The 401(k) retirement plan is an essential financial vehicle for millions of Americans, enabling them to save money over time and invest in their future. But it’s not unusual to wonder how your account stacks up against the national average. By comparing your 401(k) to the average American’s portfolio, you can gain insight into the overall health of your savings plan and ensure you’re on track toward a comfortable retirement.

So, how does your 401(k) compare to the average?

1. Average Account Balance

Your 401(k) account balance is a crucial indicator of progress over time. In 2020, Fidelity Investments reported that the average 401(k) balance was $106,478. This number varies depending on factors such as age, income level, and years in the workforce. To get a clearer picture of where you stand compared to your peers, look at the average balances by age or income brackets.

2. Contribution Rates

Another important factor when comparing your 401(k) is the contribution rate. The average American contributes around 7% of their salary into their 401(k), with many financial advisors recommending a higher rate of at least 10% to 15% for those just starting in their careers. It’s important to consider factors such as an employer match or vesting schedules when assessing your own contributions.

3. Performance Relative to Benchmarks

Measuring how well your investments are performing relative to benchmarks can help determine if you need to make adjustments. For instance, if the overall stock market has gained 15% in a year but your portfolio has only grown by 10%, you might need to reconsider your investment strategy. Carefully examining key indices such as S&P 500 and Russell 2000 can be useful in gauging performance.

4. Diversification

Having a diverse mix of assets in your 401(k) portfolio can help protect your savings from market fluctuations. The average American’s 401(k) is divided into various asset classes, including domestic and international equities, bonds, and cash. Analyzing your asset allocation compared to the average portfolio can help you identify any imbalances that could potentially increase risk or limit returns.

5. Fees

Many 401(k) plan participants are not aware of the fees they incur within their accounts. It’s essential to know the expense ratios of the funds in which you’re invested, as well as administrative and advisory fees assessed by your plan provider. The average 401(k) plan fees have been falling in recent years but can still range from 0.5% to 2%. Comparing your costs to industry averages helps ensure you aren’t paying excessive fees that could limit long-term growth.

It’s important to remember that individual financial situations differ, and everyone’s path to retirement is unique. Comparing your 401(k) to the national average is a useful exercise but should be done keeping your personal goals, risk tolerance, and preferences in mind. Consult with a financial professional when making adjustments to your 401(k) strategy — and remember, consistency and a long-term outlook are key ingredients to successful investing and a comfortable retirement.