Vanguard has just dropped its annual blockbuster survey of all the millions of retirement plans it manages, called How America Saves, and it’s pretty astonishing reading — as usual.
Bottom line: The average reported balance is dismal.
Ignore the headlines, which say the “average” American worker has a 401(k) balance of $142,000. This is merely the “mean,” reached by adding up all the balances and dividing by the number of participants. It is heavily skewed by a small number of very big accounts. (Elon Musk walks into a bar, and the “average” net worth of everyone in it skyrockets.) More useful is the “median,” which is calculated by ranking everyone from poorest to richest and picking the one in the middle.
Today the median American 401(k) balance is … $35,000. No, really. It hasn’t risen that much since 2012. Some 40%, or two in five, have less than $20,000.
Brett Arends | MarketWatch