Why Your 401(k) Might Not Be Enough
Updated: Oct 7
Saving in the plan is a good habit. It isn't the same thing as a plan, and the difference is where most shortfalls get built.
We hear the same sentence most weeks. Somebody says they're in decent shape because they've been putting money in their 401(k) since the year they started at the shop. The balance goes up most years. Nobody has ever told them otherwise.
That's usually the whole plan. Sign up your first week, pick a percentage, glance at the statement when it lands in the mail.
It beats doing nothing by a mile. But a 401(k)—or a 403(b), TSP, or similar workplace plan—is a bucket, not a plan. It doesn't know what you spend, when you want to quit working, what your tax bill looks like at 63, or how long you'll live. It holds what you put in it. The plan is the part that decides what goes in.
The average is lying to you
Vanguard tracks 4.6 million 401(k) accounts. At the end of 2025 the average balance was $167,970. Sounds alright. The median, meaning the person standing right in the middle of the line, was $44,115.¹
That gap is the whole story. A handful of long-tenured high earners drag the average up, and everybody else reads the headline and figures they must be about normal.
Closer to the finish line it gets sharper. For people 55 to 64, the median 401(k) holds $107,269.¹ At a 4% starting withdrawal that's about $4,300. Not a month. A year.
Meanwhile Americans say it'll take $1.46 million to retire comfortably, and 46% don't expect to be ready when the time comes.²
Social Security was never going to cover it
The Social Security Administration says it plainly in its own material for workers: the benefit replaces about 40% of your pre-retirement pay, and full retirement age is 67 if you were born in 1960 or later.³ Most planning targets retirement spending at 70% or 80% of pre-retirement spending, because the mortgage and the truck payment don't drop by half the day you retire.
So there's 30 or 40 points of your income to cover on your own. In most households the 401(k) is the only thing that can do it.
There's a second wrinkle. The 2026 Trustees Report projects the retirement trust fund (social security) runs out of reserves in late 2032, with incoming payroll taxes covering 78% of scheduled benefits after that.⁴ We're not predicting cuts and nobody should.
Congress has changed this program before and can change it again. But if you're decades out, plan for a range instead of a promise.
What an 18-year-old is actually chasing
What follows is a hypothetical illustration, not a forecast, and nobody's situation looks exactly like it.
Say a kid graduating this spring wants to be done working at 60. The life they want runs $60,000 a year in today's money. At 2.5% inflation, that same life costs about $170,000 a year by then. If Social Security handles roughly 40% of it, their own savings has to throw off about $102,000 in the first year, which at a 4% starting withdrawal means a portfolio somewhere around $2.5 million.
Two and a half million sounds ridiculous. It should. But it isn't a fancy lifestyle. It's $60,000 of ordinary living run through forty-two years of inflation.
The flip side is the good news. Forty-two years is a long runway, and somebody starting at 18 needs far smaller monthly savings than somebody starting at 40 to land in the same place. Waiting is the expensive part.
Quitting at 60 has a price tag of its own
Going early is doable and we help people build toward it. It just carries bills that are easy to leave out of the math:
No Social Security before 62, and claiming then cuts the benefit permanently.
No Medicare before 65. Five years of buying your own health coverage is usually the biggest line in an early retirement budget.
Penalty-free access to the plan generally starts at 59½, with a separate rule if you leave an employer in or after the year you turn 55.
Every early year counts twice. It's a year you spend instead of save, and a year the portfolio has to carry.
Stopping at 60 instead of 67 can mean funding seven extra years out of pocket. That's not a reason to skip it. It's a reason to know the number before you pick the date.
Building beyond the bucket
Your 401(k) is a fantastic foundation, but it shouldn't be the only tool in your shed. Expanding into other account types doesn't replace your workplace plan—it works alongside it to give you flexibility when you actually go to retire.
For instance, if you want to retire before age 55, a standard taxable brokerage account is critical for bridging the gap, as it carries no age-based withdrawal penalties. Similarly, establishing Traditional or Roth IRAs can open up a vast universe of investment options beyond your employer's limited menu, while adding vital tax diversification for your future withdrawals.
What actually moves the needle
Nobody fixes this by picking better funds.
The rate comes first. Vanguard's average total savings rate, employer money included, is 12.1%, and their own target is 12% to 15%. About half of savers sit below it.¹ If you got auto-enrolled at 3% and never touched the dial, you're saving at well under half the pace of the average and you probably don't know it.
After that: take the whole match, because contributing under it is the one place in finance where you turn down a raise by accident. Pay attention to where the dollars sit, since pre-tax, Roth and taxable money are taxed very differently when you go to spend them. Use the catch-up years, which run $24,500 in 2026 plus $8,000 once you're 50, or $11,250 if you turn 60 through 63 this year.⁵ And don't cash out an old plan when you change jobs, as you may face taxes and early withdrawal penalties.
Then there's everything the plan menu doesn't cover: a pension election, a land sale, a business you mean to exit someday, a spouse's claiming date. None of it lives inside the 401(k) and all of it changes the answer.
How we help
We usually try to help answer the question that almost nobody can answer: what number are you aiming at, and what does your current contribution rate actually get you? Everything else follows from that.
From there we look at the whole picture instead of one account: what you're saving and where, how the plan menu is invested, which bucket your money belongs in for tax purposes, when Social Security should start, how to bridge the years before Medicare, or what a business or real estate does to all of it. We're fee-only and we don't sell products, so there's no commission or hidden incentive riding on the advice.
Want to see if your 401(k) is enough, or if you should be doing more? We offer a complimentary consultation and a no-obligation review of what you already have. Bring your latest 401(k) statement and other investment account statements, and we'll walk through where you stand. Schedule a free consultation at longevitywealthadvisory.com/book-online.
Footnotes
Vanguard, How America Saves 2026 (25th edition), published June 2026, covering data through 31 December 2025. Balances at Figure 53, contribution rates at Figures 44 and 49.
Northwestern Mutual, 2026 Planning & Progress Study, conducted by The Harris Poll among 4,375 U.S. adults, January 2026.
Social Security Administration, Retirement Ready fact sheet for workers ages 18 to 48, ssa.gov.
Social Security Board of Trustees, 2026 Annual Report, released 9 June 2026.
Internal Revenue Service, Notice 2025-67 and IRS guidance on catch-up contributions, 2026 limits.
Disclosures
Longevity Wealth Advisory LLC is a fee-only financial advisor in Wisconsin and acts as a registered investment adviser registered with the State of Wisconsin. This material is for educational purposes only and is not individualized investment, tax or legal advice, nor an offer or solicitation to buy or sell any security. Figures cited are as of the dates shown and are drawn from the sources listed. Any examples are hypothetical, are provided for illustration only, do not reflect the experience of any client, and are not a guarantee or prediction of future results. Investing involves risk, including the possible loss of principal. Tax rules, contribution limits and benefit programs are subject to change. Please consult your tax or legal professional regarding your own circumstances.
