 50 years of age, it likely has grown to $543,000 without saving another dime. And then that means “wait a minute, my savings rate only has to be like 7%. And I’ve still reached the goal.” This is why a lot of you are going to watch this and you’ll be behind. Use that as motivation because it doesn’t mean that your situation’s dire. It just means you have a little bit more work you need to do on increasing your savings and investment rate so you can catch this up because it’s not going to get easier. It’s going to get harder as you’re starting to lose less and less time for the money to grow and work upon itself.

What to Focus On in Your 40s (35:25)

Bo: Now, what’s beautiful about 401(k)s is they’re not all that complicated. We’ve covered a lot of the basics in our 20s and our 30s. So what do we begin to focus on in our 40s? What are the things that we begin to focus on? What are some of the nuances that may be available to us? Well, one of the things we want you to do is as you get into your 40s, we want you to begin fine-tuning your specific plan. I mean, we say all the time, we want you saving 25% of your gross income. 25% of your gross income. As your income changes and as your financial circumstances change, one of the questions we want you answering is “well, can I actually count the match? Can I count the money my employer’s putting in? Is that part of my 25% or am I supposed to be doing 25% on my own?”

When to Count the Employer Match (36:11)

Brian: How do people answer that question? It depends on how close you are to the social safety net. So we’ve gone ahead and defined—we’ve taken into account a lot of this. If you’re a single individual, if you make over $100,000, you need to only count your funding—don’t count your employer match. If you make under $100,000, you can count the employer match. That’s for single individuals. For married couples, $200,000. Like I said, it’s all tied back to the social safety net. So pay attention to where you are from an income standpoint. If you’re under, then embrace the fact that you get to count your employer. Use that as motivation to see if you can keep growing this thing even more.

Can You Max Out Your 401(k)? (36:50)

Bo: Again, in your 40s, we want you fine-tuning. So maybe this is your story. Maybe when you were in your 20s, you just got your employer match. You put in 5% and they put in 5%. Then you got to your 30s and say “you know what? I’m going to double it. I’m going to start saving 10% of my salary.” And you felt so great about that. But now you’re in your 40s. One of the questions we want you asking at this stage of your life is “can I actually max out my 401(k)? Can I actually go up to the governmental limits that they make available to me to put money in my 401(k)?” And if you’re in your 40s, if you’re below 50 years of age, in 2025 this year, you can actually defer $23,500 of your salary into your 401(k). That’s the maximum allowable amount the government’s going to let you put in there to take advantage of that tax-incentivized growth. So are you taking advantage of that or are you leaving some money, leaving some opportunity on the table?

Step 6 and Step 7 (37:40)

Brian: I mean, we still want you prioritizing the Roth IRAs, the health savings accounts, because that’s step number five of the Financial Order of Operations. The tax motivation is very powerful, but I think by the time you’re in your 40s, you’re probably exceeding step five and you’re also in step six, which is hopefully having you max out your retirement options in your 401(k).

Bo: And then as you do that, Brian, you get into step seven. You get into hyper accumulation. One of the questions we get all the time is, “Okay, if I’m in hyper accumulation and I’ve maxed out my 401(k), I’ve done my salary deferral, what comes next? What options are available to me after?”

After-Tax Contributions and Mega Backdoor Roth (38:16)

Brian: I mean, we always like—and in step seven, especially if you’re one of these people that thinks you’re going to need access before 55 for 401(k), 59½ for all the other retirement accounts besides 457 by the way that don’t have those—but it is one of those things where you might want to have some taxable brokerage accounts. If you’re also—if you’re a really high income person and you have the right structured account, you might get excited about finding out that you have after-tax contributions which can set up backdoor Roth conversions, mega backdoor Roth conversions, a lot of cool planning opportunities. So pay attention as you go beyond 25%. How do we need to structure those accounts to maximize all the tax benefits but also to use appropriately or best for you in retirement?

Bo: Yeah, a lot of people don’t realize—they think about when I put money in my 401(k) I can either do pre-tax or Roth—they don’t recognize there’s actually a third contribution type called after-tax contributions. And even though $23,500 is the most you can put into pre-tax or the most you can put into Roth, in this third type of contribution bucket, you’re not limited. You can actually take this all the way up to the section 415 limits of $70,000. So if you are a very high-income individual or you do have an employer that has a very robust plan with after-tax options, between your contributions on salary deferral, between your employer safe harbor or profit sharing or matching contributions and after-tax contributions, you might actually be able to get $70,000 a year into your 401(k) in a tax-advantaged manner. So you want to make sure as you’re fine-tuning and customizing your plan, you’re asking the question “are these types of benefits available in my plan? And if they are, are they something that I should be taking advantage of?”

Brian: Yeah, really exciting stuff from an opportunity to plan beyond.

The 50s and Beyond (40:08)

Brian: Now, Bo, I want to pick on you because earlier you said when we got to the 40s, you kind of leaned in, and I think that’s just old habits because we’ve been creating content so long that you look at me as a 40-something year old. I still think about it. However, I’m actually in my 50s now. So it’s time to transition. What do 401(k)s look like for those in their 50s and 60s and even beyond?

Average 401(k) Balances in the 50s and 60s (40:28)

Bo: Yeah. So when we think about average 401(k) balance, again, Fidelity did a wonderful study in 2024 looking at the average 401(k) balance of folks by age, and we know that the average 50-year-old has a 401(k) balance right now of about $176,000. The average 55-year-old’s 401(k) balance is about $222,000. 60-year-old, it’s about $246,000. And then for the average 65-year-old in this country right now, their 401(k) balance alone is about $250,000.

Mile Markers: 50s and 60s (41:01)

Bo: Now again, you know, we said our ultimate goal is we’re working towards having 20 times our annual income for financial independence. When we check our mile markers, if we’re going to stay on this path, we know that we needed 6.4 times our income by 50. That would mean we need 13.7 times our income by 60 and then 20 times by 65. Well, if we know, Brian, that the median income for someone in their 50s is about $110,000 a year, the average American, at least by this metric, is falling drastically short.

Brian: Yeah. And that’s why I mean—look, if we pull up the chart of actually what the spread is between what the averages are versus what we’re projecting you should need—get motivated. I mean don’t be part of the statistics of the average American. You want to be beyond average. And we showed how earlier on for 20-year-olds, 30-year-olds—just do something. A little goes a long way. Still in your 40s you have opportunities to catch up. And then the government has written into tax laws in your 50s, you get some incentives. So there’s all kinds of opportunities. Do something today. Don’t let these numbers discourage you. Let it be motivation.

Specific Targets by Age (42:14)

Bo: If you’re a median income earner, just for those of you out in podcast world, if you want to hit your number by 50, your total portfolio should be about $650,000. By 55, you should be into seven-figure land, a little over a million—$1,040,000. By age 60, about $1.5 million. Then by age 65, if you were a median income earner in this country, you should have 20 times your annual income—about $2.2 million saved up.

What to Focus On in Your 50s and Beyond (42:40)

Bo: So as you transition into this 50s and in the 50s and beyond, what are the things that you ought to be thinking about, ought to be focusing on? Well, you just said it, Brian. This is the stage where retirement or financial independence is right on the corner. So you really ought to be focusing on landing the plane. What tweaks should I be making that would help me operate?

Catch-Up Contributions (43:00)

Brian: Yeah. Well, that’s what the government—as I already alluded to it—catch-up contributions. You hit 50. It’s probably the only good thing that you feel better about yourself that you’re now in your 50s is you get catch-ups on your IRAs. You get catch-ups on your 401(k)s. Don’t sleep on these unique opportunities because we’ve already heard $23,500 is what the government says—the max you can put into your 401(k)—unless you’re 50 or greater. And now you can do $31,000. If you’re—now they even have this crazy super catch-up—between 60 and 63 you can even contribute up to $34,750. That can actually make a big difference over the long term. So take advantage of those unique windows of time that the government is giving you—a little bit extra that you can put into these plans.

Rule of 55 (43:44)

Bo: And as you think about exiting the workforce or making this next decision on this next phase, are you familiar with the rule of 55? If I’m thinking about leaving in my 50s, should I potentially consider making sure that I do not retire or do not leave work before the year in which I turn 55? Because if I do it in the year that I turn 55 or later, I can actually access those 401(k) assets before age 59.5.

Allocation, Tax Location, and Asset Location (44:10)

Brian: And then this is also time where—your allocation matters. You know, this is where we’re going to pay attention to tax location. We’re going to pay attention to asset location so you can actually have access to what cash when. So this is very important to understand. And plus—I don’t want you to be a cowboy forever. I mean there’s a point where you need to dial down risk just because you don’t have the time to recover if you go too far out on the risk spectrum.

Bo: And we want you especially in this phase—we want you to measure twice, cut once because it’s not clear how many retirements you’re going to have. You hope you only have to do it once, but you only get one shot at that and it’s really hard to get the water back up the hill once it’s gone down the hill. So have you done the things necessary to make sure you’re ready for this stage and ready for this transition?

Know Your Number Course (44:50)

Bo: A great tool that you can use if you’ve not done this is have you gone to learn.moneyguy.com and done our Know Your Number course? Do you understand “okay, to live the life I want to live and the terms I want to live it at, the numbers I want to live it at, have I hit my number? Have I reached the level where I can actually step away from the workforce and be okay?” If you’ve not done this work yet, you might not be at the place where you can actually sign that retirement notice.

Consider Working With an Advisor (45:18)

Brian: Well, I think the Know Your Number course is perfect for people 20 to 50 years of age because it lets you know if you’re ahead of the curve, behind the curve, or right where you need to be. I will say as you actually are approaching retirement, I want you to consider even taking it to the next level. And that’s where—there’s a reason if you go to moneyguy.com/become-a-client, you’ll see that we actually have a “work with us” section. You can watch a video on what value we think we offer clients. And this is the part where humbly I talk about the abundance cycle. We give you tons of free advice because I know in the beginning your decision should just be simple—just do something. Make the money work as hard as you do and you’ll be rewarded in the long term. However, as you get more successful, the side effect of success is complications. That’s right. And you’ve only had one retirement and you don’t want to screw it up because you’re now more than likely the CEO of a seven-figure enterprise that you don’t want to lose 20-30% just because you had the wrong allocation. You don’t want to pay extra taxes just because you didn’t know that you could restructure it this way. All those blind spots are complications that we think are the perfect steps for why you probably want to take the relationship to the next level so that you can find somebody who’s done hundreds if not thousands of retirements for their clients so you know you’re getting the best version of your retirement and maximizing your financial life.

Closing: Own Your Financial Life (46:37)

Brian: That’s why go to moneyguy.com—if you’re in the beginning—and go to our resources section, all the free stuff. But don’t be scared to go to that “work with us” section because it is one of those things where you either need to own your financial life or if you just let it happen to you, it will own you. And that’s why we want you to command your army of dollar bills. I’m your host, Brian Preston. Mr. Bo Hanson, Money Guy team out.