401(k) balances soared last year — but they’re nowhere near what Americans need to retire comfortably (2024)

Americans are storing away more than ever for retirement, but they’re fighting an uphill battle as a comfortable retirement seems further and further out of reach.

In 2023, the median account balance for Vanguard participants was $35,286 — a 29% increase from a 2022 dropoff, according to Vanguard Group’s annual How America Saves report, published Monday. The average account balance was $134,128, up 19% from a year earlier. The investment advisor attributed the sizable year-over-year jump to a significant rise in both contributions, as well as in the equity and bond markets.

The wide divergence between the median and the average balance is driven by a small number of very large accounts that significantly boosted the average, Vanguard said.

While both the average and median balances show significant growth from 2022, the figures fall far short of what Americans say they need to retire comfortably. The so-called “magic number” — how much U.S. adults believe that they’ll need for retirement — hit $1.46 million, Northwestern Mutual found. That number has grown more than 53% from $951,000 in 2020.

Read more: The number of 401(k) millionaires has hit a record, Fidelity says

Despite inflation worries and overall downbeat consumer pessimism marking much of 2023, both plan participation and participant saving rates reached all-time highs last year, the Vanguard report found.

When looking at all employees in Vanguard-administered plans as if they were in a single plan, which the firm refers to as the participant-weighted participation rate, 82% of employees were enrolled in their employers’ voluntary saving program last year. That figure has grown five percentage points in the past decade.

At the same time, a whopping 43% of plan participants increased their rate of contributions, either through an automatic increase feature or by their own hand.

Vanguard plan participants contributed a record average of 11.7% of their salary into plans, combining employee contributions and employer matches. This maintained the record high set in 2022 and represents a 0.4 percentage point increase from 2019. Employees alone contributed an estimated average of 7.4%.