Here's the Average American's Retirement Plan Balance. How Does Yours Compare?

You'll need money in retirement to cover your bills outside of Social Security. Those monthly benefits will only replace about 40% of your pre-retirement income if you earn an average wage. If you'd rather not subject yourself to a 60% pay cut in retirement, then saving on your own is crucial. And you can do so in an individual retirement account (IRA), 401(k), or combination of both.

You may be in the early stages of your career with a minimal retirement plan balance. Or maybe you're in your late 40s or early 50s and are curious as to how your savings compare to the average person's. Recent data from the Federal Reserve tells us that among people with retirement savings, the average balance as of 2022 was $331,400. And if you're thinking "holy heck, my balance is nowhere close to that," stop right there.

The only reason to panic about a low retirement plan balance is if you're right on the cusp of closing out your career and don't have any time to play catch-up. And even then, all isn't lost, though you may need to make some adjustments to your plans.

But if you're years away from retirement, don't sweat it if your IRA or 401(k) balance doesn't come close to the average. You may be able to boost your nest egg without having to part with a whole lot of cash.

A tough comparison

Before we talk about building up a large nest egg, let's get one thing out of the way. The average retirement saver might have a balance of $331,400, but if you're only a few years into saving for the future, then you might understandably have much less.

Remember, there's a big difference between being 25 and 55 in the context of retirement savings. So give yourself some grace if your balance isn't close to $331,400.

Also, remember that the Federal Reserve is calculating retirement balances across all savers -- including higher earners. It may be that a small percentage of very high IRA or 401(k) balances are driving the average up.

How to boost your retirement plan balance

It may be that you have very little money saved for retirement. You might even have none saved as of yet. Don't freak out. When it comes to building a nest egg, time is a very effective tool. So is the stock market. Put them together, and you might end up with a lot of wealth over time.

Over the past 50 years, the stock market has delivered an average annual return of 10%, as measured by the S&P 500. If you load your IRA or 401(k) with S&P 500 stocks or index funds (funds that track that index), you might enjoy that same return over time.

So, let's say you're able to contribute $200 a month to a retirement plan over 30 years. You'll be looking at about $395,000 at the end of your savings window thanks to that 10% average annual return on your investments. And while it's certainly not easy to part with $200 a month, especially if you have a lot of expenses, if you earn a typical wage, it may be doable with careful planning and spending.

If your retirement plan balance is comparable to the average saver's, or, better yet, higher, congrats! That's a big accomplishment. But don't stress if your balance is much lower, because in time, you might see it take off in a really big way.