Are Your Retirement Savings Average? Don’t Let Them Be!

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One of the scariest things when it comes to finances is being average. This is especially true when it comes to retirement planning. The reason average retirement planning is so scary is due to the fact that average retirement planning is so often inadequate. Let’s take a look at some retirement savings statistics. The numbers…

One of the scariest things when it comes to finances is being average.

This is especially true when it comes to retirement planning.

The reason average retirement planning is so scary is due to the fact that average retirement planning is so often inadequate.

Let’s take a look at some retirement savings statistics. The numbers are eye-opening!

Scary Facts about Retirement Savings

Average Retirement Savings by Age

When you look at the numbers surrounding retirement, it becomes clear that the average

American isn’t going to retire comfortably. Using numbers from Employee Benefit Research Institute’s most recent retirement survey, here are some of the scary realities:

  • 56% of Americans haven’t performed a retirement needs calculation, and have no idea how much they need to save for a comfortable retirement.
  • Those who have actually performed a retirement needs calculation are more than twice as likely to believe that they need at least $1 million accumulated for a comfortable retirement. This means that most Americans are grossly underestimating what they need.
  • 60% of workers have less than $25,000 in total savings and investments, including retirement savings.
  • Since 2002, the number of workers who are confident about the financial aspects of their retirement has declined.

Not only do most people not know how much money they will need for retirement, but they also haven’t gotten started on a good retirement savings plan.

Takeaway: Take a few hours to determine what your retirement needs may be and start saving toward that goal. If you are a long way from retirement, make a reasonable estimate – you will have time to make adjustments later.

Average Retirement Savings by Age Group

Overall, today’s workers are less likely to save for retirement than workers 10 years ago. Consider the following numbers about retirement savings by age:

  • Those aged 25-34 are the least likely to have saved for retirement, of the age groups, with 55% reporting that they save for retirement.
  • 68% of those between the ages of 35 and 44 say they save for retirement.
  • 67% of those aged 45-55 save for retirement.
  • Those who are 55+ are the most likely to have saved for retirement, at 77%.

There are many ways you can look at these numbers: Retirement saving becomes a higher priority the closer you get to retirement age. There is no greater incentive to start saving than knowing you will need the money soon! Many people in the more advanced age groups may be better able to afford retirement contributions, since they have also had time to increase their income through career advancement and pay off much of their debt. Those in the younger groups are often starting families, and juggling debts such as student loans, car payments, and new mortgages.

Takeaway: Regardless of age, retirement saving should be a priority. The more you save now, the longer you have for compound interest to work its magic and increase your wealth. Even a little saving now can reduce the amount you need to save in future years.

Retirement Savings Through Work:

Employer Sponsored Retirement Plan Participation
Do you participate in your employer-sponsored retirement plan?

The majority of employees who have access to an employer-sponsored retirement plan take advantage of it. But almost one in five people do not.

A recent law established guidelines for giving employers the option to automatically enroll new workers in their company’s 401k plan or another employer-sponsored retirement plan unless they specifically opt out. However, this doesn’t do anything for those who were already working, but not participating in their employer’s plan.

This law will go a long way toward increasing plan participation and help people get on the right track for reaching their retirement goals. But it is important for employees to take control of their retirement savings and not leave their contributions or investments to the default settings.

Here are some facts about plan participation:

  • 47% of workers say that they are offered a retirement plan at work, and 81% of those offered a plan contribute to it.
  • Overall, only 38% of workers contribute to a workplace retirement plan.

Takeaway: Save for retirement if you have access to a plan at work, even if you don’t have a matching contribution. Investing in your employer-sponsored retirement plan gives you a structured way to save directly from your paycheck, making it quick and easy to save. You also get great tax benefits. Don’t have access to a retirement plan at work? Then open a Roth IRA or other retirement account. It’s quick, easy, and will help you meet your retirement goals.

Average Retirement Savings = Long Term Financial Trouble

As you can see, if you are average with your retirement savings, you probably aren’t saving enough. Even though many workers claim that they contribute to their retirement plans, the reality is that they probably aren’t setting aside enough.

When you think that most workers have less than $25,000 in savings and investments (not including primary residence value and defined benefit plans), and when you consider that even among those who are 55+ only 22% of workers have at least $250,000 in savings and investments, it becomes clear that you probably aren’t saving enough money for the future.

In fact, you would be hard pressed to find someone between the ages of 35 and 44 with more than $50,000 set aside (29%). If you are almost 45, and you only have $50,000 in savings and investments, chances are that you aren’t going to hit your retirement goals by the time you’re 60 if all you contribute is $100 a month. According to a compound interest calculator, you’d actually need to contribute $1,000 a month just to have more than $460,000 in your account (assuming a 7% annual rate, and not considering taxes).

If you are one of the 24% of those aged 25-34 who have at least $25,000 right now, and you contribute for 35 years until you are 60, you’ll still need to contribute at least $1,000 a month to end up with almost $415,000.

Can you imagine how much you’d have to contribute each month in order to end up with $1 million? Your best option is to start as young as possible and contribute as much as you can.

You can contribute to a 401(k) or an IRA. And when you max out your retirement options, you can use taxable accounts. Use automatic investing plans, have it taken out of your paycheck, and make use of the employer match. You’ll build wealth faster, and beat the average when it comes to retirement.

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About Miranda Marquit

is a freelance writer and professional blogger working from home. She has contributed to, and been mentioned by, numerous financial web sites. Her blog is Planting Money Seeds

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  1. krantcents says

    Although I will receive a pension, I still max out my 403B, IRA and Roth IRA plans. In addition, I have a tidy nest egg accumulated from proceeds from sales of rental properties and businesses. The variety of income streams or savings provides a confidence that I have enough for retirement.

    • Ryan Guina says

      It sounds like you have a handle on your retirement plans, krantcents. You should be well provided for throughout your retirement. I won’t likely be in a position where I will have a pension, since I am self-employed, but I max out my Roth IRA and contribute as much as I can to my solo-401k. Between those retirement accounts, my wife and I have a strong start on our retirement savings. At this point, I am not planning on Social Security, since that is about 30 years off for me. I think Social Security will be around in some form, but I have no idea if it will be the same as our current system. My goal is to plan on not having it, then be pleasantly surprised with whatever plan is in place when I retire. My long term goal is to add additional income streams as I believe cash flow is one of the most important (and underrated) elements of any financial plan, especially retirement!

      • Ben says

        Great point, Ryan! I am about 30ish years from that magic retirement date and I think our generation of workers needs to start planning on not having SS as a funding source and really “plan for the worst case scenario”.

    • hallikany says

      Good plan. Here is the rulebook I’m following –

      Rule #1: Pay yourself FIRST.

      Rule #2: Don’t let greedy salesmen/brokers/agents take any of your money in fees, commissions, loads, etc. Do the paperwork yourself with a discount broker – Fidelity, Vanguard, TD Ameritrade, etc., then invest in no-load mutual funds with no front loads, no back loads, and certainly NO 12b1 FEES whatsoever. It will make a difference of hundreds of thousands of dollars by the time you retire!

      Rule #3: Don’t waste money on stupid stuff you don’t need. Don’t get $100/month smart phone. I pay $20/month with tMobile. Don’t get $100/month auto insurance. I pay $24/month with Insurance Panda. Don’t spend $50/month on your gym. I spend $15/month at Planet Fitness. All these expenses add up and end up cutting into your savings.

      Rule #4 Save at least 10% of your gross income. Join your 401k at work, set up IRAs on your own.

      Rule #5: Again – Pay attention to your savings. As they grow you will feel empowered

  2. robert says

    the article mentions that a new law requires a company to automatically enroll a new employee in their 401k plan unless the opt out??

    • Ben says

      To the best of my knowledge (public accounting auditor who deals with plan audits), I do not think there is a law that mandates the auto-enrollment feature. This is a feature that needs to be “turned on” by the employer and communicated accordingly to the participants/employees of the employer.

      • Ryan Guina says

        Robert and Ben, I stand corrected, your statement is correct. The law gives companies the option of automatically enrolling employees unless the employee opts out of the program, but it does not require it. Thanks for pointing that out!

  3. Kenny says

    I am 62 and currently have over 2 mil in Investments In 1983 my starting salary was $19k and my wife a school teacher had a salary of 15k. We grew up on a farm and had always learned to live on less. After renting for 5 years, we had a house built for $100k nothing fancy or big but it served our purpose. We drove our cars for 10+ years and always chose vacations back to the family farm 1200 miles away and we didn’t fly since we had 2 children. Bought our daughters new cars when they were 16 and they still have them 11 years later and paid for their college education. We use credit cards but never paid a cent in interest. If we couldn’t pay for it, we didn’t buy it. We don’t have monthly cable bills with premium channels nor do we have internet on our phones but we are happy. Live within your means and SAVE, you too will be home free.

  4. Jackie says

    My husband and I are retired with substantial savings from 401K, IRA, CD’s etc. I might point out that not every company 401k offers good selections within their plans. Sometimes you are better off saving within the company 401K plan up to the amount your company matches and then invest in an IRA with a good financial planner. Your returns might be much more sizable at the end of your working career and beginning of retirement. Unfortunately many mutual funds offered through you employers plan is just horrific.

  5. ron says

    Instead of trying to up your 401ks buy income property and concentrate on paying it
    off before you retire it will be worth a lot more then any 401k roth etc

  6. Tampa745 says

    I have a 401K that I max out, a savings plan that stays put and an IRA. My 401K is money I never miss, I have my bonus go into my IRA and never miss it, and once my checking acct reaches a certain limit, it goes into savings acct. Hard rules that pay off, it hurts at first, it hurts like hell but you do it, somehow you do it. Didn’t think you’d pass 10th grade Geometry either

  7. Henry Lim says

    Currently 40 . I want to retire in 10 years when my son finish schooling. Currently have $386k in a brokerage account, $68 k in the Roth IRA, $12.5k in an HSA, $58k in a 529 plan and $228k in a 401k. Fully funded emergency fund in an online bank account. I’m saving over 50% of my gross every year. Gonna enjoy been free in 10 years.

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