Many people dream of retirement, and there’s a good chance you're one of them. You’ve worked hard for many years, diligently saving in hopes of retiring from the workforce with enough cash to keep you afloat. But here’s the big question: do you have enough?
According to the Federal Reserve, the average retirement savings for adults is $65,000. If that sounds too low, don’t worry—you can always save more as retirement nears. That’s why it’s crucial to monitor your retirement savings, as it can tell you if you’re on track to retire or if you need to start saving even more to meet your goals. Here’s what to know about retirement savings, and why you should start thinking about it sooner rather than later.
What are average retirement savings?
A PwC report shows that a whopping one in four Americans don’t have any retirement savings.
Furthermore, investment firm Vanguard found that the median retirement account balance in America was just $35,345—and the average balance was $141,542. Sure, those numbers are better than nothing, but expenses add up in retirement.
The Center for Retirement Research did a study in October 2020 that figured out the average retirement account balances by age from Federal Reserve survey data:
Median Retirement Account Balance by Age |
Age Group | 401(k)/IRA Balance |
35-44 | $51,000 |
45-54 | $90,000 |
55-64 | $120,000 |
How much is the average household net worth?
Overall household net worth tells a similar story to retirement savings. The same Federal Reserve report showed that the average household net worth for a head of household (age 35-44 years old) is $91,300. If you bump that age up to 45 to 54 years old, that figure is $168,600. The median net worth is $212,500 from ages 55-64.
Will Social Security benefits alone be enough?
Many Americans rely only on Social Security benefits for retirement income, though it wasn’t intended to be that way. The average monthly Social Security benefit for a retired worker is $1,543 as of January 2021—pretty much the same as working a minimum-wage job. Factor in debt, medical expenses, and other costs and that number gets eaten up pretty quickly.
Does America have a retirement savings gap?
Yes, America has a retirement savings gap that matches our income gap. Think of it this way: higher income earners are more likely to have higher retirement savings. Meanwhile, people who have lower incomes typically don’t have much, if any, retirement savings.
Make no mistake, though—high earners can still have a retirement savings gap, especially if they have tons of debt or other high-cost priorities (mortgage, children’s college tuitions, etc.)
So, how do you measure up with retirement?
Financial experts know how important it is to save for retirement, which is why some use specific milestones to judge how your retirement savings are measuring up. Some say you should have a year’s salary in retirement by the time you’re 30, for instance. Typically, it’s thought that saving around 10 to 15% of your yearly salary can help you achieve retirement comfort.
If that’s the case, why is there such a disconnect with what experts say Americans should have, and what Americans have? Well, for starters, some people may have a harder time seeing the bigger picture to save for the future, opting to spend money now instead, Plus, rising costs can force people to focus more on present needs than future ones.
How do retirement savings in America look?
Looking at the numbers, it looks like retirement in America is pretty discouraging. However, committing to setting aside cash for your future and working with a financial advisor can help brighten your financial future. The sooner you start saving, the better—and future you will be thankful.
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