Headlines about 401(k) balances reaching new highs can leave a misleading impression. The average account can rise sharply while the typical worker's account remains modest. Vanguard's annual study of its plan participants, How America Saves 2026, offers a detailed look at both, along with the habits that shape the numbers. The figures below come from a published preview of the report, and they describe Vanguard's own plans rather than every plan in the country.
Average and Median: Two Different Stories
At the end of 2025, the average 401(k) balance in Vanguard plans was $167,970, up 13 percent from a year earlier. The median balance was $44,115, up 16 percent. The average is pulled upward by a smaller group of long-tenured, high-balance savers, while the median marks the midpoint: half of participants had less, and half had more.
The gap is large. The average is almost four times the median (167,970 divided by 44,115 is about 3.8). Anyone comparing their own account with a headline number should check which measure it is. The report attributes the 2025 increase mainly to market performance, which means balances can fall as well as rise when markets turn. Past returns do not predict future results.
Automatic Features Are Doing Heavy Lifting
One reason participation stays high is that many employers have made saving the default. Among Vanguard plans that allow employee contributions, 61 percent had adopted automatic enrollment, and 79 percent of plans with 1,000 or more participants had. Seventy-one percent of plans included automatic escalation, which raises contribution rates on a schedule unless the worker opts out.
The effect shows up in behavior. In 2025, 14 percent of participants raised their contribution rate on their own, and 8 percent lowered it. Another 31 percent saw increases through automatic annual escalation, so 45 percent of participants increased their savings rate in total. Defaults help, but they have limits: they can set a starting contribution that is too low for a worker's retirement goals, and workers who never revisit it may stay there.
The Other Side: Withdrawals and Loans
The same data show households tapping their accounts. Six percent of participants initiated a hardship withdrawal in 2025, up from 5 percent in 2024. Thirteen percent had a loan outstanding at year-end, in line with the prior year.
Both choices can cost more than they appear. A hardship withdrawal is generally taxable income and, for those under age 59½, may carry a 10 percent additional tax unless an exception applies. Money taken out also stops compounding. A plan loan avoids the immediate tax, but it has to be repaid, usually through payroll deductions, and an unpaid balance after leaving a job can be treated as a distribution. The rules vary by plan, so workers should read the plan's summary description before borrowing.
None of this suggests that people who take hardship withdrawals or loans have made poor decisions. Emergencies happen, and the figures may reflect cost-of-living pressure. Emergency savings outside the retirement account can reduce the need to reach for it, which is why some employers now offer separate emergency-savings features.
What the Contribution Limits Mean Alongside the Averages
The IRS set the 2026 employee deferral limit at $24,500, with a catch-up contribution of $8,000 for those 50 and older, according to the IRS announcement. Those figures are ceilings, not targets. Many participants contribute far less, and the median balance suggests that most are well short of the maximum.
A worker can see how far the gap runs through a simple exercise. Someone contributing the full $24,500 puts away more than half of the median balance in a single year. That comparison is not meant to shame lower savers; it shows how much the typical account depends on time, employer contributions and steady additions rather than on any one year's deposit.
What Workers Can Take From the Data
- Look at your own plan's defaults. If you were automatically enrolled, find out the contribution rate and whether it escalates. A small increase now may have a large effect later.
- Capture the full employer match. Free money left on the table is one of the costliest oversights, and most plans publish their formula.
- Treat market-driven gains with caution. A balance that rose because of strong markets can drop in a downturn, so a plan should be based on contributions and time horizon, not on recent performance.
- Think twice about loans and hardship withdrawals. Review the tax and repayment consequences before using them, and consider other sources of cash first.
- Revisit the plan yearly. Contribution increases, fund choices and beneficiary designations can all use an annual check-up.
A Note on the Source
The Vanguard figures above come from a trade-publication preview, not from the full report. Vanguard's data cover its own recordkept plans, which skew toward larger employers. Other providers and government surveys report different averages, which is a reminder that a single number can never describe the whole country.
This article is for informational and educational purposes only and should not be considered personalized financial, investment, or tax advice.
