The media often talks about the Top 1% and the amount of income needed to reach that level. (See here for our earlier blog post on this topic.) But what about retirement savings? How does the size of your nest egg compare to other people in your age bracket?
Households Age 55-64
Let’s start with some bad news. According to a May 2015 Retirement Security report from the U.S. Government Accountability Office, about 55 percent of households age 55-64 have less than $25,000 in retirement savings, including 41 percent who have zero. So, how will these people survive in retirement? Most of them will live off of some combination of pension and social security income.
Table 1 shows some interesting numbers. It takes a look at the various resources households have when segregated by their level of retirement savings. It’s pretty clear from the table above that many of those in the 41 percent column with no retirement savings nest egg will struggle to live financially worry-free in retirement.
Those in the 59 percent column with some level of retirement savings are doing better, but are not necessarily out of the woods, either. The report estimated that the median amount saved for retirement for this group is about $104,000.
Table 2 shows the distribution of the age 55-64 cohort's retirement savings. Relative to your peers, if you are between age 55-64 and you’re sitting on a few hundred thousand in retirement savings, you’re actually doing pretty well. However, that does not mean you’ll be able to retire at the lifestyle you want. We would need to run some numbers for your particular situation to discover the size of nest egg you need.
Households Age 65-74
The numbers are a little different as we move to an age bracket where people are normally already retired. Perhaps surprisingly, more than half of the people in this age bracket (52%) have zero retirement savings. Fortunately, as the chart shows, for the 48 percent of people in the 65-74 age bracket who do have retirement savings, their median net worth is substantially higher than the younger age cohort.
The report estimated that the median amount saved for retirement for this group is about $148,000, which is not much higher than the younger group. However, the top savers in this category have over $1.1 million saved toward retirement, which is encouraging. Comparing where you rank relative to your peers on the retirement savings spectrum, you’ll want to zero in on Table 2 and Table 5. Look at Table 2 if you are between age 55-64 and look at Table 5 if you are between age 65-74.
Nest Egg Needed to Retire Comfortably
How much do you need to save in order to retire comfortably? The internet is full of “retirement calculators,” unfortunately, if you try a few you’ll likely get different answers.
The best way to determine what you’ll need is to have a financial advisor run an analysis for you that takes your specific situation into consideration. Keep in mind, though, your “number” will change over time as life events happen. Your number should be reviewed on a periodic basis to account for any changes in your circumstances.
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If you’d like us to run some numbers for you, please give our office a call at (913) 624-1841 or send me an email at firstname.lastname@example.org.
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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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