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How Your 401(k) Balance Stacks Up

Emily Brandon

The median 401(k) account balance was $18,127 at the end of 2014. However, most people tend to have either very high or low balances. Some 40 percent of 401(k) participants have less than $10,000, while 20 percent have more than $100,000, according to a recent Employee Benefit Research Institute analysis of 24.9 million 401(k) plan participants.

Workers with a high salary and more years on the job are often more able and willing to tuck money into retirement accounts. The dollar value of the tax deduction for saving in a retirement account is also more valuable if you are in a higher income tax bracket. Here's how much other people with a similar age and salary are saving for retirement, and how to maximize the value of your retirement accounts at each income level.

[Read: How to Pay Less Taxes on Retirement Account Withdrawals.]

$20,000 to $40,000. It is difficult to save for retirement when you earn a modest salary. "Many people with small incomes think that it isn't possible to save for retirement, but it really isn't the case," says Tim Baker, a certified financial planner for Script Financial in Baltimore. "When you're young, one of the things that you have a lot of is time, which means lots of compounding periods for your money to go to work for you." Many workers earning between $20,000 and $40,000 have managed to save something for retirement. The median 401(k) balance for people who have been on the job for five or more years ranges from $7,474 among workers in their 20s to $77,659 for people in their 50s.

There's an extra tax perk for people with a relatively low income who contribute to a retirement account. Individuals whose adjusted gross income is less than $30,750 will qualify for the saver's credit in 2016 if they save in a 401(k) plan. The tax credit is worth between 10 and 50 percent of the 401(k) deposit up to $2,000 for individuals, with bigger credits going to people with lower incomes. For example, a worker earning $25,000 who saved $500 in a 401(k) would receive a tax credit worth 10 percent of that amount or $50. And that credit is in addition to the tax deduction for saving in the 401(k) plan.

$40,000 to $60,000. Employees earning between $40,000 and $60,000 are likely to have a little more room in their budget to save for retirement. The median 401(k) balance ranges from $16,502 among 20-somethings to $113,504 for workers in their 50s, according to the EBRI analysis. People in their 40s ($79,786) have saved a median of over twice as much as those in their 30s ($35,602). "A moderate earner now is likely in a lower tax bracket, so paying taxes on income and contributing to a Roth now makes sense," says Jeff Rossi, a certified financial planner for Peak Wealth Advisors in Holmdel, New Jersey. "Roth IRA contributions are made with after-tax dollars, so contributions can always be withdrawn and earnings are tax-free when withdrawn in retirement and have met a five-year holding period." Some employers also offer a Roth 401(k) option.

[Read: Tax Breaks for People Over 50.]

$60,000 to $80,000. In this income bracket, even 20-somethings with a few years on the job have managed to accumulate $33,469, which still has decades to grow until retirement. And workers in their 30s have $60,504. Employees who are in their 50s have a median of $174,016, and 40-somethings have $123,554, according to the EBRI analysis.

Workers in this income range who have a 401(k) at work may lose the ability to claim another tax deduction for an IRA contribution. The IRA tax deduction is phased out for individuals with a modified adjusted gross income between $61,000 and $71,000 in 2016. "If you're below the income cutoff, you may be able to do an IRA," says Katie Brewer, a certified financial planner for Your Richest Life in Garland, Texas.

$80,000 to $100,000. If you are fortunate enough to make it to this income bracket, resist the temptation to inflate your lifestyle until your retirement plan is on track. "Make sure that you know what your broad financial plan is, when you are going to retire and how much you are going to need," Brewer says. Many people earning this amount still aren't putting enough into their retirement account to maintain this type of income in retirement. The median 401(k) balance for employees in this income bracket ranges from $53,871 for 20-somethings to $258,153 for 50-somethings. People in their 30s have a median of $97,019, while those in their 40s have $186,584.

$100,000 or more. Workers earning a six-figure salary generally have a much easier time saving for retirement than those who earn less. Fifty-something workers in this income bracket have a median of $434,733 in their 401(k) plan, and long-tenured 40-somethings have $325,054, according to the EBRI analysis. Even 30-something workers earning over $100,000 per year tend to have a six-figure retirement account balance ($154,587). Workers in their 20s who manage to somehow swing this salary have a median of $44,513 in their 401(k) plan.

[Read: How to Become a Millionaire by Retirement.]

The downside of a large salary is that some types of retirement savings tax perks are aimed at savers with lower incomes. For example, many high earners lose the ability to save for retirement in a Roth IRA. Eligibility to make Roth IRA contributions phases out for individuals with an adjusted gross income between $117,000 and $132,000. However, the tax break for making a 401(k) contribution applies to everyone who saves in a 401(k) plan. And those in the highest tax brackets get the biggest tax deduction for their 401(k) savings.

Emily Brandon is the author of "Pensionless: The 10-Step Solution for a Stress-Free Retirement."

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