Retirement Savings by Age: How Much Should You Have?

Americans believe they need $823,800 to retire comfortably. The average retiree has $288,700. That's a 65% shortfall.

But here's what makes it worse: that $288,700 is the average. The median — the number where half of Americans fall below — is far uglier. At Vanguard, the median 401(k) balance across all ages is $38,176. Not $288,000. Not $148,000. $38,176.

So where do you actually stand? And what can you do about it?

Where Americans Really Are: Savings by Age

Vanguard's 2025 "How America Saves" report tracks 5 million 401(k) participants. Here's what the data shows for median balances — the number that actually represents the typical American:

That average-to-median gap? Nearly 4x. A small number of large accounts inflate the average, making it useless as a benchmark for most people. The median tells the real story.

Look at the 55-64 bracket. The median is $95,642. These are people within a decade of retirement, and half of them have less than $96K saved. At a 4% withdrawal rate, that's $3,825 per year — $319 a month. That doesn't cover groceries.

Fidelity's numbers are slightly more encouraging because they combine 401(k) and IRA balances, but the picture is similar. Gen X (ages 45-60) averages $296,252. Baby Boomers (61-88) average $506,302. But remember — averages hide a lot of pain at the bottom.

The 10x Rule: How Much You Should Have

Fidelity's benchmark is simple: save 10 times your annual salary by age 67. They break it down into milestones along the way:

The math assumes you start saving at 25, contribute 15% of income annually (including your employer match), invest aggressively in stocks early and shift to bonds later, and plan to live until 93. Your savings cover about 45% of pre-retirement income. Social Security bridges the rest.

Here's the problem. Compare those targets to the actual medians from Vanguard. A 45-year-old should have 4x their salary — roughly $253,000. The actual median? $67,796. That's a $185,000 gap.

And this assumes a $63,360 salary. If you earn more, the gap widens. If you started saving later than 25 — which describes most immigrants, career changers, and anyone who didn't land a corporate job right out of college — the math gets even harder.

401(k) Withdrawal Rules: What Happens When

The IRS has strict rules about when and how you can access your 401(k). Get these wrong and you'll pay a 10% penalty on top of income taxes.

Age 55: The Rule of 55. If you leave your job in or after the calendar year you turn 55, you can withdraw from that employer's 401(k) without the 10% early withdrawal penalty. You still owe income tax, but the penalty vanishes. This only applies to the plan at the company you just left — not old 401(k)s from previous employers. And it doesn't apply if you roll the money into an IRA first.

Age 59½: Penalty-Free Withdrawals. After 59½, the 10% penalty disappears on all 401(k) withdrawals. Traditional 401(k) distributions are still taxed as ordinary income. Roth 401(k) distributions are tax-free — if you've held the account for at least five years.

Age 73 or 75: Required Minimum Distributions. The SECURE Act 2.0 pushed the RMD age back. If you were born between 1951 and 1959, you must start taking distributions at 73. Born in 1960 or later? Your RMDs don't begin until 75. Miss an RMD and the penalty is 25% of the amount you should have withdrawn — though it drops to 10% if you correct it within two years.

One big change from SECURE 2.0: Roth 401(k)s no longer require RMDs as of 2024. Your Roth grows tax-free without forced withdrawals. That's a major planning advantage.

2026 Contribution Limits. You can contribute $24,500 to a 401(k), plus a $8,000 catch-up if you're 50 or older. If you're between 60 and 63, there's a new "super catch-up" of $11,250 — meaning you can put away up to $35,750 per year. Max it out if you can. Every year counts.

Why Rental Income Changes the Math

A $1 million 401(k) sounds like a lot. At the 4% safe withdrawal rate, it gives you $40,000 a year — and that's fully taxable in a Traditional account. Not bad. But not exactly comfortable, either.

Now consider four rental properties, each generating $2,000 a month in cash flow after expenses. That's $96,000 per year. More than double the 401(k) income. And the math tilts further in real estate's favor:

No RMDs. You decide when and how much income to take. Nobody forces you to sell or distribute at 73.

Principal isn't depleted. When you withdraw from a 401(k), the balance goes down. When a tenant pays rent, the property is still there. You still own it. Your equity might even be growing through appreciation.

Income grows with inflation. Mortgage payments are locked. Rents adjust to the market. Over 20 years, that spread compounds. A property cash-flowing $1,200/month today might cash-flow $2,400/month in 15 years — while the fixed-rate mortgage payment stays the same.

Tax advantages. Depreciation lets you offset rental income on paper, even though the property might be appreciating in value. Many rental investors pay little or no tax on their cash flow in the early years.

The 25x expenses rule says you need 25 times your annual spending saved to reach financial independence. If your annual expenses are $60,000, that's $1.5 million in a traditional portfolio. But if four rentals cover $48,000 of that? Your target drops to just $300,000. That's an 80% reduction in the savings you need.

What to Do at Every Age

20s and 30s: Time is your unfair advantage. Compound interest does more work in these decades than any other. Start your 401(k) — even 10% is a start. And consider house hacking your first property: live in one unit, rent the others, and let tenants cover your mortgage while you build equity.

40s and 50s: Peak earning years. Max out catch-up contributions ($8,000 extra per year if you're 50+). If you haven't started in real estate, this is the decade to buy your first rental. A self-directed IRA or Solo 401(k) lets you invest retirement funds directly into property. And explore tax optimization strategies — cost segregation and 1031 exchanges can accelerate your net worth.

50s and 60s: The Rule of 55 gives you earlier access if you plan around it. Shift from active landlording to passive real estate — REITs, syndications, or turnkey properties with professional management. Focus on paid-off properties that generate reliable passive income with minimal hassle.

The Gap Is Real. But It's Closable.

The numbers don't lie. Most Americans are behind. The median 55-year-old has $95,642 saved — nowhere near the $507,000 Fidelity says they should have.

But here's the thing. A 401(k) is one tool. Rental properties are another. Combined, they create a retirement that doesn't depend on any single account balance. The 401(k) gives you tax-deferred growth. Real estate gives you income, appreciation, and tax shelter — with no RMDs and no withdrawal penalties.

You don't have to choose one or the other. Use both. Start where you are — even if "where you are" is behind the benchmarks by six figures. The best time to invest was ten years ago. The second best time is right now.

Ready to see how real estate fits into your plan? Start with our complete guide to real estate investing.