The $110,000 Illusion: Why Vanguard’s “Average” Retirement Balance is a Lie

The headline number from Vanguard’s 2025 How America Saves report looks reassuring at first glance: the average 401(k) account balance reached $148,153 in 2024. That figure suggests the typical American worker is sitting on a six-figure retirement nest egg. The median tells a different story. The median balance, the one that actually describes the worker in the middle of the distribution, was $38,176. That roughly $110,000 gap between those two numbers reflects how unevenly retirement wealth is distributed across the American workforce.

Why the Average Distorts

A simple illustration explains the distortion. If 10 people each have $5,000 saved and one person walks in with $5 million, the median balance is still $5,000. The average jumps to roughly $459,000. Nothing changed for the typical saver, but the headline number now suggests everyone is wealthy.

The same dynamic plays out in 401(k) data. Vanguard explicitly notes that the median “represents the typical participant: Half of all participants had balances above the median, and half had balances below.” The average, by contrast, “is indicative of participants at about the 75th percentile,” meaning roughly 75% of workers have balances below it.

Where the Skew Comes From

The pull at the top is highly concentrated. According to Vanguard, only 16% of participants hold $250,000 or more in their accounts, yet those balances do the heavy lifting on the average figure. At the same time, 28% of participants have less than $10,000. The distribution is a steeply sloped, heavy-tailed curve rather than a tidy bell curve clustered around $148,153.

Income explains much of that tail. Participants earning $150,000 or more had a 95% participation rate in their employer plans, compared with 31% for those earning under $15,000. High earners also defer more of their pay, contributing an average of 8.6% of income versus 6.8% for the lowest earners. Higher salaries, longer tenures, and a relatively small share of total accounts all combine to push the headline figure upward.

The 6% Stress Test: Hardship on the Rise

While average balances look healthy, the underlying stability of retirement accounts is wavering. Vanguard’s 2026 report on 2025 savings activity shows that hardship withdrawals hit a record high of 6% of participants, up from roughly 2% before the pandemic. Medical expenses, along with payments to avoid eviction or foreclosure, were among the leading reasons participants tapped their funds early.

This “leakage” suggests that for a growing segment of the workforce, the 401(k) is no longer purely a retirement vehicle. It is increasingly serving as a high-stakes emergency fund. Strong market performance kept average balances rising, but the hardship data reveals a fragility that the headline numbers obscure. Notably, Vanguard’s 2026 report also found the average balance climbed to $167,970 at year-end 2025, a 13% annual increase driven by equity market gains.

Reading Your Real Number (Median vs. Average by Age)

To find where you actually stand, look at age-specific data. The gap between mean and median is most pronounced in older brackets, where high-balance savers pull the average far from what most workers actually hold.

New 2026 Rules for High Earners

The gap between the haves and have-nots is also being reshaped by the SECURE 2.0 Act. Starting in the 2026 tax year, participants aged 50 and older who earned more than $150,000 in FICA wages in the prior year are required to make their catch-up contributions to Roth (after-tax) accounts. This removes the immediate tax-deferral benefit for the very group currently driving average balances higher, fundamentally changing long-term tax planning for top earners.

Reference Points

• The 2026 IRS deferral limit has increased to $24,500.
• The “Super Catch-Up”: Workers aged 60-63 can now contribute an additional $11,250, bringing their total potential annual contribution to $35,750.
• Vanguard’s data shows tenure remains the ultimate divider: Participants with 10 or more years in their plan average $324,510, while those with under two years have a median of just $6,140.

Editor’s note: This article has been updated to reflect Vanguard’s 2025 report figures for the 65-and-older age group ($299,442 average, $95,425 median), to correct the SECURE 2.0 Roth catch-up income threshold from $145,000 to $150,000 in FICA wages, and to add context from Vanguard’s 2026 report showing the average 401(k) balance reached $167,970 at year-end 2025 and that hardship withdrawals hit a record 6% of participants that year, up from roughly 2% before the pandemic.