1 in 3 seniors has less than $50K in their 401(k)s, survey finds

It's understandable when people at the beginning of their careers don't have much saved for retirement. But new research is raising alarms about seniors as well.

A majority — 58% — of Americans aged 65 and older have only $100,000 or less in their 401(k)s, according to a new survey by the personal finance website GOBankingRates. In fact, 36% have $50,000 or less.

In today's economy, those savings are far from enough. On average, Americans estimate that it would take $1.46 million to comfortably retire, according to research by Northwestern Mutual. And according to GOBankingRates' own research, an American retirement typically costs more than $50,000 — not per person, but per year.

"These survey results highlight the significant challenge of retiring comfortably in the U.S. in 2024," said Andrew Murray, GOBankingRates' lead data content researcher.

Why have seniors fallen so far behind? One answer is what industry experts call "leakage": excessive pre-retirement withdrawals from 401(k)s.

"There are a variety of reasons that might explain this concerning trend," Murray said. "Most notably, the rising cost of living has put many Americans in a tough financial situation, requiring an increasing number of families to dip into their retirement savings to make ends meet."

READ MORE: Is the 401(k) doing too many things?

Another possible explanation is that many Americans aged 65 or older, who were born in 1959 and earlier, built their careers in the pre-401(k) era. Many still had access to pensions and other defined-benefit plans, which could mean their 401(k)s — if they had one — were not their primary retirement accounts.

But there's a problem with this explanation: The proportion of Americans who had $50,000 or less in their 401(k)s, according to GOBankingRates, was remarkably consistent across almost all age groups. For ages 55 to 64, it was 40%. For ages 45 to 54, it was 39%. For 35 to 44, it was 40% again.

A more likely explanation, Murray said, is something affecting every generation: the high cost of living. Since 2022, inflation has reached levels not seen in decades (though the rate of increase has slowed), and interest rates on things like mortgages and car loans have skyrocketed in response.

After all these expenses, few U.S. adults have much cash to put in a 401(k).

"An alarming number of Americans are living paycheck to paycheck and don't have the opportunity to set aside additional savings for retirement," Murray said.

Other research bears this out. This year, the Federal Reserve found that only 63% of Americans could afford a $400 emergency.

GOBankingRates also uncovered other warning signs. For example, the survey found that 38% of Americans felt it would be "impossible" to save $1 million for retirement. In this case, pessimism rose as respondents got older — 23.4% of those aged 21-to-34 thought so, while for those aged 65 and older it was 48.1%.

READ MORE: Boomers may outlive their 401(k) savings — unlike predecessors with pensions

In fact, 34.8% of Americans believed they would have only $100,000 or less in their 401(k)s by the time they reached retirement.

What could account for all this pessimism? Financial advisors who have encountered clients with low 401(k) balances say it's a mix of factors.

"The most common cause in my experience is simply not saving enough or not saving anything at all," said Ron Strobel, founder of Retire Sensibly in Meridian, Idaho. "That can be worsened by working in a low-paying career, being self-employed or working for an employer that doesn't offer a retirement savings plan or health insurance — and life events like divorce or layoffs."

In all these areas, some words of advice from a financial planner can be beneficial — if they make it in time.

"There can also be an 'I'll save later' mindset, where they put off saving for retirement until it is too late," Strobel said. "Advice on career paths, finding the right employer and taking advantage of employer benefits can all help."