The Average 80-Year-Old Has This Much in Their 401(k): How Do You Compare?

When we're young, it's easy to picture ourselves enjoying a stress-free retirement by the time we hit 80. However, even with years of 401(k) contributions, employer matches, and investment growth, many retirees find themselves wishing they'd saved more. In fact, a recent survey by the Transamerica Institute found that 76% of retirees wish they had saved more.

So how does your savings stack up? Here's how much the average 80-year-old has in their 401(k), along with some practical tips to help you feel more confident about your money in your golden years.

How much does the average 80-year-old have in their 401(k)?

According to data from the financial services firm Empower, the average 401(k) balance for people in their 80s is $429,614. If that's a lot more than what you have, consider that the median (the middle figure in a series of numbers) is $77,086.

The large gap between the two balances suggests that a small number of very wealthy individuals are pulling the average up. It's far more realistic to compare your balance to the median.

Either way, if your 401(k) balance isn't what you hoped it would be at age 80, it's not too late to improve your finances. Here are some ways to boost your savings and keep more of what you have.

Handle your required minimum distributions wisely

Once you reach age 73, you must begin making annual withdrawals, known as required minimum distributions (RMDs), from 401(k)s and most other qualified retirement accounts. The amount you must withdraw is based on the account's balance and your life expectancy.

Taking more than the minimum required can deplete your balance faster, but failing to take the required amount on time can result in costly penalties. To maximize your savings, be aware of what you need to withdraw and address it promptly.

Create a sustainable withdrawal strategy

If you need to withdraw more than the required minimum distribution, take some time to develop a sustainable strategy to help your savings last longer.

The old rule of thumb is to only withdraw 4% of your savings in your first year of retirement and then adjust for inflation annually, although many advisors now suggest starting somewhere between 4% and 5%. Review your retirement and adjust your withdrawals to align with your new strategy.

Look into low-risk investments

Although you must start withdrawing specific amounts from your 401(k) and IRAs before you turn 80, you can still invest elsewhere. For example, you might put some money into low-risk investments like certificates of deposit (CDs), high-yield savings accounts, or U.S. Treasury securities.

Although the returns may not be as high as with traditional retirement accounts, these investments are an excellent way to keep your money working for you at any age.

Plan for health care costs

Health care is usually one of the most significant expenses for retirees in their 80s. Make sure you factor in these costs as you plan your finances, so that an unexpected health condition doesn't put a big dent in your savings.

A supplemental insurance policy can help cover what Medicare doesn't. Consider contributing to a health savings account (HSA) if you're eligible.

Take advantage of catch-up contributions

While many at age 80 are retired, an increasing number have decided to stay in the workforce. If you still work, you can still contribute to your 401(k), which means you can also take advantage of catch-up contributions.

This IRS rule allows you to put an extra {% lp_custom_tag '401k-catch-up-tax-year-3' %} into your 401(k) this year, starting at age 50. With the standard savings limit of $24,500, that means working 80-year-olds can invest a total of $31,000 in their 401(k) each year.

Update your estate plan

Everyone knows your estate plan ensures your finances will be distributed according to your wishes after you're gone. But what many don't realize is that it can also help protect your money right now.

Part of estate planning is setting up trusts and granting durable power of attorney to loved ones or trusted friends. Without these protections in place, a health issue could leave you temporarily incapacitated and put your savings at risk. Routinely review your estate documents with a qualified attorney to ensure they reflect your plans.

Watch out for financial scams

To maintain your savings, you need to protect them from theft. In today's digital age, it only takes some of your personal information falling into the wrong hands.

Seniors, especially retirees, are often the target of financial scams. Beware of unsolicited offers, calls, or text messages claiming to be from the IRS, or requests for personal data such as your Social Security number or date of birth.

Bottom Line

No matter where you stand compared to the average 80-year-old, the most important thing is having a strategy that puts you on track for retirement. Whether that means continuing to save, adjusting your spending, or seeking out new ways to manage your money, there are always steps you can take to feel more secure. After all, your golden years should be about enjoying life, not stressing over finances.

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