Manage Your Monies

What Are The Average Retirement Savings?

Manage Your Monies

As the economy recovers from the financial crisis, Americans are feeling better about their average retirement savings. How does it compare to each age group?

Nest eggs are indeed trending up, but the median American has only $63k in their retirement savings, which is incredibly low if they want to maintain their standard of living.

We’ll break down the average retirement savings by age group, and share surprising statistics for each age group.

Median Retirement Savings by Age

According to a survey conducted by the Transamerica Center for Retirement Studies, the median retirement savings by age in the U.S. is:

Each age group is broken down below, along with statistics that stood out.

Twenties: Committed, Concerned, & Cautious

Workers in their twenties have a median retirement savings of $16k. They’re facing large student debt, as well as credit card debt. Although they do have debt to pay down, 67% of them started saving at age 22.

We agree with building your retirement savings instead of paying down your student loans early, and are glad to see that most workers are aligned with this.

While a high number of twenties are saving, a concerning 37% know nothing about how to invest their money. It’s just as important to know how to save your money, and our mission is educate readers on maximizing their retirement yield.

Warren Buffett says that an S&P 500 index fund is the best investment for most people, so we recommend starting with that.

Thirties: Strong Savers but Weak Planners

The thirties group are well into their careers, and have a median retirement savings of $45k. 16% of them have fully recovered from the Great Recession, while another 27% were not impacted by the great recession.

Thirysomethings are getting into their retirement groove, with 30% of 401k participants contributing more than 10% of their income in their 401k. Ideally, 100% of 401k participants will be maxing out their 401k to lower their tax exposure. Either way, this is a start.

While they have started saving, there is a lot more for this group to learn. 68% admit that they don’t know as much as they should about retirement investing, and 57% have guessed how much they’ll need for retirement.

Check out the 4% rule, also known as the multiply by 25 rule, to determine how much you need to comfortably retire. Your ideal nest egg should be 25x your annual expenses. If you spend $40k per year, you should have $1 million for retirement.

Forties: Financially Frazzled but Focused

The median retirement savings for the forties is $63k. Since the median income of the forties group is roughly $41k, they’ll need to have just over $1 million saved to maintain their lifestyle based on the multiply by 25 rule.

It shouldn’t be surprising, then, that only 10% feel “very confident” that they will be able to retire with a comfortable lifestyle.

There is time to catch up, but they need to increase their retirement contributions. The median 401k contribution is only 7%, which is way too low. Your forties are your peak earning power, and your savings rate should reflect that.

Fifties: Facing Future Retirement Realities

The fifties have a median retirement savings of $117k. While this is much better than the forties, it’s still very low. By using the 4% rule, they’ll only have $4.6k per year during their retirement.

The average social security check in 2018 is $16k. That will help, but it will still be tough for the fifties to maintain their standard of living. The fifties realize this, and 42% expect to reduce their standard of living at retirement.

37% of the fifties say that saving for their retirement is their greatest financial priority. They’ll likely need to work longer as well.. 59% of the fifties plan to work past the age of 65, or do not plan to retire at all.

Everything is not totally bleak. The government offers catch up rules for 401k and IRA, and maximizing those will help a ton. After maxing those out, continue investing in your business, retirement, and brokerage.

It’s important to realize the reality, and to then find solutions to address it.  Thankfully, there are several options.

Sixties: Transforming Retirement As They Retire

The median household retirement savings for the sixties is $172k. That comes out to $6.8k using the 4% rule.

With such low savings, 82% are planning to work past the age of 65. 42% believe they will transition from full time work to part time, which is actually a great idea if it helps cover the cost of health care. Aside from covering health care expenses, part time work keeps your brain active.

The most staggering statistic is that 47% expect social security to be their primary source of income when they retire. Unless they plan on tripling their nest egg over the next couple of years, social security will definitely be their primary source of income.

Either way, keep maximizing your savings at this age. The more you save now, the more flexibility you have to decide when to retire.

Average Retirement Savings – The Bottom Line

Americans are feeling more comfortable about retirement as the economy has recovered from the financial crisis. While retirement savings are trending up, the average American needs to save more to ensure a comfortable retirement.

The median American household has $63k in retirement savings. That amount is typically realized once they get in their 40s.

Make sure you max out your 401k and IRA, and then save anything left over for stock or real estate investments. This especially matters for those in their, as the IRS offers catch up contributions to your 401k and IRA.

The more you save now, and the sooner you start, the more comfortable your retirement will be. Be realistic of your financial environment, and take advantage of the opportunities to catch up. You’ll thank yourself at retirement.