The Retirement Savings Gap: Why the Average 401(k) for Retirees Falls Short of Long-Term Needs

The retirement savings landscape in 2025 reveals a stark disconnect between the median 401(k) balances held by retirees and the income required to sustain a comfortable post-career lifestyle. According to Empower's analysis of anonymized 401(k) data as of October 2025, the median balance for individuals aged 70+ stands at $92,225. Meanwhile, Fidelity's Q3 2025 data reports an average 401(k) balance of $271,600 for the same age group. While these figures reflect modest growth compared to earlier years, they pale in comparison to the income benchmarks recommended by financial institutions for sustainable retirement.

Fidelity's guidelines emphasize that retirees should aim to save at least 10 times their pre-retirement income by age 67 to maintain their standard of living. For context, the median pre-retirement income for individuals aged 65–67 in 2026 was $58,680, implying a target savings threshold of $586,800. Even the average 401(k) balance of $271,600 falls significantly short of this benchmark. This gap underscores a critical vulnerability: many retirees rely disproportionately on 401(k) accounts, which may not generate sufficient income to cover long-term expenses, especially when adjusted for inflation and healthcare costs.

The Math of Long-Term Sustainability

Fidelity's 4% rule-a widely accepted guideline for retirement withdrawals-further highlights the shortfall. At 4% of the average $271,600 balance, retirees would receive approximately $10,864 annually. However, Fidelity recommends replacing 45% of pre-retirement income through personal savings and investments, assuming Social Security covers the remainder. For someone with a $58,680 pre-retirement income, this would require $26,406 in annual savings-based income-a figure 2.4 times higher than what the average 401(k) balance could generate under the 4% rule.

The problem is compounded by longevity. A 70-year-old retiree in 2025 can expect to live nearly 20 more years, according to U.S. life expectancy data. A portfolio of $271,600, even with conservative growth assumptions, risks depletion if withdrawals exceed sustainable limits. This reality challenges the notion that 401(k) savings alone can ensure financial security in retirement.

Strategic Planning and Income Diversification

To bridge the gap, retirees and pre-retirees must adopt a more diversified approach to income generation. Fidelity's retirement guidelines stress the importance of a multi-pronged strategy:
1. Increasing Savings Rates: Aim to save 15% of pre-tax income annually, including employer matches, to build a robust retirement foundation.
2. Leveraging Tax-Advantaged Accounts: Maximize contributions to IRAs, which in 2025 allow $8,000 for those aged 50+. These accounts offer flexibility in withdrawal strategies and tax efficiency.
3. Annuities and Real Estate: Consider annuities to lock in guaranteed income streams or real estate investments to generate passive cash flow.
4. Healthcare and Long-Term Care Planning: Allocate resources to health savings accounts (HSAs) and long-term care insurance to mitigate unpredictable medical expenses.

The Role of Social Security and Inflation

While Social Security remains a cornerstone of retirement income, its benefits are often insufficient on their own. Fidelity's analysis notes that retirees should aim to replace 80% of pre-retirement income, with Social Security covering roughly 35–45% of that total. However, inflation erodes purchasing power over time, and the average retiree's savings must outpace rising costs. For example, a $271,600 portfolio earning 3% annually would generate only $8,148 in the first year, with returns declining as inflation eats into principal.

Conclusion: Beyond the 401(k)

The data is clear: the average 401(k) balance for retirees aged 70+ in 2025 is inadequate to meet long-term income needs. Strategic retirement planning requires a shift from reliance on a single savings vehicle to a diversified portfolio of income sources. By prioritizing aggressive savings, tax efficiency, and alternative investments, retirees can better align their resources with the realities of a prolonged retirement. As Fidelity and Empower's data illustrate, the time to act is not after retirement, but well before.