What is the Average Retirement Savings?

Many Americans thinking about retirement oftentimes find themselves confused-- mainly because they aren't sure exactly where they stand. In this article, we're going to explain what the average amount of retirement savings a household has. Although it is informative to know, the average savings is not a “one-size fits all”. The amount of savings needed to retire is different for each person, use our Financial Checkpoint to gauge your progress and compare your results to the average amount explained below!

According to the Federal Reserve's "Report on the Economic Well-Being of U.S. Households in 2019," 60% of Americans are unsure if their savings are on track. If you're wondering what constitutes a typical amount of retirement savings, you're definitely one of them. The Federal Reserve's most current statistics show that the median amount saved for retirement across all persons is $65,000. By the time of retirement, the Federal Reserve projected that amount to increase to an average of $255,200.

As you approach retirement, you usually start to save more and invest a little more cautiously. So it can be useful to know how your retirement funds stack up to those in similar positions. The help of a CERTIFIED FINANCIAL PLANNER can aid in the success of your path to financial freedom and a comfortable retirement. 

First of all, the fact that too many of us aren't even saving for retirement cannot be emphasized enough. 1 in 4 Americans, according to the Federal Reserve, have no retirement savings. 

Back in 2020, the Employee Benefit Research Institute forecasted a $3.68 trillion deficit in retirement savings, simply because people were not saving enough. This predicted deficit means that the total amount of retirement savings for Americans is over $3 trillion less than where it should be. 

A Vanguard study, “How America Saves 2022” dove into the average and median account balances based on different age groups: 

Source: Average Retirement Account Balances by Age

How much Social Security will I have? 

In retirement, Social Security benefits are frequently the only source of income for Americans. However, Social Security was never intended to be the only source of income for retirees. As of July 2022, the average Social Security payout for retired workers was $1,624. The majority of people's retirement dreams of travel and leisure are a far way from reality when you consider the soaring levels of debt among older Americans.

Savings Gap Issue

The retirement savings difference in America is equal to the income gap. Larger earners are more likely to have retirement savings, and they also have higher average retirement savings. Conversely, those with the lowest salaries have a large amount of debt and little savings. It shouldn't be shocking to learn that, yet it's one of the most striking aspects of the retirement environment.

Contrary to popular belief, wealthy individuals may also have significant retirement savings gaps. Consider a wealthy household with a high mortgage payment and private-schooled children. Due to their high style of living and potential lack of retirement savings, there would likely be a significant income gap between what they currently make and what they had set aside.

Those with lower incomes can't just put off retiring later by working longer either-- many low-income roles require too much physical labor for people in their 60s and 70s. No matter how much money you earn, planning for retirement should not be left behind. Choosing to "work longer" is not a reliable substitute for a lack of a plan. 

How much should I be Saving for Retirement? 

Retirement savings are typically viewed by experts as a journey with a number of checkpoints along the way. Some people believe that by the time you are 30 you should have saved the equivalent of one year's pay. However, it won't hurt to save extra. At the finish line?  It can be a good idea to have about ten times your salary saved for retirement. 

Then why do Americans' average retirement savings fall short of what experts recommend? 

There are a few causes. One, is that our brains find it difficult to forego present rewards in favor of those that will come decades from now. Saving can be difficult! It's hard to imagine having to decide between food and prescription medications when it's 30+ years away. However, it is a lot easier to picture what we would do with our paychecks right now.

Start planning ahead to avoid uncertainties or being in a position of not knowing what to do. Check out our free Retirement Checkpoint and start learning today! 
 

This article is provided by McAdam LLC (“McAdam” or the “Firm”) for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. Past performance may not be indicative of future results and may have been impacted by events and economic conditions that will not prevail in the future. No portion of this article is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax, or legal advice. Certain information contained in this report is derived from sources that McAdam believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages. This article is the sole opinion of this individual and is not indicative of the firm’s belief.