A Retiree With the Average $167,970 401(k) Can Buy About $1,000 a Month for Life. The Average One Buys Nothing and Draws $560.
Most retirees sitting on the average 401(k) balance never ask what that money could actually buy as guaranteed monthly income, and the gap between what they could collect and what they do collect reveals a fundamental tension at the heart…
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
There is a gap in retirement math that does not get enough attention. Take an average 401(k) balance and ask what it could generate as guaranteed lifetime income if you converted it into an annuity, then compare that to what a typical retiree actually pulls out each month. The comparison matters because almost nobody annuitizes. Most retirees keep their balance invested and take percentage-based withdrawals instead, which gives them less current income but preserves flexibility, liquidity, and something to pass on to heirs.
Where the $167,970 Figure Comes From
The average 401(k) balance reached $167,970 in 2025, according to industry reporting summarized by Briefs Finance in June 2026. That figure sits above other provider datasets. Vanguard’s How America Saves 2025 report put the average balance at $148,153 in 2024, with a median of $38,176. Fidelity’s most recent read in the same window landed in a similar range. Differences across datasets reflect different participant mixes, plan sizes, and reporting periods, but the distribution’s shape is consistent.
Average and Median Tell Different Stories
Averages can be deceiving because a handful of very large accounts pull the mean upward, leaving the typical saver looking richer than they really are. Vanguard found that nearly 3 in 10 participants had balances under $10,000 in 2024, while 16% had $250,000 or more. The firm also notes that the average balance roughly corresponds to the 75th percentile of participants. So for the median household, the whole annuitization debate is largely academic. But for the household closer to that reported average, the choice carries real weight.
What Annuitization Actually Means
Annuitization is the process of swapping a lump sum for guaranteed lifetime payments from an insurance company. How much you get each month depends on a few factors: your age, the interest rate environment, and whether you choose to include features like survivor benefits or inflation adjustments. Long-term rates set the stage. With 10-year Treasury yields hovering near recent highs, immediate annuity payout rates for a 65-year-old sit around 7.1% to 7.3% for a single life. Applied to that $167,970 average balance, an immediate annuity generates roughly $1,000 a month ($12,000 a year) in guaranteed, irrevocable lifetime income.
Why Retirees Rarely Choose Guaranteed Income
Uptake of income annuities remains low even in a higher-rate environment. Clark Howard has said on his podcast that most retirees are best served by a lifetime stream of income, but that low rates in prior years made annuitization “a brutal choice.” Suze Orman has said she has changed her mind on income annuities as rates rose, and does not have a problem with them for retirees looking for guaranteed income. Even so, retirees keep balances invested for several concrete reasons: annuitization is generally irrevocable, it eliminates liquidity for emergencies and long-term care, it leaves nothing to heirs unless a rider is purchased, it carries insurer credit risk, and a level nominal payment loses purchasing power to inflation over a 25 or 30-year retirement.
What Most Retirees Actually Draw
The alternative is percentage-based withdrawal. The safe withdrawal rate, the share of a balance a retiree can pull each year with a high probability of not running out, is commonly anchored to the 4% rule, though that anchor has drawn steady pushback (we laid out the full case against it and the income-first alternative in a free report here). Applied to that same $167,970 average balance, the standard 4% rule generates $6,719 a year, or roughly $560 a month. That is nearly half the monthly cash flow of an annuity, but it keeps the underlying principal liquid, invested, and owned by the retiree. It is a smaller current check than an annuity would cut, but it keeps the balance in the retiree’s name.
Context on Retirement Spending
Neither number covers a full retirement budget. The Bureau of Labor Statistics put average annual household expenditures at $78,535 in 2024. Social Security anchors most retirees’ budgets. The 2027 Social Security COLA is tracking toward 3.1% with one of three Q3 months in, and Social Security transfer receipts ran at an annualized $1,645.4 billion in the second quarter of 2026.
What the Data Shows
The gap between what an average balance could theoretically buy in guaranteed income and what retirees actually withdraw reflects a set of preferences: liquidity, inheritance, control over the balance, and protection against inflation and insurer risk. For households at the median 401(k) balance, guaranteed lifetime income from that account is not really on the menu. For households near the average, the trade-off is genuine, and the observed behavior is to keep the money invested and draw it down slowly.
Contact [email protected] for any questions or corrections.
David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
