By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel consensus is that the '4% rule' and focusing solely on 401(k) balances oversimplify retirement planning. They highlight the need to consider sequence-of-returns risk, healthcare costs, taxes, and other factors like home equity and Social Security's solvency. However, home equity as a retirement solution is debated due to its illiquidity and potential fees.
Risk: Ignoring sequence-of-returns risk and focusing solely on 401(k) balances
Opportunity: Considering home equity as a 'hidden asset' in retirement planning
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
Many people have too little money saved for retirement in their 401(k).
Investing is critical because you can't live on Social Security alone.
If you are behind in retirement savings, you can catch up by automating investments and making budget cuts.
When it comes to saving for retirement, a 401(k) is a popular account and with good reason. Your employer may not only offer a 401(k) but may automatically enroll you in one. In some cases, companies match your 401(k) contributions, allowing you to earn essentially "free" extra money for retirement just by investing.
Unfortunately, while a 401(k) is a great account, many people simply are not investing enough in it to set themselves up for the financial security they deserve. And that's a problem, given that Social Security only replaces about 40% of pre-retirement income, which isn't nearly enough to live on.
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If you're not sure if you're on track to a secure retirement, let's take a look at the average 401(k) contributions, as well as how much you probably should have saved to see where you stand.
According to data from Empower for January 2026, here are the average 401(k) balances by age:
| | | | | 20s | $116,872 | $43,192 | | 30s | $212,356 | $78,857 | | 40s | $409,686 | $156,675 | | 50s | $629,000 | $246,554 | | 60s | $576,755 | $187,249 | | 70s | $431,834 | $95,931 | | 80s | $429,614 | $77,086 |
The average is obviously much higher than the median, with some of the country's biggest earners likely driving those numbers up by making very large contributions.
Still, while average benefits aren't terrible, especially for those in their 50s, the sad reality is that neither the average nor the median benefit would be enough to provide the typical senior with the funds they need.
So, if most people don't have enough, how much is enough, exactly? Financial advisors typically recommend that you have saved:
These numbers are fairly reasonable if you plan to follow the 4% rule, which allows for a withdrawal of 4% of your portfolio balance in year one and then adjust up each year. This rule should give you a good chance of your money lasting for at least 25 to 30 years.
Assuming you earn $70,000, that would mean you'd want around $700,000 saved at 67. Following the 4% rule would give you $28,000. That replaces about 40% of your pre-retirement income, and Social Security replaces the other 40%, so you end up at just about the recommended 80% replacement rate most experts believe you'll need.
So, what happens if you aren't anywhere near hitting these savings goals right now? Hopefully, if that's the case, you have some time to catch up. If you're still working and earning income, the best thing you can do is to automate your investment contributions.
If you make a retirement plan, decide how much you need to save each month to hit your target and set up automatic contributions for that amount, chances are good that you will continue those contributions since it is easier to stick with the status quo. You don't have to make the responsible choice and force yourself to transfer money to your retirement plans every month.
You may need to make budget cuts to be able to set up the automatic contributions you need to hit your savings target. Tracking spending and identifying areas to save can help. And if you can't invest the full targeted amount right away, start investing something.
You can inch up the percentage you are contributing by 1% or 2% every couple of months once you get used to living on less. And you can redirect all of your raises right to your retirement account every time you get a salary increase, since you won't yet be counting on that money to pay the bills.
If you follow these tips, hopefully you can beat the average and median 401(k) balances and get on track for the income you need as a retiree.
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Four leading AI models discuss this article
"The reliance on static savings multiples and the 4% rule fails to account for modern longevity risk and the non-linear nature of healthcare inflation in late-stage retirement."
The article relies on a dangerous 'one-size-fits-all' heuristic that ignores the reality of modern inflation and healthcare costs. The '4% rule' is increasingly debated in a high-volatility environment where sequence-of-returns risk can gut a portfolio early in retirement. Furthermore, the focus on 401(k) balances ignores the massive tax drag of traditional accounts; a $1M 401(k) is not equivalent to $1M in a brokerage or Roth account. By emphasizing average balances, the piece masks the systemic failure of defined-contribution plans to account for the 'missing middle'—those who earn too much for subsidies but too little to bridge the gap through aggressive private savings.
Perhaps the simplicity of these benchmarks is a feature, not a bug, designed to nudge low-information savers into action rather than paralysis by analysis.
"The article mistakes a liquidity/behavior problem for a solvency problem; median workers face a structural income gap that no amount of budget-cutting closes, especially if Social Security benefits contract."
This article conflates two separate problems and offers a solution that only works for one. Yes, median 401(k) balances are low—that's real. But the article's prescription (automate + cut budget) assumes people have discretionary income to redirect, which median earners often don't. The 4% rule math is sound, but it assumes 25–30 year horizons; for someone retiring at 67 with $700k, longevity risk to 95+ is material. The Social Security replacement math (40% + 40% = 80%) ignores that Social Security's solvency crisis means future cuts are likely—the article treats it as guaranteed income. Most critically: the Empower data shows median balances in the 50s at $246k, not $629k. That's a $700k gap at retirement, not a 'catch-up' problem. For lower-income cohorts, this is structural, not behavioral.
The article's core premise is sound: most people are undersaving, and automation + discipline demonstrably work for those with margin to save. If someone earning $70k redirects raises and cuts discretionary spend, the math compounds powerfully over 20 years.
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"The article's optimistic retirement targets (8x-10x salary and a fixed 4% withdrawal) rely on favorable markets and stable policy, which is unlikely amid wage stagnation, rising healthcare costs, and sequence-of-returns risk; many workers won't hit those goals."
The article highlights that many Americans under-save in 401(k)s and that automation and disciplined budgeting can catch them up toward target multiples of salary (8x by 60, 10x by 67) under the 4% rule. But the numbers are heavily skewed by high earners; Empower's averages mask distribution and the reality that a large share of workers face flat wages and employer changes. More importantly, the 4% rule and a fixed target lifespan ignore rising healthcare costs, potential sequence-of-returns risks, taxes, and policy changes that can shrink promised withdrawals. The piece also uses clickbait-like Social Security secrets, which distract from real planning.
Against that stance, the strongest counter is that averages are driven by a small share of high earners; many workers won't be able to meaningfully boost contributions, and even catch-up assumes stable wages and access to employer matches.
"Retirement planning is failing because it focuses on 401(k) liquidity rather than total balance sheet optimization, specifically the role of home equity."
Claude, you’re right about the $700k gap, but everyone is missing the 'hidden' asset: home equity. By focusing solely on 401(k)s, we ignore that for most Americans, the primary retirement vehicle is their primary residence. Downsizing or reverse mortgages aren't just 'last resort' options; they are essential structural levers for the 'missing middle' that the 4% rule completely ignores. We must stop analyzing retirement as a pure cash-flow problem and start viewing it as a balance sheet optimization challenge.
"Home equity solves the balance-sheet problem on paper but fails the cash-flow problem in practice for most retirees."
Gemini's home-equity pivot is clever but masks a critical constraint: reverse mortgages carry 7-10% fees and erode principal for heirs—a tax on longevity. More damaging: housing is illiquid and geographically locked. A retiree in a $400k home in a declining market can't easily arbitrage that into annual spend. The 'balance sheet' framing obscures that most middle-income retirees need *liquid* cash flow, not trapped equity. Home equity is a backstop, not a solution.
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"Don't treat home equity as a universal retirement lever; liquidity, local market risk, and long-term care costs mean housing wealth can't reliably fund retirement."
Gemini's pivot to home equity as a 'hidden asset' is intriguing but overly optimistic. Housing wealth is illiquid, geography-dependent, and exposed to local cycles; downsizing, reverse mortgages, or tapping equity can entail substantial fees and drag on heirs, and may not be available to those in rising-cost metros or declining markets. A robust plan should test liquidity across healthcare shocks, tax drag, and policy risk, not assume housing wealth reliably funds retirement.
The panel consensus is that the '4% rule' and focusing solely on 401(k) balances oversimplify retirement planning. They highlight the need to consider sequence-of-returns risk, healthcare costs, taxes, and other factors like home equity and Social Security's solvency. However, home equity as a retirement solution is debated due to its illiquidity and potential fees.
Considering home equity as a 'hidden asset' in retirement planning
Ignoring sequence-of-returns risk and focusing solely on 401(k) balances