If you want to discover how many retirement savings you need and determine the right path to follow, you should have as much information as possible about the retirement landscape.
At least 60% of Americans believe they are facing a retirement crisis and their savings are not on track. Additionally, the Federal Reserve’s most recent data shows that the average retirement savings among adults are $65,000. However, many consider that the figure is below what they really need.
Whether you’re in one group or another, comparing your retirement savings with those of your peers can be helpful. Fortunately, this article pulls together the most relevant facts about how much Americans are saving for retirement and the retirement savings accounts they use the most.
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What Will I Learn?
- Key Findings
- Current Average Retirement Savings by Age
- What Is the Recommended Retirement Savings Amount by Age?
- Median Household Net Worth
- Social Security in a Retirement Plan
- Using Social Security as a Source of Retirement Income
- Why Are Americans' Savings Lower Than Experts Say?
- Tips to Save for Your Retirement
- Final Thoughts
At least three-quarters of Americans believe the US is facing a retirement crisis.
According to the Federal Reserve, the average retirement account savings for US households was $65,000 in 2019.
Only 30% of people aged 18-29 feel on track for retirement.
25% of non-retirees do not have retirement savings.
55% of non-retirees do not have a 401(k) or 403(b).
According to the Fidelity Q1 2022 Retirement Analysis, Fidelity Retiree Health Care Cost Estimate, the average 401(k) balance as of 2022’s first quarter was down 2% to $121,700 compared to $123,900 in the same period last year.
The average IRA balance was $127,100 during the first quarter of 2022, accounting for a 2% drop compared to the same period in 2021.
37% of active workers over 25 and 19% of retirees do not know where to get financial or retirement planning advice.
The average retirement age for 51% of working Americans is 61, while 23% retire at 62-64.
At least 64% of Americans believe they will continue to work after retirement, and 7% think they will never stop working.
MagnifyMoney and LendingTree studies and surveys say that people with an average lifestyle living in 28 US metropolitan areas need over $1 million to retire.
57% of retired adults rely on Social Security as their primary retirement income source.
The Employee Benefit Research Institute estimated the retirement savings deficit for all US households to be $3.68 trillion in early 2020.
Americans’ mean retirement savings is higher than their median personal savings.
Current Average Retirement Savings by Age
The latest data from the Federal Reserve shows that the average retirement savings by age increase from $4,745.45 at ages 18-24 to $206,819.35 at ages 65-69. The figure for people aged 55 to 59 is higher, reaching $223,493.56, while adults aged 60-64 save around $221,451.67.
However, Northwestern Mutual’s 2021 Planning & Progress Study’s results showed that Americans are putting more money into personal and retirement savings. Compared to the $65,900 and $87,500 estimated in 2020, average personal savings and retirement savings increased 10% to $73,000 and 13% to $98,800 last year, respectively.
What Are the Median Retirement Savings by Age?
According to the latest Federal Reserve Survey of Consumer Finances (SCF)’s results, the median retirement savings for Americans by age is:
35 and younger: $13,000
75 and older: $83,000
What’s the Average Personal Savings by Age?
The latest SCF results also showed that US households’ average transaction account balance was $41,600 in 2019. However, the mean transaction account balance varies by generation, as shown below:
35 and younger: $11,250
Experts say that the generational changes are complex, and the three existing generations save much less than recommended. People born between 1981 and 1996 (millennials) spend more money on properties than those born between 1946 and 1964 (boomers), reducing the amount they can contribute to their retirement savings.
Those born between 1965 and 1980 (Generation X) have higher incomes but tend to spend more, while those born between 1997 and 2012 (Generation Z) save less than millennials but have less debt, which could increase their saving options for retirement over the years.
What Is the Recommended Retirement Savings Amount by Age?
While considering the median retirement account balance, average retirement savings and median savings by age can be helpful in comparing your savings with those of your peers, the statistics do not show where you stand on your retirement planning journey. Therefore, seeking help from a financial advisor is the best way to go.
Also, keep in mind that there are many ways to calculate how much money you should save for retirement. Some of the factors to consider are:
How Much You Can Take from Your Income for Your Savings
According to financial experts, people should save between 10% and 15% of their gross income starting at age 20. However, not everyone in their twenties can save each month, as many must pay off a student loan debt and other credits. In contrast, a person in their forties with a high income and no debt could save much more.
Retirement Target Date
The “retirement target date” is the closest year in which you could retire. Surveys on the average retirement age show that more than half of US citizens retire at 61 or earlier while 23% retire between 62 and 64.
Knowing the your retirement age can influence how much money you should put into your retirement accounts and your retirement investment strategy. People who start saving after age 50 should be saving more aggressively than those who started in their 20s, for example. We also set up this page on finding out what age is best to retire.
How Much Should You Spend in Retirement?
Finally, there’s your retirement goal. What do you hope to do after you retire? Traveling the world means spending much more than living in a retirement living community. The projects or plans you have in the future can also impact the amount of money you need before entering this period.
Median Household Net Worth
The latest Federal Reserve Survey of Consumer Finances (SCF)’s report also showed that the overall net worth of Americans is also showing issues even though the numbers have risen steadily since the Great Recession.
Furthermore, the results showed that a householder aged 35-44 had a median household net worth of $91,300. The figure for those aged 45-54 is $168,600, while those aged 55-64 had a median net worth of $212,500.
Social Security in a Retirement Plan
Any retirement plan and discussion must consider Social Security. The Social Security Administration says that about 65 million Americans receive an average of $1,555 per month or $18,660 per year, including 46.7 million retirees. However, the average is below what people need to retire comfortably.
The average cost of living for seniors in the United States is $48,885 spent on average per year, which means they need more than $30,000 a year more than what Social Security provides.
Furthermore, if they only pay for food and housing, seniors spend over $22,000 a month on average. Therefore, they would still need almost $4,000 more for food and shelter. If they spend on transportation and medical bills, the annual expense increases by another $14,000.
Using Social Security as a Source of Retirement Income
The figures above show that Social Security benefits alone are not enough for retired workers to live comfortably. Unfortunately, at least 30% of seniors’ income comes from Social Security benefits. Other important related statistics are:
37% of men and 42% of women consider Social Security as 50% or more of their annual income.
12% of men and 15% of women consider Social Security to be 90% or more of their income.
In addition, experts expect the figures to be compounded by the projection that the number of US citizens aged over 65 will increase from 57 million to 76 million in the next 13 years.
How Many Retirees Use a Pension or Retirement Plan as a Source of Income?
Investment or retirement accounts can be very good investment tools for those planning to retire. If they start saving early, retirees could bring in even bigger benefits.
However, only 57% of retired workers use a pension plan, including defined benefit pensions, 401(k)s, 403(b)s, and other retirement accounts. Moreover, 78% of them use Social Security retirement benefits that can only replace 40% of their annual salary during the retirement period.
Therefore, having a financial advisor who can provide help regarding average savings and how to create an individual retirement account is essential if you want to enjoy a comfortable retirement.
Social Security vs. Other Retirement Accounts
The current Social Security system does not cover living expenditures. Unfortunately, this coverage gap will only widen as a sizable portion of retirees need other sources of income.
59% of retired people who are 65 or older have a pension.
46% of all retirees have investment income or 50%.
The percentage of those aged 65 and older who still need to work increases to 32% for all retired adults.
Individual Retirement Accounts
An Individual Retirement Account (IRA) enables a person to contribute to a retirement account while getting some tax benefits. While the money you contribute to a typical IRA is tax deductible, the withdrawals you make in retirement are taxed. If you choose a Roth IRA, you have to pay taxes on income before investing, but withdrawals are tax-free.
According to reports issued in 2019, at least 14.9 million US citizens pay into an IRA, totaling $75.5 billion in total contributions. Meanwhile, 4.6 million Americans pay into a traditional IRA while 7.9 million Americans use a Roth IRA, totaling $20 billion and $27.6 billion in total contributions.
The 401(k) model is another well-liked choice for many Americans when it comes to saving for retirement. Under this plan, the company and employee agree that a specific portion will be deducted from earnings. That cut has to be partially matched by the employer, and the whole amount goes to a retirement account. These are some relevant statistics:
401(k) plans account for $7.3 billion in assets in total
There are only 60 million active people contributing to 401(k) plans.
Only participants over 40 years old with more than 20 years in the companies have more than $100,000 in assets
Although some numbers seem high, keep in mind that the figures are divided into a population of millions of people. In other words, most non-retirees aren’t contributing enough to have a strong IRA or 401(k), so they could fall short in retirement.
Why Are Americans' Savings Lower Than Experts Say?
Understanding why Americans save less than they should is a bit complicated. However, it is important to comprehend two behavioral trends. The first is that people fail to give up rewards they can get in the present for something that is decades away.
Also, saving is not easy. Can you visualize how you would buy your fruits and vegetables in the future, or do you constantly think about how much money you need to cover your medical expenses in 30 years? Do not worry! Just a few people do that. However, almost everyone has in mind how they can spend their money every time they cash a check, making it more challenging to prioritize retirement savings.
Tips to Save for Your Retirement
Do you think you need help with your retirement planning? Here are some of the tips you can follow to prepare before welcoming this important period of your life:
Seek help from a financial advisor. Even if you haven’t determined a retirement age, a qualified expert can help you create a long-term strategy to help you get to retirement or find a good source of retirement income.
Remember that Social Security benefits alone are not enough and cannot support the lifestyle you want. While they can help you cover some living expenses in retirement, you should have more savings in your retirement account or find another source of income.
Follow the basic rules and contribute at least 15% of your income to your retirement account.
- Consider converting some of your IRA to a gold IRA for extra protection.
Start saving for your children’s college education or other important future expenses as soon as you can.
Set a strict spending budget, especially if you are considering investing in properties or other assets.
Find out if you can contribute to a workplace retirement plan or other defined contribution plans.
Make your retirement savings a priority.
Pay all your debts as soon as possible.
Consider putting your bonuses or pay raises into your retirement accounts.
If you want to have more retirement savings or get your annual salary saved to enjoy a better retirement period, you need financial planning!
You don’t have to do it alone! If you seek help from a professional who can create better retirement plans for you, you will not have to worry about your account balances running low after you stop working and are finally resting as you always wanted.
However, you should always keep in mind that there are some steps you need to take to reach that goal. Saving for retirement doesn’t have to give you nightmares! If you get the right help, you can streamline the process and create a good strategy to get the peace of mind you deserve.