Average retirement savings

[cats mom]

I was looking into the best age to claim Social Security when it mentioned that the average American in their early 60s has $172,000 in their retirement account according to Transamerica, $182,000 per Fidelity or $221,000 per the Federal Reserve. That doesn't seem right, does it? I couldn't tell if that was per person or per household.

Is there anyone with good Google skills that could verify or disprove what I saw? I was under the impression that the goal was 10x your income, or one to two million, are we that far behind?

Anecdotal no doubt, but I was always surprised at how many employees didn't take advantage of a particularly generous 401k plan when I worked back-office retail. When the program was introduced into our benefits package we held meetings for all employees to explain how it worked and we included a segment on it during in-person training, but many (from new-hires making minimum wage to upper management making significantly more) chose not to participate. Not at least maxing out the employer match seemed like turning down free money to me. Plenty of people didn't seem to agree though. I have a hard time believing anyone who couldn't or wouldn't set aside enough to get those matching funds was saving for retirement any other way, so I bet I know a few people sitting on the low end of those numbers, or in an even worse financial situation, about now.

 

[amylevan]

Anecdotal no doubt, but I was always surprised at how many employees didn't take advantage of a particularly generous 401k plan when I worked back-office retail. When the program was introduced into our benefits package we held meetings for all employees to explain how it worked and we included a segment on it during in-person training, but many (from new-hires making minimum wage to upper management making significantly more) chose not to participate. Not at least maxing out the employer match seemed like turning down free money to me. Plenty of people didn't seem to agree though. I have a hard time believing anyone who couldn't or wouldn't set aside enough to get those matching funds was saving for retirement any other way, so I bet I know a few people sitting on the low end of those numbers, or in an even worse financial situation, about now.

Heck, I’m an engineer and we preach to the new graduates to at least put the amount needed for a company match away because hello, free money and compounding interest. These are supposed to be people who are good with math and there are still many who don’t bother to contribute.

For most, it’s their first “real” job with real income, and they rush out to buy new cars, go on vacations, but don’t bother to put that measly 6% PRE-TAX money away even though it will earn them an additional 6% match. Cmon kids!!!!!

 

[teller80]

View attachment 540251


https://smartasset.com/retirement/average-retirement-savings-are-you-normal

Highlight: according to Vanguard the average 401K balance at age 65+ is 216720. So it fits with the numbers presented by the OP

I would expect 401Ks to be considered individual, not per-household. I've never heard of a joint 401K; yes you can name a beneficiary, but it is owned by a single individual.

So now I'm really confused. The chart says the average retirement savings is $104,000 for ages 55-64 (not clear on if thats per family or per person), but per disneydentist Vanguard says the average 401k balance at age 65 is $216720. If ladyjune is correct and it's per person, then the average family (assuming husband and wife) retirement savings is now $433,440.

Help!

 

[mgarbowski]

I don't have info to prove or disprove that statistic, but I heard an equally scary one. It was that a large percentage of Americans (I don't remember the exact number, but I think it was upwards of 40%) would have trouble coming up with $400 if they needed it in an emergency.

That was widely reported but is not true.

https://www.cato.org/blog/it-true-40-americans-cant-handle-400-emergency-expense-0

 

[Moliphino]

Heck, I’m an engineer and we preach to the new graduates to at least put the amount needed for a company match away because hello, free money and compounding interest. These are supposed to be people who are good with math and there are still many who don’t bother to contribute.

For most, it’s their first “real” job with real income, and they rush out to buy new cars, go on vacations, but don’t bother to put that measly 6% PRE-TAX money away even though it will earn them an additional 6% match. Cmon kids!!!!!

I've had multiple bosses at different companies who would always try to convince people at the yearly meetings to at least contribute enough to max out the company match. Like practically begging people to do it.

 

[tex1989]

I think people are talking apples and oranges when you are looking at average 401(k) balances. Someone quoted a $104,000 average from 2017 and I might even question that. I take any number from a firm that manages 401(k)'s for companies with a grain of salt because they are quoting average balances in the funds they manage so right off the bat that means that you have to have access to one to be counted in their average. There are many Americans that don't have access through their employer or the way they make a living to 401(k)s. I know there are other plans for government workers etc. and could buy an average like those presented for people with access to those plans. But I have read that foe every one that has a plan there is another American worker that has no plan. So if you look at the broader spectrum and survey across all workers and ask the question "how much do you have saved for retirement, including all plans, and cash?", the answer is scary. At age 60 it comes back more like $50k.

I work for a large energy company and Fidelity manages or plan. My employer is generous to the extent that once you hit 9 years of working they put 10% into the plan for you. You get that whether you put a penny in or not. Therefore most people at my company have large sums in their plans. A friend recently took a package and he had worked there for 40 years. He had millions in his 401(k) not to mention receiving 64% of his average annual pay a year in retirement. He has 0 money issues in retirement. Numbers like this tend to drive up averages provided by firms but not give an accurate representation of what true retirement savings are across all Americans.

 

[Turn the Page]

So now I'm really confused. The chart says the average retirement savings is $104,000 for ages 55-64 (not clear on if thats per family or per person), but per disneydentist Vanguard says the average 401k balance at age 65 is $216720. If ladyjune is correct and it's per person, then the average family (assuming husband and wife) retirement savings is now $433,440.

Help!

Wee for starters, the first is the average retirement savings, meaning all Americans. The second is the average 401k balance which is just those who have a 401k to begin with. At least that is how I interpreted it.

 

[dclpluto]

Yep lots of people don’t want to put a lot of money into retirement. I don’t get it. There’s a lot of people at work that thinks 8 percent is enough. If we put in 8 our employer will put in 4 matches half up to 8 percent. Than they put in 1 percent no matter what. So you put in 8 our employer puts in 5. That is not enough. People don’t understand it. Our pension is very very low. We need the 401k. I’m at 20 percent right now. For years I thought 16 was enough. Sadly many years I was at a low of 10 percent. I’m almost at a million. But I know it should be way way higher. Should of put in more when I was younger. I’m 50 now. Only 2 years I maxed out the 401k . That was back in 06and 07.

 

[Turn the Page]

I think some people have issues with delayed gratification or worry they may not be around to enjoy retirement.

 

[spiders]

I've had multiple bosses at different companies who would always try to convince people at the yearly meetings to at least contribute enough to max out the company match. Like practically begging people to do it.

I am always shocked at people who don’t at least put in to get the match. It’s jaw dropping. Especially in my job - we are forced out at the end of the month we turn 56. Retirement accounts get watched very closely.

With that being said, I would be equally as concerned about how much money I have in my retirement account as I would be in how much debt I have. You can bet the house will be paid off before I hit retirement.

 

[snappy]

When you reach a certain age, I think 60 or thereabouts you are currently allowed to have far more from your earnings withheld before taxes. The max goes up each year. Good way to play catch-up if you are still working and want to grow your nest egg. This could change of course with changes in Washington.

 

[tvguy]

When you reach a certain age, I think 60 or thereabouts you are currently allowed to have far more from your earnings withheld before taxes. The max goes up each year. Good way to play catch-up if you are still working and want to grow your nest egg. This could change of course with changes in Washington.

$6,500 is the maximum allowed employee catch-up contribute. I did not realize until now that your employer can also make catch up contributions to your 401k to the tune of $57,000 ! I suspect that only goes to the most highly compensated employees.

 

[disykat]

Comparing apples to oranges is a good analogy because there are so many variables. Per person or per household is a big one. I think the biggest variable is how many "prongs" each person has towards retirement. DH and I are fortunate in that we both have 3 prong retirement plans - social security, pensions, and 401Ks. We also have a fourth "prong" in that we own our home so will have no rent/mortgage in retirement and have that as an asset to sell. Then we have some added savings and the possibility of some inheritance money - more "prongs" towards our own retirement. Being a team and sharing our assets is also a prong. The less prongs you have, the more you need to rely on your 401K or other retirement savings.

I'm very lucky to have quite a few prongs but it's STILL scary when I look at the numbers.

I think a lot of people get a nasty surprise if when/if they haven't planned ahead and didn't really realize that most people can't rely on one or even two retirement sources, they have to have a multi-faceted strategy. My MIL lives on social security only, so the fact that she owns her home and has children who help her with some of her bills is what keeps her afloat. She'd be in big trouble otherwise. (When FIL was alive they could survive on both their ss incomes, but with only one person getting ss it's not enough to keep afloat. I think a lot of people don't factor in what will happen when their spouse dies either.)

 

[mi*vida*loca]

Not surprising. The Dis isn’t the average American. What’s surprising to me is how many people on here can’t fathom that people are poor and can barely make ends meet so saving for retirement isn’t a priority when they’re worrying about buying groceries.

Not everyone who lives paycheck to paycheck has cable or an iPhone or a car payment or go on vacation. Some people live paycheck to paycheck and barely make it. That’s real life for a big portion of the population.

Have we seen the single parent statistics? When I was a single mom I did not save for retirement. I couldn’t afford it. We also didn’t vacation or eat out and I didn’t have an iPhone. I did have a car payment but that was because the car was almost paid off when we divorced and I would’ve been worse off if I sold it and tried to buy something cheaper.

 

[tvguy]

Anecdotal no doubt, but I was always surprised at how many employees didn't take advantage of a particularly generous 401k plan when I worked back-office retail. When the program was introduced into our benefits package we held meetings for all employees to explain how it worked and we included a segment on it during in-person training, but many (from new-hires making minimum wage to upper management making significantly more) chose not to participate. Not at least maxing out the employer match seemed like turning down free money to me. Plenty of people didn't seem to agree though. I have a hard time believing anyone who couldn't or wouldn't set aside enough to get those matching funds was saving for retirement any other way, so I bet I know a few people sitting on the low end of those numbers, or in an even worse financial situation, about now.

I work for a corporation with about 5,000 employees. At least once a year our CEO notes that less that half our employees are even in the 401k plan, at all. He begs people to sign up and points out the tax reduction may be nearly what you are putting in from your paycheck. Kind of a selfish request on the CEO's part because I believe the highly compensated workers are limited on THEIR 401k donations based on how many workers are in the plan, and what percentage those workers are putting in the plan.

 

[MillauFr]

I work for a corporation with about 5,000 employees. At least once a year our CEO notes that less that half our employees are even in the 401k plan, at all.

The default when you get hired should be to put everyone in the retirement plan with a contribution rate high enough to trigger the maximum company match. You should be able to opt out of the plan put the company shouldn't make it easy to do so.

 

[Feralpeg]

And, no matter how well you plan, things can happen. Keep in mind that a 401k is at the mercy of the market and whoever manages it. Don't keep all of your eggs in one basket!

 

[GreatLakes]

Every job I've had as an adult has had a 401K and I always made sure I maxed out the company match. It is free money and starting in your early 20s means you will compound interest for around a half century if you retire in your late 60s or 70s.

No doubt there are people scraping by who can't save but I can tell you in my peer group I see so many educated people who make bad money decisions. I have friends that are always driving two brand new cars, moving to bigger houses with every promotion, and are living paycheck to paycheck despite making multiples of the median income. It is what it is.

 

[lanejudy]

Average 401k account balance is a different animal than average retirement savings. People may have multiple retirement accounts with various financial institutions/brokerages. Ultimately it’s the combined value that is important. But considering the hit many of us took this past spring, I’m not surprised at low balances. And a lot of people simply don’t save much if any. The best thing we can do for our children is teach them to save and encourage young adults to think towards the future

 

[adkkev]

Many of you are making the assumption that all companies match 401k contributions. Some companies do not offer any match at all. Or, in the case of some non-profits, the organization will deposit a small percentage of the employee’s salary into their 401k ... and something like 4% of a relatively small salary isn’t “big money”.