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The typical employee contribution rate falls between 8% and 10%, depending on the data source.
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When employer matches are added, the total savings comes to about 12% to 14% of the employee’s salary.
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Contribution rates rise with age: Workers under 25 save 9.3% of combined earnings, according to Vanguard, while those 55 to 64 save 13.8%.
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If you don’t meet the typical figures for your income and age range, you can start contributing enough to get your full employer match.
The typical American worker puts away about 8% to 10% in 401(k) and similar savings plans. When employer matches are included, that number jumps to about 12% to 14%, according to Fidelity and Vanguard.
If you’re in this range, you might want to know if you’re saving enough for retirement. The answer depends on a number of factors.
“The ideal share price is really situational,” said David Tenrelli, a certified financial planner at Value Added Finance. “Conventional wisdom says that contributing 15% of gross income to retirement accounts is a good rule of thumb for most people. But if an employer makes similar contributions, it can actually factor in.”
That puts many savers on target—but only 14% of employees at companies that offer the maximum defined contribution plans, according to Vanguard, and rates vary dramatically by age and income. Here’s how to top up your savings rate.
Share prices increase steadily with age. According to Vanguard figures, workers under 25 have a combined employer-employee share rate of 9.3%. This rises to 11.1% for 25 to 34 year olds, 11.7% for 35 to 44 year olds, 12.3% for 45 to 54 year olds, and 13.8% for 55 to 64 year old workers. Savers 65 to 64 years old – most of whom contribute 65 to 64 years.
Fidelity’s generational breakdown tells a similar story: Baby Boomers account for an average of 11.9% of their income, followed by Gen X at 10.2%, Millennials at 8.7%, and Gen Z at 7.2%.
It’s no surprise that those with higher incomes can save more: workers making less than $30k save about 9.7% to 10.3% combined, while those making $150,000 and above contribute the most, at 13.9%.
Fidelity and Vanguard’s standards assume you have room in your budget to save a significant amount of money each month. For most Americans, this is not the case. According to the Federal Reserve, one-third of adults (37%) cannot fully cover a $400 expense with cash or its equivalent, and nearly half (54%) of 18-29-year-olds do not have a retirement account.
