Here’s the Average 401(k) Balance of 73-Year-Old Americans (How Do You Stack Up?)

By the time you turn 73, you've spent a lifetime saving for your retirement plan. Hopefully, that means you've been able to leave the workforce behind and are focusing on making the most of your golden years, but the remaining balance in your 401(k) account could affect how much rest and relaxation you're really able to enjoy in retirement.

In this article, we list the average and median 401(k) balances for retirees your age so you can see how your savings compare with those of others in your age group. From there, you'll be better prepared to assess whether your savings are on track for a successful future or if your retirement savings are stretched thin.

The average 401(k) balance for Americans at age 73

According to data from Kiplinger, the average 401(k) balance for individuals in their 70s is $260,300. Fidelity puts that number a little higher at an average balance of $264,500 per person, while Empower offers a much higher average of $439,604.

Why the average 401(k) balance often skews high

If you see those numbers and start to panic, try to remember that averages aren't the most realistic representation of what's in most people's accounts. Since an average includes both the highest and lowest numbers in a data set, just a handful of extremely high earners could skew the total and give the false perception that most people have a higher balance than they actually do.

How the median 401(k) balance might be more realistic

In contrast, the median number is the middle point in a data set, which could make it a more accurate representation of exactly how much cash most 73-year-olds actually have in their 401(k)s. For instance, Empower's median 401(k) balance for those in their 70s is just $98,076, about a quarter of the reported average.

Why 73 is a crucial age for 401(k) account balances

For traditional IRAs and most employer-sponsored retirement plans, such as traditional 401(k)s, required minimum distributions (RMDs) begin for the year you turn 73. In most cases, you must take your first RMD by April 1 of the following year. The amount is calculated by dividing your account balance at the end of the previous year by a life expectancy factor from the IRS's Uniform Lifetime Table.

RMDs are one reason the median 401(k) balance for those in their 70s is so low. After a lifetime spent filling your IRA with savings, you're finally in the stage of life where you're not just able to spend your hard-earned cash but are required to do so.

How RMDs could impact your income

Since withdrawals from a 401(k) count as taxable income, making your first RMD may push you into a higher tax bracket, which in turn could cause you to pay more taxes than you're used to on your Social Security benefits.

What happens if you fail to take your RMD on time

Failing to take your RMDs may result in a 25% excise tax on the amount of money you failed to withdraw. That number could drop to 10% if you withdraw the required amount within two years, but you'll still lose a large chunk of your savings to taxes that you could avoid by making the distribution on time.

You could continue to contribute to your 401(k) if you're still working

If you're still working at age 73, you're allowed to continue contributing to a 401(k) even while taking RMDs. Depending on your job, you might not have to take RMDs until you retire: if you own less than 5% of the business associated with your 401(k), you could delay taking RMDs from that account until you leave your employer.

Think about saving with a traditional IRA

If you're worried about dwindling savings but are no longer able to contribute to a 401(k), think about contributing to other savings accounts instead. In the past, retirees had to stop contributing to traditional IRAs by age 70 and a half, but the age limit has since been lifted, so you could keep storing money in a traditional IRA to take advantage of interest as long as you'd like.

Bottom line

Since 401(k) income may have a big impact on your taxes, it's crucial to work with an accountant to figure out how much you're required to withdraw starting at age 73, then create a smart tax strategy that ensures you don't withdraw more than you are able to afford.

Doing so could mean making adjustments to your retirement plan, but putting in a little extra work to craft a solid tax strategy for your 401(k) withdrawals could pay major dividends as you continue to enjoy retirement.

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