Figuring out how much you should have in your 401(k) at 25 depends on your income, savings rate and when you started contributing. A common benchmark from financial planners is to aim for one year’s worth of salary saved by age 30, which could translate to about 50% of your annual income by 25. Factors like employer match, investment returns and early contributions can push your balance higher or lower than average.
What Your Retirement Savings Should Look Like by Age 25
According to Vanguard’s How America Saves 2025 report,1 the median 401(k) balance for participants under age 25 was $1,948 in 2024, while the average was $6,899. By contrast, participants ages 25 to 34 held a median balance of $16,255 and an average balance of $42,640.
Only an estimated 54% of eligible workers under the age of 25 participated in a retirement plan, while participation jumped to 82% among those 25 to 34. These figures reflect the real-life variance that can exist at age 25: Some workers may just be starting their careers, while others have already benefited from several years of employer-sponsored plan participation.
Benchmarks to Guide Your Retirement Saving Strategy
A common benchmark suggested by financial planners is to have saved roughly half to one year’s salary by age 25. So if you’re earning $60,000, a balance between $30,000 and $60,000 would be consistent with this guideline.
Vanguard’s data shows that workers contributing around 7.7% of their salary on average, coupled with a typical employer match of 4.6%, are saving at a total rate of over 12% annually. If you start contributing early, especially in a plan with automatic enrollment and annual deferral increases, reaching the benchmark becomes more feasible. However, these figures aren’t fixed targets. Instead, they’re reference points meant to keep long-term saving on track.
Another way to gauge progress is to use target-date funds as a proxy. The same Vanguard report shows that 84% of plan participants used a target-date fund in 2024 and 60% had their entire account invested in one. These funds account for retirement timing, helping younger savers stay heavily allocated in equities during their accumulation years. If you’re in a target-date fund intended for retirement at 2065 or later, your investment mix likely aligns with the long-term growth strategies recommended for someone in their mid-20s.
How to Catch Up and Reach Your Savings Goals
Whether you’re starting from zero or saving less than you’d like, there are practical ways to build your 401(k) balance in your mid-20s. Small adjustments in how much you save and how you manage your account can make a noticeable difference over time.
Increase Your Contribution Rate
If you feel behind, one of the most effective steps is to increase how much you contribute. Vanguard’s 2025 report notes that 45% of participants boosted their deferral rates last year, either independently or through automatic increases. Even a small annual adjustment like going from 6% to 7% can have a meaningful long-term impact without requiring a big change to your monthly budget.
Use Employer Matching to Your Advantage
Many employers offer matching contributions, often between 4% and 6% of your salary. If you are not contributing enough to receive the full match, you are missing out on part of your total compensation. Matching contributions are effectively free money added to your retirement savings, so aim to meet at least the threshold that qualifies you for the full match.
Align Your Investments with Your Age
Younger savers typically have time to ride out market volatility, which makes growth-oriented investments more suitable for them. Vanguard found that 67% of participants were invested in professionally managed allocations, including target-date funds. These funds automatically adjust to become more conservative over time, helping align your portfolio with your retirement timeline without the need for constant oversight.
Consolidate Old Retirement Accounts
If you have changed jobs and left behind one or more retirement accounts, consider rolling them into an IRA or your current employer’s plan. Managing fewer accounts can help you keep track of your investments more easily. It may also reduce fees or administrative costs. A consolidated account also makes it easier to apply a single investment strategy consistently.
Open a Roth IRA If a 401(k) Is Not Available
If your employer does not offer a retirement plan, a Roth IRA is a strong alternative. For 2025, you can contribute up to $7,000 if you meet the income requirements. You make contributions with after-tax dollars, but your qualified withdrawals are tax-free in retirement. A Roth IRA also gives you access to a wide range of investment options and more flexible withdrawal rules than most 401(k) plans.
Bottom Line
By age 25, 401(k) balances can differ significantly based on factors like income, job history and when you started to save. Aiming for a balance close to half your annual salary offers a useful benchmark. Many workers in this age group are still ramping up, with participation and savings rates rising quickly between early and later 20s. Contributing consistently, taking advantage of employer matches and using age-appropriate investments can help build a strong foundation for future retirement savings.
Financial Tips for Your 20s
- A financial advisor can help you plan for financial goals, whether they’re a year off or still decades in the future. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Do your best to avoid lifestyle creep, also known as lifestyle inflation. As your income grows, avoid increasing expenses at the same pace. Redirect raises or bonuses toward retirement savings to accelerate progress toward your long-term goals.
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