At least once per year, I like to pull together the latest data for a blog post or podcast that answers one of the most common questions we get asked at Keen Wealth: "How does my retirement savings compare to other folks my age?"
I understand that these kinds of broad comparisons can provide reassurance to some or shine a light on gaps in retirement planning for others. But I also think it's important to look beyond the numbers, analyze what these figures say about general retirement trends, and revisit your specific retirement goals.
First thing's first. Ready to see how your retirement savings stacks up?
Average retirement savings by age
According to Fidelity1, here's what the average annual contribution rates and average retirement savings account balances look like for U.S. adults:
Average Contribution Rate: 8%
Average Account Balance: $93,400
Average Contribution Rate: 10%
Average Account Balance: $160,000
Average Contribution Rate: 11%
Average Account Balance: $182,100
Average Contribution Rate: 12%
Average Account Balance: $171,400
A recent report from Vanguard also analyzed average 401(k) balances by age group:
Under 25: $5,419
65 and older: $216,720
You'll notice that in the above examples, contribution rates and balances are rising with age. That tells me that many older adults and seniors are taking advantage of options like 401(k) catch-up contributions after age 50 and, per the SECURE Act, making contributions to retirement accounts past age 70, as long as you're still earning income.
I would like to see those numbers start trending a little higher for adult kids and grandkids. Young workers often delay their long-term financial planning as they're trying to pay off student debt, buy their first homes and vehicles, and start families. Don't underestimate how a word or two from you on the benefits of savings and investing early could impact how your younger family members think about their money.
Average retirement savings by gender
The U.S. Census Bureau’s most recent Survey of Income and Program Participation includes some data on retirement savings and gender that's worth looking at as well. The chart below reflects retirement savings for men and women, ages 55-66, who have not yet retired.
I can sum up my thoughts on this chart in one word: yikes!
Forget about the dollar amounts. I'm staring at those big blue bars at the left side of the chart, wondering how approximately 50% of both men and women who are nearing retirement age are planning to support themselves. Add in the 12% or so of folks who say that they have less than $25,000 saved and we're talking about 60% of adults who could really struggle during their golden years.
Also, while the fine print at the bottom of the graph says there's no "statistical difference" between men and women, the numbers here are slightly worse for women. As we've discussed in some previous blogs and podcasts, women are at a higher risk of having money problems in retirement, in part, because they tend to live longer than men. And while married couples are sharing financial planning responsibilities much more than they used to, some households do still operate under outdated gender roles where the man manages the money. In those cases, if the husband passes first, the widow may find herself trying to catch up on decades of financial planning she wasn't very involved with.
Your money and your life
So, how do you feel about your retirement savings after taking in all this data? Better? Worse? Uncertain?
Again, these numbers may give you a little clarity on where you are on your journey to retirement. But they don't answer a more significant question: how much money will you need to live your best possible life in retirement?
It's rare, but some folks at the lower end of these graphs might be able to live a happy retirement with minimal savings. And at the other end of the spectrum, high-net-worth individuals might get hit with an unexpected health care crisis or an expensive home repair and find that they have to recalibrate their expectations for retirement.
Helping folks answer these big money questions, anticipate the unexpected, and plan accordingly is at the heart of what we do at Keen Wealth. Wherever you fall on these retirement savings spectrums, call up my team and let’s talk about how you’re feeling about your financial plan and what we can do to help.
1This study was based on age and the ZIP code for individuals actively contributing in a workplace savings plans. Where insufficient data was available for a specific ZIP code, the average contribution rate and average account balance from the state were used. The material in this blog is for informational purposes only. When deciding how much to contribute, consider your individual situation and other future sources of income. Keep in mind that you can make changes to your contributions according to your plan's rules. Contributions to the plan are subject to the annual IRS limits. Although we attempt to use sources that we believe to be reliable KWA did not audit any of the data provided by any of the links provided and cannot guarantee its accuracy.
Bill Keen is a CHARTERED RETIREMENT PLANNING COUNSELOR℠ and independent financial advisor with more than 25 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he specializes in providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.
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