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
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
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.
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.
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?
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.
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How Much Should I Have Saved By Age For A Comfortable Retirement?
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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.
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.
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.
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 $200,000 today and tax-free withdrawals if I did.
Congrats on your little one! We are also older parents. My son came two months before my 40th birthday.
Thanks for sharing your thoughts! Please sign up for my free newsletter if you want more great personal finance content. Also, I have a new book coming out with Penguin Random House called Buy This, Not That: How To Spend Your Way To Wealth And Freedom I think you’ll enjoy too.
Best,
Sam
Thank Sam. I just preordered your book. Looking forward to reading it!
It’s amazing to read how easy it should have been to have a retirement. So much has happened to my husband and I and our retirement. It’s not always the persons fault for not having any. We had a very nice retirement and my husband lost his job, we lost our home, cars, etc. while in the middle of raising our family. And yes, lost our retirement. And it wasn’t just our family, it was many families at that particular time. We have not nor do we expect to ever recover what we’ve lost due to economics of our country at that time. Parts of this article and some of the comments make my stomach turn. Everyone is not in the same situation. At this point in our lives, we’re scared to death. People make us out to be stupid. Unfortunately, shit happens at times that is out of our control. I would love to know where that perfect life is that everyone is living.
Thanks Sam for the article. I am a student who is writing a research paper about “Is American saving enough?” I just came to the U.S 3 years ago and I began to build my IRA 2 years ago. The more I have learnt about finance, saving and retirement, the more I am surprised about people around me thought about saving and retirement. Last time, a friend asked me about investment and retirement plan, and I told her what I knew, such as saving, compound interest, 10% average yield on stock investment, things like this. After that, she just said “I can save like 200$ 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.
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.
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!
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.
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.)
Thanks for sharing your thoughts. Here is a follow up post that surprisingly shows the average 65+-year old is doing pretty well!
The Average Spending Amount In Retirement Is Surprisingly High
Americans are doing fine after all!
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.
“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!!!
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!
Why save when you can Buy a Ford F150 Raptor for 70K and be the coolest dude in your Hood!!
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.
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.
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.
HALF A MILLION DOLLARS.
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.
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!
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.
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.
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.
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.
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.
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.
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…
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.
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?
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)!
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.
It’s indeed scary. So many of us are living on the verge.
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.
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.
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……
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.