The 401(k) Numbers Are Lying to You
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Why do record‑high 401(k) balances give a false sense of confidence?
There are lies and then 401k number lies.
Brent, I am so excited about this because sometimes a piece of information or a headline or an article will come out and at first blush, you'll think, okay, ooh, this is good. This is awesome. But I love that we get to sit in this spot where we get to look behind the numbers and determine, okay, is this actually a good thing or is there some creative accounting going on?
Well, it's also the context. Always be careful. Numbers are great. We are big math people. But you need the additional context to kind of know what's truly going on. And what's all over the headlines right now is 401ks are hitting all-time highs. That sounds pretty good. But... there's a catch. And that's what we kind of want to cover today because I want to make sure you don't fall into a trap of overconfidence because this is not the first time we've covered this. It's just today it's going to be with 401ks. We'll talk about in the past it's been on net worth with the FRED data. There's all kind of behavioral traps that we just want to make sure you kind of are immune to.
Yeah, so Vanguard recently released their study. This is the How America Saves 2026 Report. And this is what came out of it. They looked at defined contribution 401k balances and what the median balance of 401ks are. And they look at this over the course of every year. And what you can see is since 2022, it's been increasing. Median balance in 2023 was $35,000. Median balance in 2024 was $38,000. Median balance in 2025 was was 44,000. So you might say to yourself, holy cow, the median balance of 401ks are increasing. That must mean that people are listening to the Money Guy show. They're beginning to take heed that they need to save for their future, and they're beginning to save more But that may not be the truth.
Well, there's also, if you look at this, it's kind of a curious thing. This is almost more like the Warren Buffett quote of being greedy when others are fearful and fearful when others are greedy. And the fact that you look at this and go, wait a minute, why was it so high in 2021? Why did it get its teeth kicked in in 2022? Man, what a recovery or what a saving strategy in 2023. And then let us go ahead and let the cat out of the bag. If you overlay the S&P 500's performance... What do you know? This is less about the behavior of good savings and investing habits and more about just what is going on in the financial markets. And that's something that we want to be. It's something to be celebrated. Look, I'm happy the markets are going up.
But when you find out account values are going up less than what the rate of return is from the general market, we have a disconnect from the behavior of actually what creates the dollars in your bank and in your investment accounts.
Now, look, don't mishear us. We're not saying that we don't like seeing account balances go up, but we want to be careful that when you see that there was a 16% increase from 2024 to 2025, I don't want you to think it's because, oh, well, people have finally realized I need to be saving, I need to be doing more. It's likely more driven by how? The market performed, and the data would actually substantiate this. We know that from the FRED data that the national average savings rate across the average American has now dropped to 3%. Yeah, and look- Average savings rate of 3%.
It's disgusting. And this is the part that I hate to be, because we're optimists. I am Mr. Good Time Rock and Roll, but I am one of those people that when I see a troubling trend, and it's always about the behavior of saving and investing, and Americans are notorious for- We like to consume and spend. And look, there's industries out there trying to help facilitate that or grease the skids. But I'm here to tell you there's a better way to do money. And you need to actually intersect what are your goals? What are your desires for what you want this money to do? And if you start... early and do it often with your savings rate, you can find that actually the heavy lift is just the behavior and the discipline, but all the work is going to be done by your actual investment dollars through compounding growth.
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Chapters
5 chapters
1
Why do record‑high 401(k) balances give a false sense of confidence?
0:07–4:49
2
How does Vanguard’s How America Saves 2026 report explain the rise in median 401(k) balances?
4:49–11:23
3
Why is market performance driving 401(k) growth more than actual saving habits?
11:23–17:16
4
How much should you increase your contribution rate to strengthen retirement readiness?
17:16–24:28
5
What lessons can you teach kids about investing and ownership early on?
24:28–1:02:31