Retirement Savings By Age Show Why Americans Are Screwed

This post will explore the retirement savings by age in America. Unfortunately, the retirement savings by age is pretty low, which is why Americans need to work longer.

From a personal finance writer's point of view, I found a pot of gold with the Economic Policy Institute's report looking at the state of American retirement. In this report, I've come to realize how screwed the average American is when it comes to enjoying a comfortable retirement.

It's perplexing to me why Americans don't have more in retirement savings. We've seen a massive boom in the stock market, bond market, and real estate market for the past…. forever.

If I was a working adult back in 1980, I'd like to think I'd be worth at least $10,000,000 today. Not only would I be worth $10,000,000, so would all my friends. How hard can becoming a deca-millionaire be when the S&P 500 is up over 20X since 1980?

Look at all the real estate you could have bought for dirt cheap 40 years ago as well. But let's get real. Life happens. Everything is easier said than done. If only I had a time machine.

The main reason why I think more Americans aren't doing financially better is due to a lack of education. Why aren't personal finance fundamentals indoctrinated in kids by the 12th grade, I don't know. I certainly plan to teach my children about the power of compound returns, saving, investing, asset allocation, and the importance of optionality.

Let's take a look at some select charts from the Economic Policy Institute report. The Economic Policy Institute is a 501(c)(3) non-profit American think tank based in Washington, D.C. that carries out economic research and analyzes the economic impact of policies and proposals.

I still have my doubts about the efficacy of the data since there are some truly worrisome numbers being reported.

The State Of America's Retirement Savings

Retirement Savings By Families By Age

The first thing to note from this chart is that it's highlighting household average (mean) savings. A household includes individuals and couples. To be between 56 – 61 and only have $163,577 in your retirement account means you are going to be living a spartan life once work stops.

If you spend just $33,000 a year in retirement, your money will run out after five years. Hope must come from Social Security benefits to help them make it through the golden years.

Only the 32 – 37 and 38 – 43 age groups have more in retirement savings in 2013 than they did in 2007. The amount of increase in retirement savings isn't that impressive either ($4,500 for 32-37 and $13,000 for 38-43).

It's strange why the 44 – 61 age group have shown a 23% decline in their retirement accounts during some of their prime earning years. Did many in this age group sell their investments in 2009 and stay in cash? It looks that way because by Jan 1, 2014, the S&P 500 was 20% higher than right before the crash on July 1, 2007, and 120% higher since the low on January 1, 2009.

In Understanding Why The Median 401k Balance Is So Low, I profile several readers who explain what's going on with their low retirement balances.

Median Retirement Savings By Age

Median Retirement Account Savings For Families By Age

If the median age in America is about 34 years old, this means the median American only has $480 in retirement savings (blue line 32 -37)! That is kind of crazy and very unbelievable. At least folks between 32 – 37 have 25 – 30 years left to save aggressively before Social Security kicks in.

For the people in the 56 – 61 age bracket, they are walking on thin ice with only $17,000 in retirement savings. It is scary to see the median retirement account balance is less than half their pre-recession peak. Surely balances are higher now in 2017, but I bet they are not back to even.

With median numbers this low, it's only logical that taxes on those who have saved for retirement will go up to pay for those who have not. In fact, the majority of working Americans don't pay federal income taxes! Further, such low numbers mean government welfare should only get larger.

Retirement Account Savings By Age Savings Percentile

Once again, half of Americans (50th percentile) have almost no savings ($5,000). Meanwhile, the 90th percentile family had an average of $274,000 in retirement savings. The top 1 percent of families had $1,080,000 or more in retirement savings (not shown on chart).

You would think being in the top 10% of retirement savers between age 32 – 61 would yield greater than a $274,000 savings account. All a 46 year old (average of 32 – 61) needs to do is save $11,416 a year for 20 years after college to get to $274,000. Once you add on company 401k matching and investment returns, getting to $274,000 should be highly feasible.

Retirement Account Savings For Americans

The $60,000 median savings for all families with retirement savings may be a truer reflection of the average American savings. The mean (average) of $95,776 is more than 50% higher because wealthier families are dramatically pulling up the average. This indicates widening inequality.

Thankfully, stocks and real estate have continued to perform well through the global pandemic. The average retirement savings by age should be roughly 30% higher in 2024.

Does America Truly Have A Retirement Savings Crisis?

The median and average 401k balance by age

Despite all this wonderful data from the Economic Policy Institute, I'm having a hard time believing these figures. Is the report perhaps… fake news used to raise taxes and enlarge government oversight for power hungry politicians? After all, if you make people beg for money, you can control their votes.

The median retirement savings account for families age 56-61 is only $17,000? Come on. This means the median family is never going to retire. Or is going to die of starvation within five years after retiring.

The median retirement account savings of all American families is only $5,000? This number sounds like it would come from one of the poorest countries in the world, not the absolute richest.

Whatever the true mean or median retirement savings balance is in America, the biggest difference comes from those who actually decide to save for retirement and those who do not.

The long term trend for stocks, bonds, and real estate is up and to the right. Further, once you start religiously tracking your money, you'll plug all the leaks.  If schools aren't willing to provide basic financial education, at least Financial Samurai and other personal finance sites will.

How old are you?

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How much have you saved for retirement? Include all pre and post tax investments in stocks, bonds, real estate, fine art, etc. Exclude primary residence.

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Related Retirement Posts:

How Much Should I Have Saved By Age For A Comfortable Retirement?

401k Savings Goals By Age

Recommendation To Build Wealth

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Invest In Real Estate As Well

If you want to boost your retirement savings, then I recommend also investing in real estate. Real estate is a core asset class that has proven to build long-term wealth for Americans.

Real estate is a tangible asset that provides utility and a steady stream of income if you own rental properties. As a retiree, I mostly depend on my steady rental income to survive + stock dividend income.

Given interest rates have come way down, the value of rental income has gone way up. The reason why is because it now takes a lot more capital to generate the same amount of risk-adjusted income. Yet, real estate prices have not reflected this reality yet, hence the opportunity. 

My favorite two real estate crowdfunding platforms are:

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and manages over $3.3 billion for over 500,000 investors. It primarily invests in the Sunbelt region in residential and industrial properties.

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations and higher rental yields. Further, they potentially have higher growth due to job growth and demographic trends.

Both platforms are free to sign up and explore. 

I've personally invested $954,000 in real estate crowdfunding across 18 projects. My goal is to take advantage of lower valuations in the heartland of America. I also want to earn more passive income.

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Retirement Savings By Age is a Financial Samurai original post. I've been writing about achieving financial independence since 2009. I'm positive if you read my book, you will boost your retirement savings by age.

185 thoughts on “Retirement Savings By Age Show Why Americans Are Screwed”

  1. I started investing in a 401(k) at 26 years old 20 years ago, making $35k/year, saving around 10% and it has been once of the best financial decisions I’ve ever made. My only regret was not starting when I first entered the work force at 24. Every time I got an increase in salary, I’d bump up my contribution rate. Even through the 2001 recession and the 2008 crash, I kept the same long term growth allocation (equities) in my retirement savings making very minimal changes to my investment options and each time I changed jobs, I would roll over my 401(k) into the new plan instead of taking a distribution. I know people my age who have taken distributions when leaving companies and their reasoning was that they were young, and that they had time to build up their retirement savings which of course is bone head idea because they are now in their mid-40’s with very small retirement accounts. What also helped my retirement savings was delaying marriage and having one child at 40. Both my husband and I are on track to retiring comfortably in about 15 years with pre-tax and after tax savings. So I agree, the key is start early and gradually increase contribution rates, and keep invested in equities.

    1. Good job Veronica! Yes, time in the market is huge. I regret not opening up a Roth IRA in my 20s as well. The account could have been worth over $200,000 today and tax-free withdrawals if I did.

      Congrats on your little one! We are also older parents. My son came two months before my 40th birthday.

      Thanks for sharing your thoughts! Please sign up for my free newsletter if you want more great personal finance content. Also, I have a new book coming out with Penguin Random House called Buy This, Not That: How To Spend Your Way To Wealth And Freedom I think you’ll enjoy too.



  2. It’s amazing to read how easy it should have been to have a retirement. So much has happened to my husband and I and our retirement. It’s not always the persons fault for not having any. We had a very nice retirement and my husband lost his job, we lost our home, cars, etc. while in the middle of raising our family. And yes, lost our retirement. And it wasn’t just our family, it was many families at that particular time. We have not nor do we expect to ever recover what we’ve lost due to economics of our country at that time. Parts of this article and some of the comments make my stomach turn. Everyone is not in the same situation. At this point in our lives, we’re scared to death. People make us out to be stupid. Unfortunately, shit happens at times that is out of our control. I would love to know where that perfect life is that everyone is living.

  3. Hoang Nguyen

    Thanks Sam for the article. I am a student who is writing a research paper about “Is American saving enough?” I just came to the U.S 3 years ago and I began to build my IRA 2 years ago. The more I have learnt about finance, saving and retirement, the more I am surprised about people around me thought about saving and retirement. Last time, a friend asked me about investment and retirement plan, and I told her what I knew, such as saving, compound interest, 10% average yield on stock investment, things like this. After that, she just said “I can save like 200$ a month, and I want to retire at 35. I don’t want to work till death.” I fail to convince her that it’s not what she want, but what life is. I really hope that our institutions will have more class saving and investment, and maybe a more interesting way to teach them. As we all know, young people do not like to think about old age and retirement.

  4. Kids are taught plenty of thing in High School they forget six minutes later. Fine, get ride of chemistry and calculus since 98% of kids never use those classes. Basic science can cover biology and chemistry.

  5. I have a good friend who is 35 and earned over a million bucks over the past three years-not a dime was placed in savings! I asked her to start saving, but she refused and told me she liked working and will do it until she dies! Millennial’s?? Generation Z I do not know butt….?
    I am a Gen X!

    1. I am Gen X as well. It is difficult to encourage saving when that work until the end mindset is used as an excuse to not save. Sounds like your friend lives check-to-check.

      Usually something bad has to happen like a health scare or getting laid off in order to change. In our case there was a wake up call with the pandemic, and being hospitalized, and that was enough motivation to start putting aside money. I even did a financial assessment for the first time ever which was both fun and scary at the same time. Fear was a driving force and motivator to change.

      Fortunately we have no car payments or debt (other than the house) and the GI Bill prevented student loan debt. There were people on our block who financed 2 new cars, during COVID, and then had the gull to file for emergency rent relief (they did not pay the land-lord) claiming they could not afford to pay rent. There old cars were fine but not as trendy so they “had” to get new ones.

  6. Dayle B. DeLancey, Ph.D.

    I’m a huge Financial Samurai fan generally — and, having found this post just today (2/15/19), I’m quite late to this party — but I gotta say that find the amount of stereotyping about the working-class, working-poor, and poor that appears in readers’ comments on FS’s (tacitly judgmental) original post truly distressing.

    The assumption that folks whom life circumstances (ranging from industry shifts to simply being born into the ‘wrong’ family or the ‘wrong’ zip code) channel into dead-end, low-paying jobs have access to rivers of cash that they blithely blow on fancy cars and other trifles instead of saving for retirement reifies the worst and most inaccurate misunderstandings about what it means to live from (small) paycheck to (small) paycheck in this country.

    (I’m a ‘pragmatic-liberal’ Democratic voter who stumped for Clinton in my state’s 2016 primary and main elections, but reading the comments posted here, I thought to myself: “If this thread is any indication, Bernie Sanders, AOC, and other hard-Left Progressives who rejected Clinton as too centrist are on to something when they say that the average wealthy- or upper-middle-class American neither truly understands the lived reality of the nation’s working-class and working-poor nor cares enough about said lived reality not to belittle the folks who are living it.”)

    I agree, however, with the assertion of FS’s original post and many of the responding comments that comprehensive training in viable retirement saving strategies and general financial management wouldn’t go amiss in most U.S. communities.

    Given the tone of the comments posted in this thread, I can only assume that those who’ve posted here spend a few hours every month or so making gratis financial literacy presentations in local secondary schools, community centers, and the like in a concerted effort to bring the rest of the population up to speed.

    For your part, FS, if you’re making such presentations at, say, the many high schools and rec centers across the Bay in Oakland that could benefit from such outreach, I’d wager that more than a few of your readers (myself included) would love to see you reflect upon such activities in future posts. … (In the meantime, thanks again for your great website.)

  7. I think that you’ll find that the numbers you’ve found include the approx 1/3rd of American’s that have $0 in a Qualified Retirement Plan. It really skews the medians and averages.

    Data that excludes these people from the stats will show more realistic numbers for those that do contribute to a QRP.

  8. “Why save when you can Buy a Ford F150 Raptor for 70K and be the coolest dude in your Hood!!”

    Yeah……..that is only $833/mo for 84 months!! Who, with a decent job, WOULDN’T do that! $833/mo for 30 years @ 10% compounding interest is just a myth and that is too late to be cool in the hood!!!

  9. Gregory P Drury

    If you are over 30 and your cars(depreciating asset and worth way less than people want to admit) are worth more than your saving, you will never retire!

  10. Gregory P Drury

    Why save when you can Buy a Ford F150 Raptor for 70K and be the coolest dude in your Hood!!

  11. Just another Boomer

    The people that say that they’ll just work longer to make up for their lack of retirement savings are amusing to listen to… Let me assure you that most 70 year olds are not as productive as they were in their 40’s and 50’s, and typically need significantly more time off from work than those who are 20 years younger. But they are typically at the top end of the salary scale for their position. These older folks simply WILL NOT be able to hold onto their job unless they are in an area that accords protection based on years of service. Look at it this way – if you were the “Boss” would you rather have two 35 year olds working for you or one 70 year old – assuming the costs for either option would be about the same ??? Yes – I’m well aware that there are age discrimination laws – but there are numerous ways around them, and “poor performance” is certainly one reason to legitimately terminate someones employment.

    While there is no question that many who don’t have adequate retirement savings may have other assets that they can use to provide for retirement income – I would suggest NOT including the value of a primary residence – you have to live somewhere, and IF the primary residence is paid off – the costs to keep it up (taxes, repair etc.) are probably lower than a rental in the same area.

    A number of years ago – I read that one sign of growing up is the ability to postpone gratification. It appears that based on that one definition – we have a lot of children out there. Sure – it’s great to be able to take a nice vacation, or to eat out regularly, but there are costs to doing these things. If doing these things impedes you from achieving your savings goals – then the truth is that you simply can’t afford to do them.

  12. Not surprising really. There aren’t many mid-level jobs anymore. There are tons and tons of service type jobs that pay far below the median and many jobs that pay well above the median (doctor, lawyer, engineer, scientist, high-level manager)

    Between rent, healthcare, and necessities there is just very little leftover to save unless you have the mental aptitude, drive, and health to find a high income jobs.

    Then add the fact many people compound the problem by making poor financial choices or by being financially illiterate and its a recipe for disaster.

    The poll here isn’t likely to be representative slice as the average reader of this blog is likely already doing well beyond average.

  13. I did up a spreadsheet experiment a couple of years back because I have too many friends who think “the system is broken”.

    Two families. Two different decisions. 30 years of time to see what happens.

    Family One buys a $250,000 house on a 30 year mortgage at 5%.
    Family Two buys a $125,000 house on a 15 year mortgage at 4.5%

    Family One buys a $60,000 new car every 10 years. That’s 4 cars.
    Family Two buys a $10,000 low mileage used care every 10 years. Ditto on 4 cars.

    Family Two puts the savings in the mattress because they don’t know how to invest.

    What happens after 30 years?

    Family Two has about $500,000 more money than Family One.


    If they had invested those savings Family Two would even have way more.

    My wife and I started a rental property business on the side. A person at work who knew we were doing that started to get pissy about it. Their attitude was, “Why do they have these houses making money and we don’t?”

    I asked them if they had noticed how very many $60,000 pickup trucks were in the parking lot outside. They said they had.

    “Well, you’ve seen that beat-up old car I drive. That $60,000 pickup truck I DID NOT BUY accounts for our first rental property. My wife drives another beat-up old car. That $60,000 pickup truck she DID NOT BUY paid for the 2nd rental property.”

    “You know the bulletin board here where people post their houses for sale when they get transferred to another town? In the last 9 years, I’ve only seen 2 houses for sale that cost less than our own home plus the first 3 rental houses we bought.”

    “We have somethings other people don’t have and they have things we don’t have.”

    “Choices have consequences.”

    People don’t like to hear that choices have consequences.

    But the universe doesn’t give a damn about that – so choices still have consequences.

  14. I was just recently talking to one of my colleagues. He’s got ton of student loans. He didn’t know what a 401k was. My company offers 5% matching. No one had ever told him that 401k contributions are essential and the company matching is free money. I showed him the power of compounding and the importance of contributing to a retirement account. Hopefully I can help more people through my website. Thanks for the informative post!

  15. It still perplexes me that we haven’t implemented personal finance courses into school curriculum. It is arguably the most important subject matter an individual can learn and is directly applicable to every facet of an individuals life. Having worked in finance for a few years it all makes sense to me now, but I remember when I started my first finance gig right after college it was just information overload. The world of finance is such a nebulous field and nobody really shows you how to navigate it, except maybe your parents. Until our schools begin teaching our children these important lessons, it is on us to do our best in providing that education for our children and others.

  16. This “study” IMO is just another example of “fake news” and I don’t believe the study even comes close to representing the true financial state of people approaching retirement. After all, the vast majority of people do retire, and they are able to survive financially which this “study” seems to indicate would not be possible.

    There are several keys to indicate you should be concerned about bias in this report. A few examples are as follows: (1) A not for profit think tank with an official sounding name (almost all D.C. think tanks work for someone in gov’t wanting a study to support a policy change), (2) the information is from a “survey” of consumer finance data (who did they survey? would you tell some D.C. organization all the details of your financial accounts), (3) no attempt made to identify all sources of savings and investments (real estate, land, rental property, other taxable financial accounts, etc.), so they really were not interested of finding out if people are prepared for retirement.

    It is easy to mislead and lie using statistics, or “survey” information. For example, consider how the data is presented in the chart about how the gap between the “haves” and the “have-nots” is wider now than just a few years ago. It may be, but this chart would look very different if put on a percentage basis. Suppose Group 1 had $5 in 1989, and Group 2 had $10. Group 2 has $5 more or 100% more money than Group 1. If Group 2 had $100 in 2013, and Group 1 had only $50, then you could say the wealth gap between the two groups has “really grown” from $5 to $50. However in reality, the wealth gap has not changed at all because Group 2 still only has 100% more than Group 1. Do you think someone may want to use this study to show a need for “policy changes” or new laws to create more wealth redistribution (which really means buying votes)?

    Yes, a lot of people have not saved enough for retirement, but the vast majority are better prepared financially that this report implies.

  17. Both the statistics and the poll results show some interesting facts.
    Personally, I’m in my 30’s but have (unfortunately) never taken retirement seriously up until recently. As a young adult I always thought time is on my side. Sadly, this is what most young adults still think.

  18. These numbers are definitely alarming. I hope that they are only revealing a portion of the truth. Otherwise, there will be a lot of misery.

  19. I’m glad I’m not the only one who thinks the major data is exaggerated to the worst. People click on bad news more often than good. I didn’t vote in the polls because I know our family is definitely above average and it would skew off your data.

    I can tell you my immigrated parents who has been in the US for almost 17 years has saved up a total of 30K each for retirement and they are hoping social security, medicare and ME to cover rest.

  20. I think that, like many of our politicians, people are inclined to assume others are like them. There are many, many, many people who count on social security alone for their retirement. Savers and planners are a true minority, and the number of people who live paycheck to paycheck and pay the minimum amount on their credit card debt is astounding to those of us who actually read financial newsletters and contribute to our retirement savings.

  21. Paper Tiger

    I think the survey is only relevant to the data it used and not reflective of how well people will perform in retirement since it is based solely on what people show in retirement savings. My Dad passed away 3 years ago and my Mom has ZERO retirement savings. What she does have is $50K in cash, $700K in CDs and $4K a month in pensions and SS and no debt. Her CDs throw off another $1K/mo. in interest.

    Needless to say, she lives a very comfortable retirement life and plenty of money to support virtually anything that might come up. Many people in her age class are not quite as fortunate but most of them have lived their entire lives within the means of what they have and seemingly continue to get by just fine.

    I don’t worry as much about my parent’s generation but I do worry about their children’s generation. They have had more emphasis on retirement savings and they, as a whole, are not traditionally living within their means like their parents did. If these numbers are really reflective of the retirement savings of my generation, then this could be where the smoking gun lies…

  22. I referenced that data in an article as well. It’s very sad to see.

    At least many of them have equity in their home. The median figure of $17k for families in their late 50’s is only for retirement accounts. A significant subset will have a nearly paid-off home, which will help keep their housing expenses low or will allow them flexibility to move to a cheaper place and bank the rest.

    Still, the numbers are nowhere near where they should be. Personal finance should be a standard course in all levels of schooling, imo.

  23. If the EPI numbers are just directionally correct, a huge number of people will retire with little to no income, and a huge challenge to meet basic needs. But fear not! The over 65 set are a large and most consistently voting component of the electorate. Expect them to demand and receive benefits beyond what Social Security provides, and vulnerable politicians to support them regardless of political party. Where will the money come from? FI people, such as those who read this blog. 2% annual tax on the full value of 401K’s and IRA’s, anyone?

    1. Yeah . . .let’s keep ‘Warren the Confiscator’ out of this conversation . . . I still think that you can’t legislate against stupidity. It really doesn’t take too much to look at the Fidelity (or other) research data to see that ‘T’ pays over 5% and banks don’t.

      My wife and I live on the dividends of the $400,000 or so that we saved over the course of 35 years of working. Of course, it’s worth close to 1M now, but that why we invest.

      We also invested in Utilities, Dividend Aristocrats, and others like MSFT, CSCO, BP, RDSA, other pretty good investments. Just pay attention and save like the tortoise (vs. the hare)!

  24. Yeah, every time I run across numbers like this, it really blows me away how little people have saved. There is a crisis here for sure. 100%. And with the coming rise in AI and automation, there will be further displacement of jobs which does not bode well for even people with white collar jobs and high-barriers-to-entry jobs like anesthesiologists. The figure I’ve heard time and time again is that roughly ~50% of jobs will be gone in the next 20 years. Because of this, I think there will be some form of universal income to sustain the masses.

    1. My husband works in tech as a developer and is a strong supporter of universal income specifically because he can’t see most Americans pulling out of the AI revolution unscathed.

      1. The heck with that! Work for a living — just like the rest of us! We don’t need loafers or leeches . . . when both my wife and I were unemployed, we managed to do whatever we could until we got back on our feet — They’ll need to learn to get over it and not have everything handed to them for once.

  25. I think that these statistics are probably a good reflection of the problem. One positive is that they don’t seem to account for post employment pensions. So I’m only feeling a mild case of panic about the whole thing……

    1. My parents retired with a paid-off house, federal pension of about $45k/year, and about $4k/year in Social Security benefits. They had retirement savings of about $600k, but hardly touched it until the last 18 months of their lives. They lived very comfortably, but modestly, and even had live-in help for several years. The big factor was the federal employees’ insurance, which kept their healthcare costs down to about $300/month.

  26. Mr. Hammocker

    Americans will retire broke. I think the statistics are accurate. Look around. Most people are living above their means. They are rich by perception but broke in reality. It’s sad. We work too hard to be broke in retirement.

  27. I’m convinced that the retirement savings crisis is largely an overstated myth. Sure lots of older people live in poverty, but millions of people retire every year by choice or circumstance and live perfectly fine non-impoverished lives. Is this by magic??

    For one thing, many people have numerous retirement accounts – not to mention non-retirement investments such as real estate and brokerage assets. My husband and I have three 401ks and three IRAs between us, plus an HSA, a brokerage account and 5 rental properties and three checking accounts. Our “median” or “mean” retirement savings balance is well under 6 figures, but we are millionaires in our 30s.

    My dad has about $450k in an IRA but $3M in other investments and no debt. He was self-employed most of his life and didn’t have 401k space available for most of it.

    My in laws are pushing 70 and have about $250k in two IRAs. They also have $120k in pension/SS income and no debt.

    Lots of my wealthy clients have little to no investments in traditional retirement accounts. For most their retirement account is their smallest asset. They have stock options and employer stock and trusts and brokerage assets from the sales of businesses – or they still own a profitable business – etc.

    1. It sound like most of the situations that you’re describing would impact the mean, but not the median.

    2. I do think these statistics skew reality a little bit. I don’t think “retirement accounts” is yet a good proxy for “retirement readiness.”

      I think older folks often had jobs that provided pensions, reducing the need for retirement accounts.

      The 401k account has only been around since the early 80’s, and took years before seeing widespread adoption among companies. Therefore, many older workers, whether they had a pension or not, often didn’t have access to a 401k.

      Traditional IRAs were established in the mid-70s, but had pretty ridiculously low limits for a long time ($2000/year from 1981-2001, for example).

      Roth IRAs have only been around since the late 90s.

      I think the pool of people for whom retirement accounts conceivably make up the bulk of their actual retirement plan is still quite small. Using retirement accounts as a proxy for how retirement ready people are is fallacious in that it ignores the older workers who had access to pensions, the government workers who to this day have access to pensions, and the people without access (or with very limited access) to accounts who have saved for retirement by other means (taxable accounts, real estate investments, businesses).

      Then, among those who are left, most are young and so have had little time to really get going on their retirement savings. And, however you slice it, the lower-income folks just won’t be able to save a whole lot, regardless.

      Then there’s other wrinkles: how many people are the lower-earning spouse who will depend on the accounts and savings of their higher-earning other half? How many people have a trust? How many people could put money in retirement accounts, but are funneling the money into business ventures instead while they are young? A successful business can be a lot more lucrative than an index fund, and if it fails there’s still time to catch up.

      While I’m sure there are plenty of people who could save more, and plenty of people for whom retirement will be difficult, I think these numbers need to be taken with a grain of salt with regards to the picture they seem to present. It might still be decades (if ever) before “retirement account balances” can be interpreted as “retirement readiness.”

  28. Hi Sam,

    I’ve been an avid reader for a couple years and just wanted to tell you that you have no idea how much you are contributing to the public good and American society overall. The financial independence community is one of few movements that can remedy many societal plagues.

    Don’t expect our intentionally flawed education system to teach personal finance. Empowerment is not the purpose of education in America.

    It’s the job of the FIRE community to spread personal finance knowledge and empower people to end their financial servitude.

    Thank you again for your contributions.

  29. Working class people don’t read blogs like this so your poll will be skewed.

    Basic facts for the last 400 years: the capitalists only give the working class the absolute minimum necessary to make more workers.

    So we had to fight for the state to guarantee us a retirement. Blood was shed for this, along with the eight hour day, workmans comp, etc. See: 1877 great strike, bonus army, battle of Blair mountain, homestead strike, coal creek war, Pullman strike, the IWW.

    Now most prior shrug their shoulders and accept that this will be done away with. If no one fights against it, instead buying into the right wing “personal responsibility” garbage, the US will continue it’s decline into a place where life for the working class is actually worse than it is in poor countries.

    Thailand has universal healthcare and a clean subway and train system. New York has a crumbling filthy subway system and if you can’t afford healthcare you are out of luck.

    This is the society we have constructed, and it’s why I left America.

    1. America may have its shortcomings but it is the best country on earth. It truly is the land of opportunity. You’re in the minority wanting to leave the US. Even after the last presidential election. None of the celebrities left who said they would!

    2. Most of the working class make more than enough money to easily save 10% + 401k match every year, which in a double income household easily gets you to millionaire at 65. They just choose to spend their money on other things (iphones, expensive plans, cruises, restaurants/eat out as much as eat in, giant suvs, 3k sq ft homes with granite countertops with a 2-3 car garage, etc). It’s also not hard with a good work ethic to make decent money without a degree. I went from ~minimum wage to $45k/year (in Today’s $) in less than 3 years at a supermarket when I was 20-23. Not a fortune, but easily live a very comfortable live, and yes save 10% (and could have done a little more with any amount of discipline at all).

      1. Agreed. I think a large part of it comes down to education. The power of compounding interest is A) somewhat unintuitive to understand at a young age and B) far enough in the future that the motivation to understand it is low.

        Incorporating (and perhaps mandating?) better financial literacy in our educational system might be a piece of the solution.

    3. At what point do you accept that “personal responsibility” exists? We can exclude those who are substance-dependent or ill or old. Who else? The ignorant? With the internet and cheap widely-available smart phones that’s not much of an argument anymore. Do you want to claim that laziness doesn’t exist or that almost no one is lazy? Because that’s as ridiculous as right-wing claims that homeless addicts should (or are able to) pull themselves up by their bootstraps.

      People make choices. And they are ultimately responsible for the cumulative effects of those choices, especially when they involve avoiding change or laziness. Even if you start out forced to make bad choices, you come to a point where you can change those choices for a much lower cost. And if you choose not to do that, then that’s a choice too.

      1. Amen. Some of our contemporaries i.e about 61 years old, chose to buy boats, RVs, second homes, swimming pools, upgraded homes and cars every few years, extravagant fad holiday gifts, the latest electronic gadgets and now have lower amounts in the retirement accounts than others who made different choices. That is not inequality.

    4. Paul,
      I believe you are misguided. The episodes you mention were led by opportunists who just created a “market” and then capitalized on it. These snake oil salesmen (union leaders) are no different than the capitalists you apparently hate. Others, like me look at capitalists as leaders and idea generators who create opportunities for those willing to partake and bring us the goods and services we desire. If they get rich along the way – good for them.

    5. Personal Resposibility does exist! I started working at a pizza place at 23, I was working 3 jobs, sometimes 4 – economy was bad where I was at – saved $25,000 in three years, bought my first store at 29, put most of my money back into the business, donated a lot of money and pizza to the community. That is when the state, Federal & unemployment taxes wasn’t taking it (over 40%) I lost over half the value of my business in 2010 & 2011, but I had minimized my debt so I just hung on, bottomed in 2012 started climbing again. I helped 3 (tried to help more) of my employees start at the bottom and do what I did. I sold my business for $4M last year and paid well over a Million dollars in taxes. I took a year off and I’m starting over again, in a completely different business. I’ve been very blessed, but this is a great country thanks to our Constitution that protects many of our freedoms. I will NEVER work for a greedy corporation or Wall Street company and I will only buy from them when I have to.

    6. No matter where you live, ‘personal responsibility’ is innate. No able-bodied, thinking person should expect help from the ‘state’ . . . think Thomas Jefferson, JFK, Warren Buffett . . . or anyone with half a brain.

      The reason New York is falling apart is exactly the ‘half to take care of the world’ wasting of money and effort on people who should be standing up for themselves, not because of those who do . . .

  30. I work in the Industry with 401k/403b participants and I can tell you this data isn’t far off at all. I rarely see someone 50+ with a balance with our firm over $100,000. You’ll have a few outliers but its very rare. Now we may or may not have all of their assets but when I do ask I don’t hear, Yes, I have a lot more assets held elsewhere for retirement. I also see people who start late for whatever reason either due to “I forgot to sign up years ago” or just not having a job with a 401k until later in life.

    I alos find a lot of people don’t know that you can invest and save in a non-retirement accounts. I mention this to people and they’re surprised thats even an option. I speak to a lot of doctors and well compensated people who max out their workplace plan and an IRA.

    1. Am I the only one who thinks this is going to be a national crisis? The country has shifted from a defined benefit model to a defined contribution or do it yourself model and most are woefully underprepared for this. Many think they work forever to make up for any shortfall but this isn’t realistic at all. To me it has vast economic implications over the next 25 years and is very deflationary as consumers will need to cut back.

    2. Does this take into account rollovers though? I just joined a new firm 2 years ago and have only been able to contribute to it for 18 months and have about $40k saved it in (plus another $40k in a NQ Def Comp Plan). Meanwhile, I rolled 6 digits+ over from my last 401k into my IRA account with a different firm.

      The Fed Reserve says roughly 1 in 13 households are worth 7 digits, for example.

    3. Erik Warren

      I live in a very affluent community(average household income is ($128k) and now that my wife and I have reached the age that we are sending our kids off to college we have come to realize how poor most Americans, even higher income ones, are at saving. Many of our friends who live in homes worth $800k or more and make $200k+ per year have saved very little, if anything, in a college fund. Many of them seem annoyed that both of our kids are attending private colleges and will graduate with little or no debt. We started saving in 529’s when our kids were born, initially $400 per month and increased it later as our incomes rose. If our 50ish year old friends haven’t saved anything for college I can guess that many of them only have a $100k or so in their 401k and other retirement accounts. I believe many of our friends will be working to age 65-70 simply because they are poor savers. Of course most of our friends always drove much nicer cars and owned the toys that we didn’t. We can’t even talk about the fact that we are retiring in our early 50’s in the next year or two. My wife and I both started contributing to 401k’s in our early 20’s and neither of us made six figures until after the age of 35. We now both have 7 figures in our 401k’s and 2 homes that are paid for along with some rental properties that are mostly paid for. Our kids have jobs and they both are required to save 50% of what they make since we pay for their food, shelter, and car insurance. We hope to pass on our savings habits to both of them so they too can retire in their 40’s or 50’s if they so choose.

      1. . . . but there’s the problem . . . why did you feel that you had to pick up thetab for your kids’ college? I figured out that the ratio of the minimum wage to a year at the college where I graduated is exactly the same now as it was when I went.

        It comes out to about 2200 hours of minimum wage work per year. Now I worked a lot (80-90 hours a week in the Summer) and had a minimum of loans, but it is always possible to work during the year at most schools.

        There is no benefit to the kids if they never work for anything.

  31. Graham @ Reverse The Crush

    Thanks for sharing the eye opening post, Sam. These numbers are actually bizarre! But I do believe they are correct. After working in the Canadian financial industry in various customer service roles over the last 5 years, it’s easy to see why these numbers are realistic – there is a complete misconception about money. It seems as though most people don’t care about what they do for work, they just focus on the level of pay. They don’t care about the work, they care about the status of a job and what they can afford to spend their income on – BMW’s, expensive weddings, trips, and constant instant gratification. I see so many people who are 50 plus that are still paying off large debts.

    Also, you mentioned how taxes will will eventually increase to accommodate the non-savers. I’m not sure about you but I actually find this to be slightly infuriating… It seems totally unfair for some of us to suffer for others negligence and lack of discipline. Actually, I liked the idea mentioned by one of your other commenters, Alex. He mentioned how Australia forces a 10% savings rate for anyone over 18. Making people save with their own money seems like the most logical explanation to me. Thanks again for sharing!

  32. Hello,

    Do what Australia does and legislate that all persons over the age of 18 MUST pay 10% into a retirement account before taxes are deducted and the money hits their bank account.

    Easy fix.

  33. I’ve heard similar statistics many times before. It kind of contradicts some other stuff you posted once, about coming windfalls of money that will be passed on to Millenials by their parents. How can the older generations be both woefully unprepared for retirement as well as pass off windfalls to their children?

    Something smells fishy in all the data. I blame our massive debt.

  34. John C @ Action Economics

    I think this poll certainly has validity. I know many people from millennials to boomers who have NOTHING saved for retirement. Some plan to live off of Social Security, some plan to work til they die, but for the most part, they don’t plan at all. It never enters their minds. I think auto 401K enrollment with yearly increases of 1% would be a great idea to help those who don’t plan. Part of the problem is that many jobs don’t offer retirement account participation at all….And other commenters have hit on this, Americans like to spend everything they earn and then some. I would certainly like to see middle school and high school financial literacy classes be a core requirement.

  35. The book Nudge by Richard Thaler and Cass Sunstein has what I think is the best policy solution – setting up automatic enrollment in a 401k plan or what would be considered an opt-out policy. One way or another, we are influencing people’s choices via a default, so why not make the default something that is better for people rather than worse? They site a study that shows that the participation rate is significantly higher using an opt-out approach than it is with an opt-in approach.

    A professor I really respected advised all his students to max out our 401k as soon as we enter the work force. At the time I knew nothing about personal finance, but did it because I respected this man, and am forever grateful that he cared enough to push this issue when I was a student and young enough to get the maximum benefit from his advice.

  36. I didn’t read all the comments above me so I’m sure it’s been said, but we’re fools to think the “haves” will not be on the hook for bailing out the “have nots”. The direction the country is moving is away from accountability and towards collectivism. I anticipate one of the following to occur before I retire (currently 34 w/ $250k saved):

    – Higher income taxes to cover the increase in SS outlays, which may impact all income level to make up the massive gap
    – Taxes on ROTH IRA withdraws
    – Taxing 401k withdraws – move from being taxed as income to a set rate (maybe similar to something we see with cap gains)

  37. My hate for taxes saved my bacon. Even after the crash I kept maxing out my 401k to avoid taxes. Going to cash was not a mistake I was going to make after I missed the warning signs of the crash. I was surprised at how many people around me in corporate finance were putting everything on the sidelines.

    1. Finance people tend to follow to many academic books. PE ratio blah blah blah. Sometimes knowing too much works against you. They go to cash at the wrong time, buy at wrong time, etc.

  38. Wikipedia says that consumer spending was 71% of American GDP in 2013 (62% in 1981). That sounds about right, so I’ll go with it.

    So, like, would the stock market have gone up as much as it did, if everyone had a significantly higher savings rate?

    I think about this a lot.

    I believe the overall message of the personal finance blogosphere is a really good one. People should live within their means. They should save aggressively to give themselves and their children a better future. Etc.

    At an individual level I firmly believe it’s a good way to live one’s life, and I too want people to get educated about finance (especially friends and family because I care about their well-being).

    But what would happen if everybody actually did it?

    What if everyone got woke and stopped getting a new car every 3 years, and buying 60″ flatscreen TVs and furniture to fill up their houses that are way too big?

    Would the economy collapse?

    Don’t we kind of need people to buy a bunch of stupid stuff they can’t afford so that our investments in the companies that sell that stuff can grow at a historical rate of 7-8%?

    It makes my head hurt a little, and I feel a little gross thinking that way. But I do wonder what would happen if the PF message were to really gain momentum…

  39. Interesting data.
    Do you think it adequately address people with multiple accounts?

    For example spouse and I have $2Mil spread across 8 different IRA’s, 401k’s and tax funds earmarked for retirement. Individually, each account is “meh” but in total, we are ok.

    How would the study makers know this?

    1. It’s a good question. The data probably doesn’t fully capture the summation, as I have a Rollover IRA, Solo 401k, and SEP-IRA as well.

      But, I would guess a small minority of Americans have more than one retirement savings account, given it looks like roughly half of Americans don’t have any retirement accounts.

  40. Would have liked to see an age option for the poll at the bottom as well since that gives a little more info on your demographics here and where I’d fit in as a new-comer to the blog and currently age 27.

    But yes, retirement savings are scary… I am doing OK (not great, but not bad) myself according to your previous posts. Looking at my parents though who are 10 years away from retirement….I have more in my retirement account than them. I have no idea how to cope with the very real possibility that I’ll be needing to take care of them in the next 10-20 years

  41. I’m gonna be honest, I have WAY less that I wish I did saved… but I do have plans for real estate / blogging / generating other forms of passive income. Do you see these as alternative retirement savings vehicles? There’s an opportunity cost lost either way, I put 30K into buying a house to rent, with lots of work day-to-day but potential higher cash flow forever, or I lock 30K into a retirement account now, never to be seen again, to hope for compounding and just enough passive income from dividends to live off way later…

    1. Building your passive income streams is ABSOLUTELY alternatives to retirement savings vehicles. In fact, they are fast becoming a necessity given interest rates and yields are close to all-time lows now. Cash generation assets are extremely valuable, which is why everybody should try to build one, and nobody should try to sell off their cash cows, unless it’s causing them a tremendous pain.

      The thing I’m noticing is: not only do many Americans not save enough for retirement, they definitely don’t bother to try generating income beyond their day job.


      Ranking The Best Passive Income Investments

      Your Cash Cows Are Worth More Than You Think

      How To Create Next Level Wealth: When $1 Million Just Won’t Cut It

      1. Phew! good to hear. :) I’ll keep tucking away my 10% (with 5% company match) just in case, but hubby and I are actively pursuing the rental side of things for now… who knows what the future will bring! Thanks. Off to read about cash cows…

  42. It is going to be their kids’ burden to take care of them when they run out of money. Multi generational house holds are going to become a very big norm. Might be a good investment to grab some ‘mother/daughter’ kinds of properties!

  43. If this is true, it is very sad. How can WE fix this? If everyone would set even a small percent of their earnings in savings, we wouldn’t be in this situation.

    I put WE in caps, as it is small actions that can make a difference. While sometimes awkward, I try to discuss personal finance with friends and family. Even if I can help 1 person, it is worth the efforts. By doing this, I have seen high fees and 5% loads on underperforming funds. I have also seen ultraconservative 401k fund selections for someone early in their career.

  44. These numbers are staggering (in a bad way). But how are all these brand-spanking new 55+ retirement communities with popping up everywhere and how are all these retirees able to afford them???

  45. Brian McMan

    Lol nah man, here I am almost 30 grinding it out for minimum wage got almost 50k for retirement, there’s not a chance in the pit of hades gonna pay for other people to retire. If you want to keep them then send their 70 year old butt to work.

    Let’s face it man they’ve spent all their money and had the good life now while looking down on minimum earners like me. I’m not about to slave away and have the bad life now and then pay them through taxes so that they can spend more money later when they’re older.

    Let them politicians go the way of dinosaurs if they think that’s gonna happen, the early retirement movement is gonna produce enough of me to vote them out. We are the powerful minority because lets face it, we got the dolla’ bills and they don’t.

    P.S. Dinosaurs did not go extinct, they just got put in parks and had movies made about them.

      1. Brian McMan

        Hey thank you very much for providing an individualized reading recommendation. I appreciate it Financial Samurai. Furthermore with the U.S. debt at over 2.6 trillion minimum wage hours (which is all 221 million people working 40 hour minimum wage weeks and giving it all to the government for 17 years) I suspect ‘they’ are gonna raise more then just social security.

    1. Brian, I was looking for contact info for you. Do you have an email address? Or do you have a contact page URL you can give me? I couldn’t find one on your site. Thanks.

  46. Our parents have meager retirement savings but they are probably going to be fine. My dad owns his home (worth about $350K) and his expenses are less than $2000 per month which SS covers. He has about $250K in retirement savings spinning off $8K in dividends but he said he’s likely going to reinvest those for a while and pick up a part time job for a few years. My mother actually has the higher amount saved ($300K+) but doesn’t own a home so I think she’ll have a harder time than my dad. My in-laws have less than $100K saved but bought a duplex which cash flows $1000 per month and with SS (about $4K combined) and my FIL (my husband’s step father) still liking to work at 69 they’re okay. My husband’s father has a part time job and lives for free in the house he grew up in so he may need some help at some point because he probably has $0 saved. I think there are a lot of stories like these where maybe the actual cash and investments isn’t high but they either have low expenses, rentals or paid off houses.

  47. different country, but here in South Africa, people I’ve asked have said that there isn’t any reason to save, because you can buy with a loan and they’ll want to work till they die, so what would you do with the savings. Also, Social Security is not a thing here, the social support is so small ($75 pm) you have to do your own support. Yet, despite this, people don’t save.

    If your plan is to work forever, then I guess saving doesn’t make sense to you. I just reply by thanking them for propping up my share prices and nice dividends and walk off.

    1. Do people who plan on working till they die plan on staying a young healthy 20 year old physically. What’s their plan if they get hurt of get sick and physically can’t work?

  48. This is frightening for sure. If the median 30 something has less than $1000 saved, are they planning on working forever? The vast majority will not have a pension. I’d be curious if people are counting on social security 30 years down the road to maintain their lifestyle. Seems very risky.

  49. Charleston.C

    Purely speculation on my end, but while 401k and other retirement saving is the status quo for financial security during retirement, pensions was much more common for baby boomers.

    Given the fact that someone with a pension cannot convert their benefits into a dollar amount saved for their retirement, we will always be presented with sensational fake news comparing apples to oranges.

  50. Joe Kearney

    There should be an auto enrollment into a pension scheme which should automatically take a percentage of your income each month and put it into a 401k or equivalent.

    Most people either are lacking the financial education or are not able to make themselves invest/save each month.

    1. I believe more companies nowadays are auto-enrolling new hires into 401K plans. You have to actively check mark the box to opt OUT of contributing. This was to increase enrollment rates of employers.

  51. Grant @ Life Prep Couple

    As scary as this is I believe it is probably true. Money tends to run through people’s hands like water. I had a friend who’s grandfather gave him $10,000 to fully fund two years of a Roth IRA. My friend left in there for about 6 months and decided that money would be better spent today instead of waiting 30-40 years. I strongly encouraged him not to do this and told him that money could easily be more than $150,000 when he retires.

    I know people at work who put nothing into our 401k even though we have company match. How much more incentive do you need to invest? They say they just can’t afford it because of some crazy excuse. Judging by the pole results these people aren’t reading your blog.

  52. People make money and spend it on regular life stuff. My parents never could save much and they don’t have much in their retirement fund. My in laws are doing better because they have pensions. All these people are frugal. The problem is they never made high income.
    It’s just hard to save and invest when you don’t make much money.

    I had higher income and started saving right away so my retirement fund is in good shape.

    1. My folks too. Dad was the only regular income provider and it was really low income (there was hardly ever splurge money). Mom had several side hustles and ran our finances really well. When dad was retrenched in 2005, his pension was tiny despite working for some 30 years. If my brother hadn’t been working at the time, we would’ve starved.

      Along the way, they’d purchased insurance which basically paid out what they put in for 10 years, invested in money market (which an unscrupulous advisor took 10% of before investing) which took 2 years to recover back to their initial investment amount and managed to buy land and build a house over the course of 20 years. Let’s also not forget the financial help they gave to ungrateful family members, sharing what little they had with others.

      But my mother does regret not learning more about finances but back then (pre-internet) the information wasn’t readily available as it is now. Where could you go for this information? The library? Financial newspapers? You were forced to go to brokers (even the ones at the banks) looking to make a quick buck.

      It really was a Kobayashi maru no win scenario.

        1. quantakiran

          Worse still, it wasn’t really advice worth 3k which in the late 90’s was a small fortune!

          My parents didn’t even realise they could complain to an ombudsman! It’s only years later when I started learning about the world, I realised they could’ve but by then it was too late (+5 years I think).

  53. I don’t see what is so hard to believe about it. You talk about saving every year after college. Well the first mistake you made is to forget that most people don’t go to college. There are millions of people working multiple part time jobs at minimum wage. A single person with that kind of income who is very disciplined might be able to save a bit for retirement. Throw in a couple kids and forget about it. Living on just social security won’t be a big deal for these people because they have struggled all their lives.

      1. I’d assume an individual in scenario #1 would have a greater opportunity to save more:

        (1) Complete College (obtain a “4-year” or bachelors degree) and get the potential to acquire a significantly higher earning job (thus able to save/invest more).

        (2) Do NOT attend college but have the advantage of four more years to earn and save.

        I agree with David’s point re: the wider segment of people, but even individuals in scenario #1 (those who go to college) make these numbers realistic. Between student debt, rising costs of living, and the reasons for actually going to college, a 4-year degree only gives individuals the potential to earn more. I know plenty of people who spent $120,000 (assuming they actually finished in 4 years) to obtain a degree that earns them $30,000 a year and then they live the lifestyle at their level of experience – how they grew up – which is often well beyond their means.

        Overall, a number of these comments we’ve all shared articulate multiple problems (lack of financial literacy / education, consumerism, immediate gratification, poor investment choices even for those saving, etc.); I don’t think there is a single explanation or solution.

  54. Don’t you think looking at just retirement accounts paints a bit of an overly pessimistic picture? I wouldn’t be surprised if the average American didn’t have a retirement account (IRA, 401k), but that doesn’t mean people aren’t saving anything. Anecdotally, I know a few small town millionaires that only invest in rentals because that’s what they know. Technically 0 “retirement” savings, but they won’t be on welfare or vote for higher taxes.

  55. So is it a scary thing Sam? Or is The Fear of Running Out of Money in Retirement Overblown? J/K, enjoyed the post.

    Being an attorney with a large number of domestic clients, I can tell you that it is scary that many people come into my office looking to get divorced but have insane credit card debt, large mortgages, vehicle debt, student loans, etc. They end up wondering how they got into this mess.

    The most interesting part of it for me is that some of these people have pretty good retirements considering their incomes, however; some of these folks have 300-400k in retirement but do not have money for a small retainer which they have to borrow. It’s crazy. This leads me to an issue that I wish you would write a post about which is “Are you contributing to your retirement to your detriment?” Retirement is super important but putting all of this money into something that you have to pay a large penalty+tax if you take some out early, while you do not even have 5-10k in liquid cash, in addition to vast amounts of debt, not to mention NO income producing assets, is beyond nuts in my opinion.

    1. Jack Catchem

      Interesting point! I deliberately keep myself cash poor and retirement investment rich, so I get your argument. At the same time my financial flexibility can come from the SAME ACCOUNTS without penalty (“the files are IN the computer?!”).

      While a 401k loan or withdrawal of contribution from a Roth IRA are not best for the account, the money can be accessed with minimal to no penalty. Therefore I have an “emergency account”, just through the fungible magic of money, it works in those accounts until summoned back to my home base of a Checking Account.

  56. I think it is fake news, as it does not cover all the grounds.

    Its absolutely shocking to see that 55-60 years old have almost nothing in their 401K to folks who started working in late 90s, now. But aint 401K kind of new in themselves?

    If I were working in the 70s and the 80s – I come from a different set of circumstances, and choices. Electronic trading wasnt there. Pension was there. SS was there. Even when 401Ks started, the limits were almost half of what it is today, assuming you could contribute max.

    30-40 years from today, the next generation will look at us and say – really? This is what you did?

    One simple point is this that the finance websites tend to create a fear, to encourage millennials to save in their 401K – the web is full of it – but they show them the figures of their grandparents 401K balance who had a pension back in the time.

    A $40K per annum pension holder grandma is equivalent to a millionaire millennial or more, in today’s dollars, given the absolute pain to generate anything over 3% reliably.

    IMHO, The news item must take out pension holders to report what Americans have saved for retirement.

  57. This is not surprising at all. A majority of Americans like to eat out all the time for coffee, breakfast, lunch, and dinner. Surprisingly there is still a large number of people who smoke a pack of cigarettes a day or more despite knowing the risks! A lot of people trade in their cars every few years and either lease of take out loans. People buy a house before they have a 20% down payment, thus paying PMI and a large amount of interest. Most Americans are overweight, taking prescriptions, and paying a lot of money for health care! I could go on and on and on.

    This is all on top of the lack of financial education that people have mentioned. I have also noticed that the media has been scaring the public away from stocks and investing since the Great Recession. They say that the next big drop in the market is coming so don’t risk your money! There is always a get rich quick scheme that is shown on TV ads. How has it worked out for people who have stayed out of the stock market from 2009 to 2017? I guess with all of the reasons I listed above there wouldn’t have been much money to have invested anyway.

  58. Albert Jeans

    Another indicator: many of the residents of a Title 8 apartment complex nearby drive more expensive cars than I do (I retired early from a 6-figure salary engineering job). Cars depreciate quickly, and chances are, they’re paying expensive car loans too. It’s a matter of education and planning for the future.

  59. The key is to start saving/investing early in life and be consistent (save with every paycheck). Taking advantage of a matching 401k plan should be a no brainer. The power of compounding is lost on many people. Also maxing out contributions when possible, eliminating debt, avoiding risks with your nest egg, planning for multiple streams of income once retired (social security, pensions, dividends, part time work, etc.) and making catch up contributions once you reach 50 should all be part of everyone’s plan. And work at staying healthy to reduce illness, injuries and medical costs. I recently found the site Retirement And Good Living which provides information on all these issues as well as many other retirement topics and also has several retirement and health calculators.

  60. My inlaws have $1M+ ($2M maybe) but they live off their SS checks except for luxury purchases (RV and a new corvette). House is paid for with relatively low prop taxes and they live a modest lifestyle.

    A guess: Many folks with minimal savings don’t make that much today so SS may be enough to continue their lifestyle?

    1. Two SS incomes… that’s a base plan, yes, but they are not accounting for one spouse dying early. That income then goes away.

      Congrats to your inlaws. That’s the way to do it. Live cheap enough that SS pays for most everything, but you can still travel, etc.

  61. Unfortunately this does not surprise me. I don’t think it is all education. I can tell you first hand as an employer who provides a 4% matching on a 401K plan. The majority of my employees that are in the age range of 26 to 35 years old pass on the 401K and the added value of the 4% matching. I even went as far as having the company that manages the 401K meet and educate every employee about our company sponsored retirement plan with 4% matching and this did not increase enrollment at all. One of the comments made by my employees during the meeting/education session was “I feel like you are trying to sell us something”. The problem here is ignorance. The know that they should be doing something but don’t have any urgency and lack grit. I think the problem is that 40 is the new 20 and they have zero plans for tomorrow and think they can deal with it when it comes or the government will somehow provide for them or they will just take over what Mom and Dad have and that will be fine. They will be in for a rude awakening when they realize that Mom and Dad have less than expected due to supporting them their whole lives and that assets cost money to maintain and it doesn’t always transfer tax free. Bottom line they know they should be laying their own foundations but are having it way too easy to be concerned.

    1. @Randy, agree. I look around me and those I know of Facebook, and it’s like the whole world are zombies (financially speaking). No plan for the future. I told my wife we are going to need to move away from 99.9% of everyone we know just so we can live our “rich” live in peace. 20 years from now, all of these people we know are going to be broke trying to take care of their broke parents. It’s terrible. We try to give advice to folks here and there, but they just don’t get it.

  62. Unfair and unreasonable 401k fees contribute to the problem. I have 1/3 of my 401k in bonds, 1/3 in a S&P Index and 1/3 in Fidelity Money Market Trust Ret (FRTXX) Currency in USD. I’m a psuedoBoglehead. Fee for the S&P Index fund is 0.04, Bond Index fund is 0.05 and the FRTXX is .42%. Why is it that expensive for them to hold my cash. Why should I be paying anything for them to hold my cash. No wonder it’s difficult to make a real retirement out of a 401k.

    1. Hi Mike, I’m not sure of your age, experience in personal finance or your risk tolerance but your three choices of funds ensure your gonna just have a hard time staying even with inflation let alone makeing money. May I suggest you talk to your funds advisor about your current fund choices. They should be able to put you into funds where the growth is high enough that you don’t mind paying the sales fee.

      Just my 2 cents, Bill

  63. Ms. Conviviality

    I have a pension in Florida which is one of the states that does a good job of actually paying out so I’m not worried about having enough money during retirement. Now, if I were to pretend that I didn’t have a pension then my savings balance would be scary. The low savings could be attributed to being the sole income earner during my first marriage while my husband was still in school, making a $25,000 investment mistake, paying the mortgage on an underwater condo, buying my mom a brand new car since none of us kids lived close by and she needed a reliable car to get to her two jobs, annual trips to Switzerland to visit my best friend for the past 7 years, and vacations with my single sister who loves to travel because it was just too sad to think of her traveling solo. I’d say that the trips were something I could have cut back on but I had a fear of missing out on making special memories with people I love since my first husband died unexpectedly when I was 28 and it left a constant reminder that “this trip” could be the last one. The bright side is that the savings I do have now are in high return investments so my savings graph would look exponential over my lifetime. The condo will be paid off by the time I retire so this would be another income stream that isn’t accounted for yet in the retirement funds.

  64. Sam my wife and I have a net worth of -$119,238 due to student loans and stupidity/ignorance. I discovered your blog (along with Wall Street Playboys) and it’s taken me from the woe is me, blame everyone but yourself mindset to trying to gain financial intelligence and payoff debt while starting a company. I know these stats are scary to you and your readers, but you are helping the situation with this blog. I share it with anyone who will listen. Keep up the good fight!

  65. According to a simple google search of the EPI, they are a liberal think tank that promotes policy changes for families. Don’t know if it is fake news but the data certainly supports their agenda.

  66. Reasons why Americans are poor. Public education woefully lacking, college not necessary for many people, short term gratification, drift away from capitalism, single parent households raising dysfunctional children, social acceptance of using government welfare and being dependent on it.

  67. I find that these numbers are a little bit hard to believe and accept. There are trillions in value in the stock and bonds market. Who owned all of these stocks and bonds?

    Even if it’s owned by institutional investors, now we ask who put the money into these investment firms?

    Are most of America’s stock and bonds owned by foreigners? If that’s the case, which country or countries are richer than the U.S.?

    I want to know the sample size of this research and the margin of errors.

    1. I just read the top 10% own 91% of all stock market equity. These numbers are pretty believable based on that.

  68. You mentioned all your friends would be worth 10 million. I’ve found it fairly difficult to get friends to take on a specific behavior. They always modify it. The one good thing I’ve done is my mom knows nothing about investing but years ago I set up an account for her and had her direct deposit to it monthly. I then made the selections for her. She eventually stopped putting in but the amount she did put in has grown to be a pretty penny. I always joke with her telling her, you see I told you not to stop. Anyway, it’s good because parents are getting older. They now have something with their own money that they may not have had otherwise.

  69. I have an 8 figure net worth but a tiny balance in my retirement accounts (thanks to crappy 401k investment options and early retirement right before the financial crisis). Maybe there’s a lot of us like this?

  70. re: the average 401k balance at Fidelity / about $98k – I wonder if they accounted for individuals with more than one 401k? i.e. they changed jobs, and (for whatever reason) left their old 401k spinning in place and started up a new additional one?

    I’ve done that – had a 401k at a previous employer with far better returns and lower fees than anything else available at the time from my new employer – so I left it in place.

    Could be an outlier scenario, and the crowd reading this blog is probably more likely to have multiple 401k accounts in play than the average american, but I wonder if that is skewing the average at least a little?

    Jeez tho… A lot of people are going to be hating life when they get older. Wonder how many of them are driving luxury cars around and living fancy lifestyles, instead of socking away an extra few K a month…

    1. Those were my thoughts, too.

      Between my husband and I we have an IRA, 2 Roth IRAs, 2 401ks, post-tax investment and a pension. So, with 7 accounts we are dragging down the average.

    2. Paper Tiger

      Really good point. Between my wife and I, we have (6) 401Ks, (3) IRAs and (4) Pensions from various employers. At some point, we have to look at consolidation but have yet to do so.

    3. Same here.

      We have 6 401ks, 3 IRAs, with Fidelity and Vanguard. The active 401k is new, and doesn’t yet even have $1,000 in it, so it would be a mistake to draw any conclusion from just looking at any single account.

  71. Todd Guthrie

    One possible explanation is that a lot of Americans have been suckered into life insurance scams due to general lack of financial literacy.
    Although these insurance policies are in fact genuine financial products, I call them ‘scams’ just because of the often shady way in which they’re marketed and sold by agents who know very little about investments, and even less about the concept of fiduciary responsibility.
    It’s not at all uncommon for people to be roped into a sales office by a friend or family member who has become involved in some kind of ‘multi-level marketing’ scheme, and who then convinces them to liquidate their 401k into a life insurance contract that supposedly has a 15%-40% guaranteed annual return.
    I come across so many people in this exact scenario, who pour thousands of dollars per month into an expensive life insurance contract as if it was a retirement savings account.
    I think it would be revealing to see the numbers on these.

  72. Albert Jeans

    Rather than plotting the savings for each age group at different points in time, each age group should be followed through time to see how their savings grow (or don’t). For example, the 44-49 group in 2007 becomes the 50-55 group in 2013. So the mean retirement savings for all groups did increase. The median still looks pretty bad though.

  73. A lot of folks just don’t get it until it’s too late. They’re too busy with focusing on buying crap they don’t need and keeping up with the Joneses. Then they get close to the traditional retirement age and panic starts to set in, but they’ve lost so many years of compounding up to that point that they just can’t catch up.

    I’m proud to say they we finally hit the $1M mark this year for net worth and our retirement accounts make up about 2/3 of that (the rest of the balance being mostly real estate equity).

    We’re not anything special, but we just figured it out. I work at a job that pays well, but not anything crazy and my wife is part time. I do a couple side hustles to bring in a little more income as well. In the meantime, we save around 35% of our income and plan to retire early and happy! :-)

    — Jim

  74. Hi Sam,

    I doubt the accuracy, or the way the data was collected in this report. I just got back from a fishing trip with 11 other guys. 10 of the guys are small businesses owners and the other 2 are worker bees. Out of the 12 guys only 3 of us have what would be considered retirement savings for this report. Keep in mind most of these guys have 7 or 8 figure net worths. The other 9 guys either have real estate and rentals or plan on cashing out the equity in their businesses to pay for retirement.

    I know this is anecdotal, but I see this often enough to believe many people are in better shape for retirement than this report suggests.

    Thanks, Bill

    1. OlderAndWiser

      I had a similar thought. The charts indicate that they only include 401ks, IRAs, and Keoghs. Sam’s poll question includes a much broader range of assets.

    2. Working Optional

      I understand what you’re saying and anecdotal or not, small business owners are almost always better off. The study in question was about retirement accounts which the majority of Americans have access to, but don’t (or can’t “afford” to) use.

      The long and short of it is that Americans as a whole are not doing great (i.e. they don’t have 7-8 figure net worths :)) when it comes to retirement assets.

  75. OK this might be a terrible thought, but how could one profit from this epidemic. Serious question.

    1. Here’s what you can do. Start a business that will create jobs. Jobs that would require hardly any skills, because these people will be working for the rest of their lives!

  76. It’s rational to not save for retirement if you have a low income. 1) you don’t get much in terms of immediate tax break because your marginal tax rate is low 2) you end up locking up money in plans that you can’t touch until you are 59 1/2 3) social security replacement rate versus your income is relatively high versus the replacement rate for higher income earners. All this means low earners have less incentive to save for retirement than high earners. Suspect that is what some of the data there pick up in their averages.

  77. Great article as usual Sam, I’m not surprised by these numbers. Most of my older family members have saved very little, and the ones who have retired were able to because Social Security provides enough income when you have no debt and live a very boring life. Additionally, most of the people I know, including family members, don’t plan at all, live paycheck to paycheck and couldn’t come up with $1000 for an emergency. I’m actually a little surprised that the median retirement savings isn’t $0, although $5000 is pretty much $0.
    As for why I haven’t saved more, I retired from the military and saved less due to my pension (could have completely retired at 39 but I didn’t have a FIRE plan while I was serving). I was on track to have $1 million by my mid 60s, but that doesn’t work when you want to retire in your 40s.

    1. Rich, it can be done. I have one more year before I hit 20 in the military (min years of service under old system for a pension), I have crossed one million in investments, and am 47. I chalk part of it up to an uncle who got me interested in finances and investing in my 20’s, plenty of mistakes and hard lessons along the way, but that early start and interest sparked it all. My parents were pretty bad with handling finances.

  78. I wish I could say I’m surprised. I have an eye into the finances of five individuals in your top age group. Four of them are basically at or below your mean. Three of those four will be saved by a pension though. So it’s actually the second age cohort, the one with no pensions, that’s more concerning.

  79. New Father Finance

    These are truly scary figures. Someone is eventually going to have to pay for all of those people and, as a younger worker, it’s probably going to be people like me.

    My question for the FIRE community is how do you plan for a 40-50 year retirement when there is so much uncertainty around the future of taxes and safety nets? Is your nest egg large enough if income taxes double?

    1. Actually it will be people making high income who don’t spend their money the way government wants who will pay as it always is. Think of this this way, the tax code is set up as to say that after you make “x” amount, it’s enough for you to live on and you can afford to give government your money. But that “x” number is based on the basics in life, so as you climb up the income ladder, the gov take gets worse. The solution / tax savings is to “spend” your money the way government wants you to and that’s by saving (401k), investing for income or cap gains (after 1 year) or real estate which can give you the most deductions, even phantom deductions. Notice if you spend your money as government wants you’re actually also doing a social service, be it saving pre-tax for your retirement or investing in real estate…. government doesn’t want to be landlords for people who can’t afford to buy a house so they encourage investing in real estate via tax savings. The more you make the higher percentage the government as you climb the income ladder. Do you know people who work a lot of OT or a second job who still don’t get anywhere?

      An important key is not only making the money, it’s learning how to keep your money. I just wish our “great” tax payer funded and government run educational system would have taught that instead of trying to teach me how to be Betty homemaker or some other useless Mickey mouse class they insisted we take. Thank god I took the initiative to learn and I’m always learning more.

  80. It’s really interesting to see how the crash of 2007/2008 not only crushed everyone’s retirement accounts, but the aftermath shows how those accounts have barely recovered.

    Interesting data. Thanks for sharing.

    1. Paper Tiger

      Actually, investments recovered quite well from 2008. On 1/1/2008 our portfolio was 3.8M and on 1/1/2009 that same portfolio was 2.7M. However, on 1/1/2010 it was back up to 3.4M and by 10/1/10 we were back to 3.8M, or about 21 months from the low to back to even. In the nearly 7 years since, the portfolio has doubled from there.

      The trick is we didn’t panic and rode out the storm. If you sold during the drop and held on too long before you got back in, you jumped into the death trap of “selling low and buying high” which would have made it much more difficult to recover.

      1. Yes, you are correct, I should have noted that my comment was based on the data being depicted in the first chart from 2008-2013. I imagine you are more financially sound than your average investor who held firm while others fled. Well done on your part.

        It would be interest to see the data from 2008 through 2016.

      2. There has to be another piece you are leaving out of your #s.

        The S&P 500 on 1/1/09 was 38% lower than a year earlier (vs your -29%), on 1/1/10 the market was still down 24% vs 1/1/08 (vs your -10.5%), and on 10/1/10 the market was 22% lower than 1/1/09 while you were back to flat.

        So the trick wasn’t really riding out the storm per se, if your #s you list are accurate you were much, much better at picking winners and losers during that time than the market and frankly probably beat 95%+ of funds on Wall Street as well.

  81. I wonder if financial education in HS would really move the needle here? I’m all for it, don’t get me wrong. But when I talk to coworkers, few of them are maxing out savings (401k). And these are professionals, earning 6 figures+, most with advanced degrees. Now, if you can’t get through to them, how effective would it be for the general population? I would want some evidence based approach, rather than just assuming that financial education would do the trick.

    What we really have is not a lack of education, but a lack of sociological values which prods people towards thrift & investment. And it’s an American thing. I believe that Asians have that virtue and is it financial education provided to them in HS what’s made the difference there? Probably not – again, it comes down to values. And I’m sorry to say, but for values, the US has little movement towards those and IMHO is regressive (evidence? look at what is promulgated by Hollywood and the media). If a close call with a depression style recession 10 years ago wasn’t enough to scare more people “straight” not sure how effective a class on personal finance will be.

    1. The song “No Shelter” by RATM comes to mind. I think more education is needed but you are absolutely right that sociology values need to improve from the top down. They need to expand the Retirement Savings Contribution Tax Credit further into the middle class ranks to encourage it, IMO. Although, I’m convinced the DNC doesn’t want (and most of the RNC) the masses with sufficient wealth. Makes it hard to rely on certain voting segments for regular votes.

  82. Sam thoroughly enjoy your blog.
    I am 64 my wife 63 as we near retirement I have been doing a lot of reading about retirement income. It does appear that most Americans are terribly ill prepared and will have to work forever. With little education about finance’s and the constant media blitz of “you need stuff and right now” there is little thought of saving for the future. My spouse and I have always lived below our means and have save aggressively and reinvested in ourselves. Its only been the last few years we have had 6 figure incomes. We have savings, own a couple of businesses and have rental property. With a net worth of 4M+ I am looking forward to not working full time but instead work at managing our assets to make them grow. When we retire and can travel and enjoy life I know other people will look at us and say “your so lucky”. We have been blessed but its also a lot of hard work.

  83. I think some boomers are waiting for their parents to die an pass on money. Bad approach. Glad to be in a better position than many my age but I’ve still got a long ways to go. The numbers here are scary.

  84. Three explanations for low median balances are the large number of those with no savings, government/military with tsp but no 401(k), and, like me, have multiple retirement accounts that dilute a total individual amount.

  85. I am not surprised by this at all. The oldest working generations today are the ones who may have started with a pension, but that rug got pulled out from under them in the early-to-mid stages of their careers. My dad (age 63 next month when he retires) is a lucky exception, so his retirement balance is $300k, but the reminder of his expenses will be covered by that pension.
    There will be decades of retirees who didn’t understand how important it was to invest in their own retirement accounts, since they are the ones blazing the trail in the post-pension workplace. Combine that with the Social Security insecurity (see what I did there?) and it’s a recipe for disaster.

  86. I was there in 1980 and you’re absolutely correct in that education is the problem. I had no idea about what an IRA was or any of that stuff.

    Thankfully I’ve eventually learned a bit, and while I’m nowhere near 7 figures in retirement and other savings, I’m also not anywhere near 5 figures. And while none of us has any guarantee of being on the sunny side of the planet for even one more day, there’s still lots of time to bring those numbers up.

  87. Adebayo Oluwole

    The main reason the “haves” keep having the more is that they know how to use compound interest to their favour through intelligent investing while the “have-nots” use it to their disadvantage by accumulating debts.

    1. @Adebayo – Exactly. You can compound dumb decisions or good decisions. The compounding will happen one way or the other.

  88. When my dad died at 63, he only had ~$88k in his 401k account. However, he’d worked 33 years at BellSouth, so he had a full pension and medical. He was incentivized to retire early at 33 years with 2 yr salary buyout, and full benefits as if he’d worked 35 years, when he was 51, due to RSI issues. He also started in the “pre-401k” days when pensions were still popular, so a lot of that 401k investment came from his buyout from the company.

    My brother is only 2 yrs older than me and while I’m looking at hitting FI in 2 more years and “retiring” he is in one of these brackets with his savings being very very minimal. We don’t make too different a salary, but we sure do spend/invest it differently.

  89. Mrs. Adventure Rich

    Wow, I kind of feel sick if those numbers are accurate. To be nearing retirement with only $17K… I can’t imagine. But in some ways, I am not surprised. Between the trend away from pensions, some hard losses in the past few years (Dot Com and Housing crashes and resulting fear of stocks) and the emphasis recently on “give your kids everything” (private education, expensive colleges, etc etc etc), it does not seem like a stretch that retirement savings are put on the back burner. If I hadn’t been given some very helpful financial advice early in my career, I would not have had the faintest notion of compounding interest or the importance of retirement savings.

  90. These numbers seem somewhat lower than the 2016 Transamerica retirement survey (from what I can remember), but not by much. It’s truly frightening.

    I think education is the biggest problem. The Transamerica survey asked participants how much money they thought they needed to retire, and the average response was $500k! Much higher than what people have saved, so they probably are frightened to admit it’s higher, but still not enough to live it up in retirement. Either they will have to live on $20,000 a year plus SS or run out of money. If they can get to $500k….

    1. Amazingly, I know quite a few who do, in fact, live quite well off of about $3500/mo. here in the Midwest.

  91. You brought up a great question. I myself sometimes wonder why Americans, who live in one of the richest and most powerful countries in the world, just don’t have a lot of savings. I know people have different priorities, and delayed gratification is not everyone’s cup of tea. But still, catastrophes and aging happen!

    Regarding the data, I think it’s good to see the patterns and reference other studies on the same topic. Just because something is based on data and some results are derived from some complicated models doesn’t mean they can’t be manipulated.

  92. Those figures are sobering. Many people will have to work until they physically cannot do it anymore. They will be forced to work until they are age 70 or beyond. That is no way to live. What is sad is that there is unlimited resources online to put a simple financial plan together. People seem to just want to live for today. They are focused on spending and improving their credit rating to spend more.

  93. Yeah unfortunately I am not very surprised. I am a single female who makes six figures, so I save up as much as I can ( thanks god I have access to both 401k and 457 at work). But you will be surprised how many of my friends who are female and high income just don’t save anything for retirement. Majority of them tell me that it’s their husbands’ job and they can’t afford to put money away anyways and then they complain of taxes! I always wonder if their husbands are really putting any money away? Some of them do not sound very financially literate to me. Even amongst my single friends a lot of them just do not save with the hopes that one day they will find Mr. Right and things work themselves out!!
    That’s half of the working adults for you ( Not all of them obviously)..
    Also I know people who are savers but are not very familiar/comfortable with stock market and 401ks so they tend to shy away from it and just sock the money away into real estate or saving accounts.. You will be surprised how many of those people are in our society …
    Anyways, unfortunately our society is in it for a rude awakening soon…

    1. The gender retirement gap is insane! Both in savings rates for similar incomes levels and the gap created by women taking more time out of the workforce (maternity leave, caring for elderly family) which means lower lifetime earnings and lower social security. 80% more women live in poverty in retirement than men! Really sad.

      I try to talk to my female friends about it as much as possible to try to encourage them to save more!

      1. I try to encourage my female friends to work and/or be financially independent as well. Ultimately, it’s up to them if they choose not to. But as a friend, I just can’t keep quiet about such an important topic. It’s important not just to them but also to their children.

        1. YES! I feel the same. My female friends don’t even have a savings account let alone a retirement account and are relying on an imaginary prince charming to wipe their debt away. I sent this blog to a few of them to no avail. We are in our late 20’s living in NYC which is expensive on its own. I agree with the poster above that ultimately it is up to them to decide to start being financially savvy.

          I think a lot of people compare themselves to their friends. When they hear that their friends don’t have much savings they feel more comfortable that they aren’t alone..unfortunately

  94. Brad -

    I don’t understand it either. Just earlier this week I worked with some clients (a married couple) who are 66 and 67. They each have pension income, and social security, but also car loans, a mortgage (35% of their income), credit card balances, and they’re down to $1,000 in their savings account. It’s scary. Of course they could scale way back if they wanted and live off the pensions and SS, but they don’t want to. They’re retired and they want to live it up a little. But since they didn’t prepare for their own retirement by saving and investing, they’re in a pickle. I suspect this will happen more and more as generations reach their retirement ages.

    1. You make a choice and vote with your dollars ….I’m betting that both of them had new cars ( 3-5 years old ) all the time , meaning ,for all practical purposes , they always had a car payment . Bought lunches instead of bag lunch, Starbucks on the way to work, paid for lawn care, had to have the best cellphones and Large screen TV’s ….expensive vacations problem.
      Their problem was they lived it up already and are now paying the consequences..

      There is no reason to be in that financial position with the added luxury of having two pensions , something that very few people will be able to get in a few short years.

      This will sound cold ,but ” Lack of preparation on your part, does not constitute an emergency on my part.”

      If you told me they were laid off for years, lost their homes in the recession , supported their children, suffered from ill health , and many other factors that happen to people thru no fault of there own , I would probably be more understanding.

      Sounds yo me like they need to go back to work …

  95. The Luxe Strategist

    My mom is in her early 60s and she only has about 100k saved. The reasons are because:
    -She’s illiterate and could only do low-level jobs.
    -She contributed to her 401k, but didn’t know to change the selections from the default (which were obviously the worst options).

    She always saved, though. She just didn’t know how to make her money work for her. So basically, just plain innocent ignorance.

    I’m saving my money to support her, but I wonder about those who don’t have a kid to help them out? Also, what I’m most curious about are those who ARE educated and still have little savings.

    1. It’s nice that you plan to support your mom when she’s older. Mr. FAF and I plan to support our parents as well. :)

      I hear the question “Why don’t poor & low-income people read personal finance blogs?” being asked a lot. I do agree that personal finance tips can help improve their finances. However, part of me wonders how someone working 3-4 exhausting manual jobs to support their family can find the time to read blogs and stay abreast of politics to vote for the right candidates among other things. Being poor sounds like a sin sometimes.

  96. While I certainly hope the numbers are wrong, it’s hardly surprising considering the dismal state of financial literacy in America. Why we can have the oddity that is Common Core math and not teach compound interest and overrating is beyond me.

    Given how conservative savers have been screwed by the low interest rates since 2008, I can only imagine what’s going to happen when this retirement mess unfolds.

    1. Mr. Freaky Frugal

      Financial literacy is definitely part of it, but there are a long chain of ifs that make it unlikely people will save:

      If someone…

      Takes the trouble to become financially literate AND…

      Starts saving early enough regularly AND

      Makes the right investment choices AND

      Doesn’t raid their retirement accounts due to a family crises AND

      Doesn’t panic during a financial crisis AND

      Is healthy enough to work long enough AND

      Is smart or motivated enough to get a decent paying job AND

      Does not have their career automated or off-shored away THEN

      that someone should have enough to retire.

      What are the odds of all that happening? Not great!

      I’m going to go way out on a limb here and say that why I think the long, long term solution is a Basic Income. I just can’t deal with seeing people starving or living on the streets because they made poor retirement savings choices.

      1. Universal basic income doesn’t work. There’s not enough money from the producers to supply everyone with a basic income. Stefan Molyneux has a great in-depth overview on the topic on YouTube, where he uses basic math to show how unworkable such a system is.

        1. Mr. Freaky Frugal

          If enough machine intelligence and automation eventually arrives, the producers will be robots and computers. When many fewer human are used as producers, and lots of stuff is still being produced, Basic Income may be needed to distribute everything.

          I realize how crazy this sounds right now but think really long-term.

          1. Grant @ Life Prep Couple

            After strong AI exists then we won’t be the ones making those decisions anyway. I agree that universal basic income would be logical when robots make everything and everything is basically free. Now we just have to hope that robots deem it nice to keep those humans around with their weak biological bodies and their brains that are about a trillion trillion times less powerful than theirs. It would be equivalent to us providing income in insects.

            I’m still not convinced we can achieve strong AI but people much smarter than I see it as a matter of when not if.

      2. Godfrey Tatyama

        I am really impressed with all that you have posted! I believe you can join the ranks of good Samaritans and educate the financially needy like myself!

      3. Arrogance is a luxury of youth. “If I was a working adult back in 1980, I’d like to think I’d be worth at least $10,000,000 today.” Pretty easy goals to meet, if you started with $2-3M inheritance. Otherwise, you’d be surprised how hard it was to stay employed through the various recessions and technology shifts over the last 40 years. i you are one of the deluded nitwits who can still argue that there was an economic boom during the Reagan years, it might even be easier to imagine how simple it would be to be rich today. All sorts of occupations have either vanished or changed so radically that one of the life expenses you’re neglecting would be constant re-education. That wasn’t cheap in 1980 and it’s even more expensive today.

    2. concerned saver

      While all this talk of low interest rates causing lack of savings is good and dandy in theory, it should be abolished altogether in my opinion.

      Consider this: I am paying 2800 / mnth in interest on my mortgage. If I were to pay this for 30 years I would have paid close to 500,000 for this duration. That money could have gone towards my retirement savings. I haven’t even included compounding effect on this savings, which may put this figure well north of cool million.

      I am not alone here. There are countless people in this country who are in the same boat. British empire’s queen abolished interest in the 15th century and they saw unimaginable rise in their power and wealth, until the greedy bankers got their hooks into the system and started chewing it from the inside.

      1. quantakiran

        Hi concerned saver

        I’m a financial idiot so your last paragraph didn’t make sense to me but definitely piqued my interest. I tried googling this but I only came up with abolishing slavery links.

        How would abolishing interest increase wealth and power? If you saved money, it would just sit there. So to make money with your money, your sole option is to invest in stocks and other financial vehicles that don’t guarantee returns and carry risk.

        And for everyday folk, that’s unrealistic because you need money to make money in those financial vehicles. There’s no compounding effect there.

        Thanks in advance for the explanation.

        1. Without an expansive debt system, you’d likely have slight deflation every year, meaning rather than lose 2% to money just sitting there, you’d probably gain 2% purchasing power.

          1. quantakiran

            But deflation is not real? Right? If it is real, why don’t we do that instead?

            I mean if the economy we’re working on is a negative (like a photograph), why don’t work with the positive (the photograph)?

            Sorry about all the questions.

            1. Deflation is the bankers worst enemy (as it discourages debt and makes debt harder to pay back), and the banks run the world, so instead we target 2% inflation, which is effectively a silent tax on the middle class of America (and the world).

              In the natural state of technological progression and without printing money, we’d have 1-3% deflation just about every year.

      2. 2800 x 12 x 30 = 1,008,000 in interest payments. $2800 a month in interest is a ton of money to service a loan.

  97. This is frightening as hell and I have no doubt that it might be true, as I know of personal examples from people I know. I just think people generally think of what makes them feel good right now. The future seems way off to people. That’s my only guess, besides perhaps stagnant wages?

    1. I agree. I think it is easy to fall into the “retirement is so many years away” trap. And before you know it, it is just around the corner and many years of compounding gains potential are lost. It is scary to think that people close to retirement age have as much saved for retirement as I had in my 20s.

      I believe the following argument might have gotten beaten to death already, but I wish High Schools and universities would offer mandatory personal finance classes. This way, kids graduating and heading off into the “real world” would understand the wonders of compounding and being prepared.

      1. I couldn’t agree more. Finance should be #1 in the school system. Many of us leave and don’t have a clue about money at all. Isn’t school suppose to prepare you for the real world. WELL? I can honestly say I learned absolutely nothing in high school. Fortunately I did learn how to save and invest BUT not till I got a lot older. The school of hard knocks. I have always loved numbers so it was actually enjoyable for me.

    2. It’s a dire situation in America, but I can’t say I know the answer.

      My in-laws were school teachers in a little Western European country and they’re getting paid 80% of their highest salary through a government pension plan starting at 60. Sounds great, except the highest earners also pay 50%+ of their income in taxes in that country (which also sounds great IMO).

      It’s hard to find good information online because even an American would have a difficult time explaining our retirement as it applies to everyone (government benefits, personal savings, the tax consequences starting the day you enter the workforce, etc.) and every picture would be kind of incomplete without excessive notations. People who tried to retire during the recession deserve a footnote, people who have lost city pensions deserve a footnote, people who have excessive healthcare costs deserve a footnote and on…

    3. it’s funny the most money i made in my life is 25000 a year when i retire this year my retirement will be 53000 a year for life not much for some people but for me I’m very thankfull.

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