The median 401(k) balance is low. You likely won’t be able to live off your 401(k) alone in retirement, but you should be able to combine your 401(k) with alternative savings, other passive investments, and Social Security to live a financially free life when the time comes to withdraw at the age of 59.5. Most Americans don’t have pensions.

The reality is that the median account balance in the U.S. is only around $72,000 for 55-64 year olds in 2019 according to Vanguard, one of the largest 401k managers. The average 401k balance for 55-64 year olds is roughly $178,000.

But the average is screwed up to due the super wealthy. Even with $178,000 in your 401k at retirement age, you aren’t going to be living it up for the next 20 – 30 years without alternative sources of income.

According to data from Fidelity, here’s the average 401k breakdown by age in 2020:

• Ages 20 – 29: $9,900

• Ages 30 – 39: $38,400

• Ages 40 – 49: $91,000

• Ages 50 – 59: $152,700

• Ages 60 – 69: $167,700

• Ages 70 – 79: $160,200

Given the median age of Americans is 35.3 according to the US Census Bureau, the median 401(k) balance per person should be closer to $150,000 – $500,000 according to my 401(k) retirement savings guide instead of these pitifully low levels.

In this article, I’d like to share some stories on what happened to all the missing savings because we all know we should be maxing out our 401k every year for as long as we work. 

Do you know how much in mutual fund fees you are paying a year? I didn’t, so I ran my 401K portfolio through Personal Capital’s free 401k fee analyzer and I’m absolutely shocked by the results! I always figured that from a percentage point of view, my mutual fund fees were small. But, when you take a small percentage multiplied by a big enough number, the absolute dollar amount starts adding up.

As you can see in the picture above, I’m paying $1,748.34 a year in fees across four mutual funds. In 20 years, I will have paid roughly $84,000 in fees based on only this amount. The second portion of the above chart shines a light on the specific fund that costs the most. In my case, it is the Fidelity Blue Chip Growth Fund with a 0.74% expense ratio.

I’ve got another fund worth about $22,000 as part of my 401K which does not show a fee, because it is a hedge fund whose fees are baked into the performance. Typical hedge fund fees are 2% of assets under management and 20% of upside. This is called 2 and 20, which is egregiously high, but it’s the only way I can get short exposure to hedge my bets.

I’ve been wanting to do a 401k/mutual fund fee analysis for the longest time, but was too lazy to do the analysis until I realized I didn’t have to do the calculations myself. Every year I want my portfolio to be as optimized as possible.