There are many elements that go into measuring your plan’s performance, and the need for methodologies and tools that measure plan success continues to grow. Among the benchmarks traditionally considered are the plan’s average account balance and average savings rate. Typically these numbers are compared against a well-respected industry research benchmark, such as those found in the Profit Sharing Council of America’s annual survey of 401(k) and profit sharing plans.

Recent from Vanguard’s “How America Saves 2022” research report offers data on these two benchmarks, culled from their own universe of 401(k) plans and broken out by age groups. Segmenting your plan’s data by age and comparing it to Vanguard’s benchmarks offers an opportunity to perform a deeper dive into plan performance and get a better understanding of where your employees are at as individuals. Here’s an overview of Vanguard’s age-group data (numbers are as of year-end 2021):

Ages <25                                                                     Ages 45 to 54

Average balance: $6,264                                            Average balance: $179,200

Average contribution rate*: 8%                                 Average contribution rate: 11.4%

Ages 25 to 34                                                              Ages 55 to 64

Average balance: $37,211                                          Average balance: $256,244

Average contribution rate: 10.5%                              Average contribution rate: 12.7%

Ages 35 to 44                                                              Ages 65+

Average balance: $97,020                                          Average balance: $279,997

Average contribution rate: 10.8%                              Average contribution rate: 12.7%

*Average contribution rates include the individual’s contribution and the employer match combined.

A Few Key Observations

It is worth noting that the jump in average account balance starting with the older groups likely reflects the fact that these groups have now spent a at least two decades in the workforce putting money in their plan. In addition, the increase in contribution rates for the older groups suggests that many workers are taking advantage of the catch-up provision which allows people age 50 or older to contribute more (an extra $6,500 in 2022) than the standard amount.

These types of nuances make a good argument for segmenting and evaluating your plan data by age groups versus just measuring and comparing the average account balance and savings rate for your plan as a whole.

Benchmarking Retirement Readiness

In general, how much should your employees be saving in order to be retirement-ready? Research from Fidelity Investments provides the following general guidelines:

• By age 30, an individual should have one time their annual salary saved. For example, if they’re earning $50,000, they should have $50,000 saved for retirement.
• By age 40, they should have three times their annual salary already saved.
• By age 50, they should have six times their salary already saved.
• By age 60, they should have eight times their salary already saved.
• By age 67, their total savings total goal is 10 times the amount of their current annual salary. So, for example, if they're earning $75,000 per year, they should have $750,000 saved.

Final Thoughts

The data from Vanguard and Fidelity are simply general benchmarks and guidelines that offer you an additional perspective for measuring plan success. But digging deeper into your plan data is a worthwhile effort that can uncover information that will help you make improvements to plan design and communications – allowing you to focus your efforts where they are most needed.

Vanguard. (2022, June). How America Saves 2022. How America Saves 2022 (vanguard.com)

Fidelity. (2021, June 27). How much do I need to retire? https://www.fidelity.com/viewpoints/retirement/how-much-do-i-need-to-