Money Management

Gauging where you stand compared to other savers can help put things in perspective. Here are the numbers for 401(k) balances. 

Accurately gauging your retirement progress can be a challenge. For one thing, even as you near retirement age, it can still feel like this distant, nebulous concept. (This is a mental hurdle more than a financial one.)

Another part of the issue is that a lot of the power of investing for retirement is taking advantage of compound interest. This means things start slow — and stay slow for years. Younger folks, in particular, may struggle to see the progress while balances are growing.

That’s where data can help. Looking at how you stack up to other savers can help put your own investments into perspective. One very useful data source for 401(k) savings is the annual How America Saves Report from Vanguard. Here’s what the 2023 edition has to say.

Framing the data

The Vanguard report analyzes roughly 5 million DC (defined contribution) plan participants across the company’s business. The median age was 43 years old, and the median participant income was about $82,000.

As you’re considering the balance numbers below, keep these numbers in mind. How does your age compare to the median? Are you younger or older? If you’re much younger or older than the median age here, then weight your own balances accordingly.

Similarly, is your income much higher or lower? Your current lifestyle, at your current income, can be a strong indicator of the type of lifestyle and income you may want or need in retirement. You may not need to save as much as someone with a higher cost of living (and vice versa).

Average 401(k) balance: $112,572

The average account balance for Vanguard participants in 2022 was $112,572. This is actually a 20% decline from the previous year’s average of $141,542. However, it is still higher than the averages from 2013 through 2019.

One important thing to keep in mind here is that this is the average balance. This means they added up the total balances of everyone, then divided by the total number of participants.

While potentially useful, the problem with using this number to compare your own savings is that it’s not exactly a fair representation of everyone. In other words, a very small number of people with very large balances will cause the average to be quite high. In fact, the report indicates that about 75% of participants had balances below the average.

Median 401(k) balance: $27,376

To get a better gauge of how you stack up more generally, you’re going to want to look at the median balance. Essentially, if you listed all of the balances in order of size, the median balance is the one right in the middle of the list.

According to the Vanguard report, the median balance for 2022 was $27,376.

This is just 24% of the average balance. And for half of the participants, it’s actually still more than they have in their accounts. Indeed, one in three participants had an account balance of less than $10,000.

How to optimize your 401(k) investments

We can attribute some of the low median balances to age; if the median age is 43, that means at least half of participants are younger than that. However, there are also a good many folks in this report who may need to think hard about their current rate of retirement savings.

If you’re concerned about your own rate of investing for retirement, there are things you can do:

Make sure you’re getting your full company match. Many companies offer some level of retirement matching, usually a few percentage points. Since this is use-it-or-lose-it money, be sure you’re contributing at least enough to maximize any available employer matching.Catch up if you can. Most 401(k) and IRAs offer “catch up” contributions for older savers who need to make up for lost time. If you can save a little extra, take advantage of these benefits.Take (reasonable) risks. When you first set up an account with a broker, it may have a default investment option that’s more on the conservative side. While there’s a case for investing conservatively when you’re close to retirement, younger savers should take a little more risk (e.g., invest a little more in stocks) to see more growth.Check your investments and rebalance regularly. Over time, your portfolio can change, and you may find you have a larger percentage of your money in cash, bonds, or stocks than you started with. Keep an eye on your portfolio and rebalance when necessary so you can be sure you’re always maximizing your return.

Saving for retirement is a long game. Don’t be discouraged if your savings aren’t over that six-figure mark. Save what you can, stay on top of your investments, and keep on truckin’.

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We’ve been living through uncertain financial times. Learn what happens when the Fed raises interest rates and how you can prepare for any market changes. 

With inflation hitting 40-year highs, the Federal Reserve has raised interest rates 11 times since March 2022, making these hikes the fastest cycle in history. This brings the federal funds rate to a target range of 5.25%–5.50%, making it the highest level of borrowing costs in over 22 years. Fed Chair Jerome Powell has stated that there may be another increase in interest rates this year. Here’s how rising rates can impact your investment portfolio.

1. Bond investments

Higher interest rates tend to harm bond investments. The value of many bonds decreases when interest rates rise because new bonds will pay a higher interest rate. This makes existing bonds less valuable in the eyes of investors, who can now get a better return on newly issued bonds.

Bonds with longer maturities will tend to see a bigger decline in value than those with shorter maturities. Short-term bonds are less risky. Since they mature faster, it gives investors an opportunity to reinvest their money at higher interest rates. In the short term, you may end up with a lower return as a bond investor.

2. Stock investments

Stock investments can be impacted by interest rate hikes as well. For example, rising rates can cause borrowing costs to rise for companies, reducing their profits. This can cause stock prices to decline.

However, the impact on stocks is not always straightforward. Higher interest rates can also mean a strong economy, which can boost stock prices. Additionally, some stocks may be relatively insulated from the effects of rising rates, such as those in non-cyclical industries like healthcare or utilities. Typically, value stocks tend to hold up better than growth stocks during times of rising interest rates.

3. Real estate investments

Another asset class impacted by interest rates is real estate. When interest rates rise, mortgage rates also tend to rise, making it more expensive for buyers to buy a home. This can lead to a slowdown in the real estate market.

However, real estate investments can be a good hedge against inflation. Rental rates can go up thanks to inflation, thereby increasing the income generated by property investments. Real estate investments such as REITs (real estate investment trusts) may be affected differently, though.

REITs tend to hold long-term leases with tenants, so their rental revenue streams are less affected by short-term interest rate changes. Additionally, a strong economy can help boost demand for properties, reducing the negative impact of rising interest rates.

4. Precious metals and commodities

Precious metals such as gold act as a hedge against inflation. Investors tend to move toward precious metals as a store of value when inflation fears are high. If interest rates rise, it could be an excellent opportunity to invest in commodities and precious metals for the short term. This is because these investments tend to increase in value during inflationary periods.

5. Cash, CDs and savings accounts

Lastly, it’s important to consider cash investments, such as CDs and savings accounts. When interest rates are up, savings accounts generally provide a higher yield. If you are looking for a risk-free investment with a relatively stable return, a high-yield savings account could be a good choice.

The downside is that the rate of return may be much lower than inflation, so you may actually be losing purchasing power by keeping money in these accounts.

How to invest during rising interest rates

As interest rates continue to rise, many investors may feel nervous and unsure about how to invest. The best course of action, however, is to stay the course and think long term. Rather than panicking and making rash decisions, it may be wise to continue making periodic investments and avoiding attempts to time the market.

Additionally, it may be a good idea to pay off any outstanding debts, as credit card interest rates will likely increase with Fed rate hikes. By staying focused and keeping a level head, investors can weather the storm of rising interest rates and come out ahead in the end.

The effects of another Fed rate hike on your investment portfolio can vary depending on the asset classes in which you’re invested. Bond investments may see declines in value, while stock investments can be impacted in more complex ways. Real estate investments can be more resilient amid rising rates if the economy remains strong. As with any investment strategy, it’s important to keep a long-term perspective and not make rash decisions based on short-term market fluctuations. You don’t want to make any costly mistakes!

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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Costco is going all in on fall — at least for now. Read on to see which items deserve a spot in your shopping cart. 

Fall is officially in the air. At this point, you can feel free to order up Pumpkin Spice Lattes to your heart’s content without being judged for doing so in flip flop weather. And rest assured that if you’re a fan of fall flavors like pumpkin and apple, you’re bound to find your share of seasonal goods at supermarkets everywhere.

Costco, too, has embraced the fall season, as evidenced by its current product lineup. Here are a few great items that are perfect for fall that you may want to scoop up quickly — before they’re gone.

1. Pumpkin pie

Some people are really only tempted to eat pumpkin pie on Thanksgiving. But if you’re throwing or attending a Halloween bash, a massive Costco pumpkin pie could be a great way to feed a crowd at an ultra-affordable price point. A pie weighing more than 3.5 pounds will only run you a credit card tab of $5.99 in some areas, though it’s worth noting that Costco prices can vary by region.

2. Caramel apple mini cakes

A Costco pumpkin pie feels like a bit of a bold commitment when you’re purchasing it to enjoy solo at home (though if you’re able to take down that entire pie yourself before it goes bad, more power to you). If you’re looking for a sweet fall indulgence you don’t necessarily want to share with 15 of your closest friends, consider Costco’s caramel apple mini cakes. You can get a pack of six for $8.99 and eat them one at a time over the course of six days. Or, freeze a couple and dip into your stash later.

3. Green chile cornbread

Cornbread is a classic fall dish. You can eat it for breakfast, enjoy it as a snack, or pair it with a nice pot of chili for a comforting dinner on a cooler night. Costco’s green chile cornbread isn’t too heavy on spice, so it may be a good buy even for younger kids. And at a price point of $6.99, you’re looking at a pretty reasonable tab for something that might feed your family for days.

4. Pumpkin streusel muffins

Costco muffins aren’t for the sugar-averse. The reason? They’re massive. But they’re also delicious, and the pumpkin streusel version is no exception. You can buy 12 large Costco-sized muffins for $9.99, and if you’d rather they not all be pumpkin-flavored, that’s okay, too. Plus, Costco’s muffins happen to freeze well, so your likelihood of wasting your money is fairly low provided you have the space to store them. Oh, and pro tip: Cut them in half before freezing so you can enjoy smaller portions if that’s more your speed.

5. Jumbo pumpkins

The massive pumpkins you see on people’s porches in October generally aren’t great for cooking. You’ll want smaller pumpkins for that purpose. But large pumpkins are great for carving and decor, and Costco is selling them for $6.99. If you’re someone who prefers not to pay a $15 entrance fee to a pumpkin patch to pick your own massive gourd, stick with Costco’s version. No one will be any the wiser.

It’s fall, y’all

Clearly, Costco has a pretty awesome fall lineup in stores right now. But before you rush to scoop up any of these items, think about whether you really need them and whether you’re likely to get good use out of them. And also, consider your financial situation.

A lot of people are still grappling with limited savings and debt on the heels of rampant inflation. So if money is tight, you may not be able to swing every item on this list. In that case, you may decide to try the cornbread because it’s more of an actual meal, as opposed to dessert. Or, you may decide to go with the pumpkin muffins because they’re your favorite and you look forward to them every year.

Of course, if you’re doing well financially and think you’ll get great use out of these items, then it wouldn’t be unreasonable to grab all of them — especially if you have a larger family to share with. There’s nothing wrong with going all in if you have the money and you’re one of those people who just really loves fall.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Maurie Backman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale. The Motley Fool has a disclosure policy.

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