How Long Will Your 401(k) Savings Last in Retirement?

February

How Long Will Your 401(k) Savings Last in Retirement?

February 5, 2024

Will your 401(k) savings last in retirement?
It’s a question on the minds of a lot of 401(k) investors. Despite that, most people underestimate how much money they will need in retirement.
Experts tend to recommend saving 80% of your pre-retirement income.
If you and your spouse bring in $120,000 annual income, you should save enough for a $96,000 annual income throughout your retirement years.
10 years of retirement at this annual income rate equals $960,000.
This is why many people are drawn to the idea of saving $1 million in their 401(k)s.
The problem is that most Americans aren’t even close…and, even more concerning, $1 million isn’t going to take you as far as it once would.
Consider these findings from Vanguard’s How America Saves 2023 report:

In 2022, $112,572 was the average 401(k) balance of nearly 5 million Vanguard plan participants. The median 401(k) balance was $27,376.
The average 401(k) balance for those 55 to 64 years old was $207,874. The median 401(k) balance was $71,168.
The average 401(k) balance for those 65 and older was $232,710. The median 401(k) balance was $70,620.¹

Both the average and the median balances for those closest to retirement are quite a bit less than $1 million.
The truth is that $1 million in your 401(k) savings may not be enough to last in retirement.
Consider the fact that retirements last a good bit longer than 10 years.
For example, the average retirement in the United States across genders is 61 years old.²
The average life expectancy for 2024 is 79.25 years.³
If you retire at 61 and live until you are 79, that’s 18 years – 8 years longer than you have saved for.
In fact, the Organization for Economic Co-operation and Development (OECD) found that American men spend 18.6 years in retirement, and women spend 21.3 years in retirement.⁴
Are you planning to save for a lengthy retirement?
Keep reading to get a better idea about whether your 401(k) savings will last in retirement.

Average Retirement Costs

401(k) savings last

How long will your 401(k) savings last in retirement largely depends on where you live.
But, before we break down the state-by-state costs of retirement, it’s important to discuss where the money goes.

Healthcare: Fidelity Investments® 22nd annual Retiree Health Care Cost Estimate in 2023 found, “A 65-year-old retiring this year can expect to spend an average of $157,500 in health care and medical expenses throughout retirement [or $315,000 for a couple].”⁵
Transportation: Retirees spend an average of $7,160 for costs associated with transportation.⁶
Housing: Retirees use an average of 36% of their annual income to pay for housing costs.⁷
Groceries: Food and groceries cost retirees an average of $6,490 a year.⁸
Long-term care: According to Merrill, “Someone turning 65 today has a nearly 70% chance of requiring some type of long-term care during their lifetime. […] A private room in a nursing home can cost upward of $100,000 per year.”⁹

[Related Read: The Real Cost of Retirement: Are You Saving Enough?]
Keep in mind that the numbers above are averages, which means these dollar amounts come from all across the country. What Californians pay for food is averaged with what South Carolinians pay.
In other words, there will be a significant cost of living adjustment for these expenses for many retirees.

How Long $1 Million Will Last in Each State

401(k) savings last

Where you choose to spend your retirement years will make a significant difference to how long your 401(k) savings will last.
A study from Go Banking Rates calculated the annual costs of living for retirees in each state in the United States.¹⁰
The state where your $1 million 401(k) savings will last the longest is Mississippi.
The state where your $1 million 401(k) savings will be spent the quickest is Hawaii.
Use this list to see how long your 401(k) savings will last in retirement in your home state.

Hawaii: 10 years, 3 months, 22 days (total annual = $96,982.26)
New York: 14 years, 1 month, 15 days (total annual = $70,755.34)
California: 13 years, 9 months, 29 days (total annual = $72,319.57)
Massachusetts: 12 years, 9 months, 14 days (total annual = $78,159.36)
Alaska: 15 years, 3 months, 12 days (total annual = $65,346.96)
Maryland: 15 years, 5 months, 13 days (total annual = $64,706.98)
Oregon: 15 years, 8 months, 8 days (total annual = $63,716.30
Connecticut: 16 years, 7 months, 13 days (total annual = $60,170.71)
New Hampshire: 16 years, 8 months, 18 days (total annual = $59,805.73)
Vermont: 16 years, 5 months, 23 days (total annual = $60,692.12)
Maine: 16 years, 8 months, 29 days (total annual = $59,701.45)
Washington: 16 years, 9 months, 21 days (total annual = $59,492.88)
New Jersey: 16 years, 9 months, 25 days (total annual = $59,440.74)
Rhode Island: 17 years, 2 months, 31 days (total annual = $57,980.79)
Arizona: 17 years, 9 months, 3 days (total annual = $56,312.28)
Delaware: 18 years, 2 months, 13 days (total annual = $54,956.61)
Montana: 18 years, 2 months, 17 days (total annual = $54,904.47)
Utah: 18 years, 9 months, 18 days (total annual = $53,183.82)
Nevada: 18 years, 9 months, 26 days (total annual = $53,131.68)
Virginia: 18 years, 9 months, 11 days (total annual = $53,235.96)
Florida: 18 years, 4 months, 7 days (total annual = $54,487.35)
Colorado: 18 years, 2 months, 24 days (total annual = $54,852.33)
Idaho: 19 years, 4 months, 22 days (total annual = $51,567.45)
Pennsylvania: 19 years, 6 months, 12 days (total annual = $51,202.46)
Minnesota: 20 years, 2 months, 2 days (total annual = $49,586.09)
North Dakota: 19 years, 8 months, 8 days (total annual = $50,785.33)
Wisconsin: 20 years, 5 months, 1 day (total annual = $48,960.40)
South Dakota: 19 years, 11 months, 16 days (total annual = $50,107.50)
North Carolina: 19 years, 9 months, 15 days (total annual = $50,524.63)
Wyoming: 20 years, 11 months, 1 day (total annual = $47,792.44)
South Carolina: 19 years, 11 months, 1 day (total annual = $47,293.53)
New Mexico: 20 years, 5 months, 12 days (total annual = $48,908.26)
Kentucky: 20 years, 7 months, 31 days (total annual = $48,386.85)
Louisiana: 20 years, 6 months, 4 days (total annual = $48,751.84)
Texas: 20 years, 8 months, 15 days (total annual = $48,282.57)
Nebraska: 21 years, 0 months, 17 days (total annual = $47,500.45)
Illinois: 20 years, 10 months, 12 days (total annual = $47,917.58)
Ohio: 21 years, 5 months, 12 days (total annual = $46,614.05)
Missouri: 21 years, 3 months, 15 days (total annual = $46,979.04)
West Virginia: 21 years, 4 months, 10 days (total annual = $46,822.62)
Michigan: 20 years, 10 months, 27 days (total annual = $47,813.30)
Arkansas: 21 years, 1 month, 23 days (total annual = $47,291.89)
Tennessee: 21 years, 2 months, 27 days (total annual = $47,083.32)
Indiana: 21 years, 3 months, 4 days (total annual = $47,031.18)
Georgia: 21 years, 6 months, 26 days (total annual = $46,353.35)
Iowa: 21 years, 8 months, 26 days (total annual = $45,988.36)
Alabama: 22 years, 0 months, 6 days (total annual = $45,414.81)
Kansas: 21 years, 11 months, 19 days (total annual = $45,519.09)
Oklahoma: 22 years, 1 month, 12 days (total annual = $45,206.25)

Mississippi: 22 years, 8 months, 12 days (total annual = $44,059.15)

Worried You Won’t Have Enough 401(k) Savings to Last?

401(k) savings last

If the info above has shaken you, don’t panic. There are ways to boost your savings.

Increase your contributions. Can you increase your contributions by 1%? 3%? This will make a difference overall.
If you are over 50, take advantage of catch-up contributions. For those ages 50 and older, the 401(k) catch-up contribution jumps from $6,500 to $7,500 in 2023 – for a total of $30,000. You have until Tax Day to make these catch-up contributions.
Wait to pull from your 401(k). You may be tempted to withdraw from your 401(k) before retirement, but as you can see, you need those 401(k) savings.
Get the company match. Prioritize contributing enough each year to receive the company match. This is free money.

Seek help from experts. If you are worried that you won’t have enough 401(k) savings to last through your retirement, reach out to us.

Click below to book a complimentary 15-minute 401(k) Strategy Session.

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