The Average Retirement Savings in America Are Not Nearly Enough

Average Retirement SavingsIf you are like most people, you have not saved nearly enough money to maintain your standard of living once you retire from your job. According to a study from Fidelity Investments, the average retirement savings for 11.8 million 401k balances in America is just $74,600. In most cases, that is maybe the equivalent to a year’s salary. Certainly not enough to keep you in the life to which you have been accustomed for the twenty five or so years you will likely have left to live.

If you are over 55 years old, you could be better off than the average of all retirement accounts, with the study showing you probably have about $130,000 in your account. Still, that will only last you for about four years, if you’re very frugal. You will probably have to really watch your expenses and even make some cuts to be able to live somewhat comfortably. If you have medical problems or develop them, that money will go even faster.


Why the Average Retirement Savings Are So Low:

The recession the world recently went through is a main culprit for the low average retirement savings numbers. Retirement accounts lost approximately one-third of their pre-recession value and many people lost their jobs, forcing them to stop contributing to their plans. In many cases, they had to withdraw their retirement funds or reduce their contributions just to survive. Once you stop making those contributions, it can be difficult to get started again.

Overall, though, Americans have never really taken saving for retirement seriously. On the whole, they would rather see the money now than save it for a rainy day that seems so far off in the future. Investment brokers have tried to stress the importance of saving for retirement, but with the recession and other factors, their advice has fallen largely on deaf ears.

In addition, there is also lots of skepticism that 401k plans have failed employees. For many decades, employers were 100 percent responsible for funding employees’ retirements. Pensions were the standard type of retirement plan until 1978, when the 401k was introduced.

This shifted the retirement savings burden to employees, who were ill prepared to handle it. They did not and still do not, like seeing a portion of their paychecks going to some fund they can’t access without a penalty until they are 59 ½ years old. Even if the employer matches contributions, many employees are looking for instant gratification instead of planning for the future.


What is the Average Amount Per Age Group?

The numbers mentioned from the Fidelity Investments study are an average of all retirement counts in the country. However, it could be beneficial for you to know what the average savings is for your age group, just to see how your account compares. According to the Employee Benefit Research Institute, these are the average retirement amounts saved broken down by age groups.

  • Under 35:              $6,306
  • 35 – 44:                 $22,460
  • 45 – 54:                 $43,797
  • 55 – 64:                 $69,127
  • 65 – 75:                 $56,212

The scariest number of all is that 39 percent of people aged 55 and older have less than $25,000 in their retirement accounts.


What To Do if You’re Below Average?

Average Retirement SavingsSo, it’s been established that even the average retirement savings amounts are not going to be enough for retirees, especially as the cost of living continues to rise. But, what if you are not even hitting the average amount? What can you do to quickly bring your retirement count up so that you aren’t scrambling to make a living when you’re ready to retire?

1. Don’t panic! Age is not always an indicator of where you are in your life. For example, you could be planning to work for a lot longer than the standard retirement age. It also depends on your lifestyle.

If you are fairly frugal, you could have enough saved for retirement by the time you get to that point. Your goal should be to have enough in your retirement account to maintain your standard of living. If you can do that and you haven’t reached the average for your age group, then you’re probably going to be fine.

2. Max Out Your Contributions: This is not always an attractive option, particularly because you are going to see less take-home pay. However, if you want to increase your average retirement savings amount, you’re going to have to contribute more to that account.

Many plans cap their contribution levels at six percent, with the employer matching between three percent and the full amount. If you can’t afford to contribute the maximum allowed by your plan, at least contribute the maximum amount your employer will match. If you don’t, you’re basically throwing away free money.

3. Have a professional review your portfolio.  You might not be getting the most out of your retirement plan, especially if you are managing the funds yourself. If you are younger, you should be in aggressive funds, which will boost your account quickly. Even though there is more risk in these funds, at a younger age, this risk is usually worth it. If you are older, you should be in conservative funds so you can sock away as much as possible before you actually retire.

personal_capital_dsktop_smallThis is where professional advice can come in handy.  That’s one of the things I like about my free account with Personal Capital.  Not only does it send me weekly emails letting me know how my retirement funds are doing, but I also got a free professional financial consultation (and you can too if your total assets are over $100,000).  Click here to learn more.

Life expectancy has only gone up, while retirement savings accounts have stayed stagnant. If you aren’t saving enough for your golden years, you could end up outliving your retirement funds by quite a few years. If you aren’t doing enough now, you can forget about the perks of retirement like freedom to travel and days filled with entertainment. Instead, you will be wondering how you’re going to pay for basic necessities. To avoid that fate, start taking an active interest in your retirement funds today.


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