Average retirement savings

[adkkev]

I remember when minimum wage was $4,25/hr

hahaha. I made $1.65 per hour when I started working in high school. That was the minimum wage. I had a summer job at the Chevy plant in Buffalo during my college days and I made $4.65/hour and that was big money.

 

[pkgman]

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.

Google "High Income Earner 401K". I believe the limit is ~$130K earned income. Simply put if not enough low income earners participate in the company 401K then high income earners may not contribute the full amount outside catchup contributions. The non-discrimination income limit is not determined until after the year is over. The amount is returned and becomes taxable in the year returned causing a higher earned income in that year.

I imagine your manager was trying increase participation and savings to avoid this relatively unknown 401k regulation.

 

[MillauFr]

My biggest concern is not that the stock market will suffer a big down turn but rather that inflation will be much higher in the future. There is no way the US Government will be able to pay back the $26 Trillion debt. I think it is far more likely that the Federal Reserve will continue to print US Dollars 24/7 to pay it back rather than balance the budget by reducing entitlements and increasing taxes. There is no way you can print US Dollars 24/7 and not have inflation.

 

[MrsPete]

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?

It's impossible to verify how much the average American has saved for retirement ... and, if you could, it'd still be an average, which isn't a very truthful number. Truthfully some people have millions, while a whole lot have literally zero ... and that gets lost in averaging.

If you have the means, wait until age 70 to start drawing SS, to receive the full benefit. Plan to use other sources of retirement income at a greater rate until 70.

It depends on your whole retirement picture:
- If you're counting on SS for the lion's share of your retirement -- yes -- wait as late as possible to max out your benefit.
- On the other hand, if you have substantial savings that are increasing in value, it might be wise to tap into your SS earlier /keep your personal savings intact ... think about it: your savings remain yours, and they can be left to your heirs. SS, once you're dead, is gone.

Yes, life style is a huge factor. We've been in our starter home for 37 years, retired our family car 2 years ago after owning it 31 years, and retired my wife's car after 20 years. So yes, I am CHEAP. Also kept my first cell phone 14 years.

Yes, lifestyle makes a big difference. My husband and I have never been high wage earners, but we've always lived cheaply. (Truthfully, we're not frugal -- we're cheap.)

Yes, some families are genuinely making all the right choices or have suffered staggering setbacks because of medical issues, etc. -- but I suspect most people could cut back on cable, meals out, etc. and could put away more for retirement. If it were a priority.

I remember when minimum wage was $4,25/hr

I put myself through college when it was $3.35

Other thoughts about retirement:
- Everyone knows this, but not everyone puts it into practice: the smartest thing you can do is start saving while you're young and you have time for compound interest to work its magic.
- When we're planning, we all think we have control over our retirement date, but I read somewhere that something like 1/3 of all Americans don't have that luxury. Some are laid off, some become sick and can't work, etc. This is one more reason to save while you're young.
- It's smart to diversify your retirement. Ideally you'd have SS, personal savings, a pension or another income stream in retirement (like a rental house), and a paid-for house (which keeps your expenses lower). If one of those things should disappear, it'd hurt, but you would not be completely screwed.
- You can't count on generalizations to determine how much you need for your retirement. If you intend to travel and pay for your grandchildren's college education, you might need more than average. If you intend to live quietly in the country and downsize to one car, you might need less. You've gotta do your own homework.

 

[disneychrista]

a paid-for house (which keeps your expenses lower).

I used to joke that not having a house payment WAS my retirement plan.

 

[SirDuff]

I remember when minimum wage was $4,25/hr

My city just raised ours to the equivalent of $25/hour. So, if you want to talk about high cost of living!

 

[tvguy]

Yes, lifestyle makes a big difference. My husband and I have never been high wage earners, but we've always lived cheaply. (Truthfully, we're not frugal -- we're cheap.)
Yes, some families are genuinely making all the right choices or have suffered staggering setbacks because of medical issues, etc. -- but I suspect most people could cut back on cable, meals out, etc. and could put away more for retirement. If it were a priority.
I put myself through college when it was $3.35

Minimum wage when I was in College was $2.10. But I didn't work except during the summer. My dad passed away when I was 9 and I got Social Security Survivors Benefits. My mom invested that money for me, so I paid my tuition out of that.....and my mom paid my room and board. $400 a month over 9 years adds up, even though I went to a private University with $2,500 a year tuition. UC tuition in those days was $630 a year!
I do put out a lot of money for things that didn't exist when my wife and I got married. $150 a month for satellite TV. $40 a month for a cell phone. $60 a month for internet. While they are sort of necessities now, I don't need satellite TV, I could get basic Internet for less, and I could get a pay as you go cell phone to cut costs.

 

[AlohaNow]

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.

Google "High Income Earner 401K". I believe the limit is ~$130K earned income. Simply put if not enough low income earners participate in the company 401K then high income earners may not contribute the full amount outside catchup contributions. The non-discrimination income limit is not determined until after the year is over. The amount is returned and becomes taxable in the year returned causing a higher earned income in that year. I imagine your manager was trying increase participation and savings to avoid this relatively unknown 401k regulation.

Yes, the begging isn't because the managers want you to be financially successful in retirement or because they care about your financial literacy. It's because their annual 401(k) limit as an HCE (highly compensated employee) is directly linked to the percentage that NHC (non-highly compensated) employees put into the plan. If the ADP (average deferral percentage) is only 1% or 2%, they can do double that. If it's between 2 and 8%, they get 'plus 2' percentage points, so up to 10%. If it's between 8 and 15% it's a multiplier of 1.25, for a max of 18.75%. If you want to know what constitutes an HCE vs. NHC the formula is Googleable.
Sorry, I should have put a nerd alert at the beginning of this one!

 

[tex1989]

So I guess as I have commented I have not really addressed the original question, which was, when to take social security. That is a question that can only be answered by the individual. Factors to consider are when do you want to stop working? What are your expenses going to be in retirement? What other income sources will you have? You can begin collecting any time after the age of 62. Retirement age is now officially 67 years old except for those born before 1960. I was born in 1959 as was my wife so our full retirement age is 66 years 10 months. If you were born in 1958 then it is 66 years 8 months and so on. Born in 1960 or later it is 67. The earlier you take, the less you get monthly but that is not always a bad thing. The calculation shows that if you take your benefit at 62 instead of waiting till you are 67 you will be around 78 1/2 years old when the two total income streams are equal. Obviously from that point on having waited till you were 67 is much better. Waiting till 70 means a whole lot more money monthly but again it takes a while to catch up to the other income streams. Another consideration quite frankly is how long do you think you will live? If you have a family history of relatives making it into their 90's then you may want to wait. But then again you have to look at your lump sum savings and make estimates of what they will look like because at 70 1/2 years old you are required to start taking mandatory withdrawals from those accounts. And believe me you want to do that because the IRS mandated penalties for not doing it is 50% of the money you were supposed to take out. This means your income out of tax deferred savings and what you take out annually becomes government mandated when you turn 70 1/2.

The company I work for sponsors retirement classes and while I have yet to attend one, I have spoken to numerous friends who have sat through it. It's funny but the one thing that nearly everyone of them has told me about and what stuck with them was the idea that retirement can be really broken into three phases and the cash needs for each differ. Phase one is active retirement. Newly retired you want to jump into all the things you dreamed of doing in retirement, travel, enjoy life, a very active period where you will tend to spend more than what you budget for retirement was. Second phase is still active but a little older so not nearly as much travel, but dinners with friends, movies, shows etc. The third phase, and again a little morbid but basically you do very little as you slow down and are basically wait for the inevitable.

Basically these are some of the things to consider but certainly there are other unique to your own situation.

 

[BuckeyeBama]

Everyone posting on this board is privileged. We have access to a computer and the internet, and we have the money to vacation regularly at WDW. It changes your point of view.

Some people will never have an opportunity to save - never - not once. In America, this represents tens of millions of people. Across the globe - billions.

We are fortunate, indeed. Today is a good day to reflect on that for a minute or two.

 

[Turn the Page]

Totally agree! I remember one poster, who was very upset about the shut downs in March and April, repeatedly posted about needing to work to feed her family! She has since posted about a trip to Florida with a second one coming up!

Honestly, if your worried about feeding your family after one missed paycheck, then go to Florida 3-4 months later........well.....makes you stratch your head!

whoops meant to quote a previous poster!!

I agree but I think for a not insignificant number of people making those statements are parroting out righteous indignation from pundits that they weren't allowed to do whatever they wanted whenever they wanted to do it. That was always the way I heard it worded. "I need to work so I can feed my family." Not "if I can't work I will struggle to buy groceries", not "i'm already struggling to make ends meet". No, it's always "I need to work to feed my family." A lot of those people were getting a lot of unemployment as well.

Don't get me wrong, I know a lot of people were hit hard by the pandemic, but I think a lot of people making that statement were exaggerating.

 

[Starport Seven-Five]

Everyone posting on this board is privileged. We have access to a computer and the internet, and we have the money to vacation regularly at WDW. It changes your point of view.

Some people will never have an opportunity to save - never - not once. In America, this represents tens of millions of people. Across the globe - billions.

We are fortunate, indeed. Today is a good day to reflect on that for a minute or two.

Agreed 100%.

Median household income globally is $9.733 (source). We should all be thankful for the opportunities we have as all of us have won the genetic lottery to some extent.

 

[georgina]

- If you're counting on SS for the lion's share of your retirement -- yes -- wait as late as possible to max out your benefit.
- On the other hand, if you have substantial savings that are increasing in value, it might be wise to tap into your SS earlier /keep your personal savings intact ... think about it: your savings remain yours, and they can be left to your heirs. SS, once you're dead, is gone.

Not if you have a younger spouse who will continue get whatever amount you are getting after you pass on. DH is waiting until 70, and I have longevity in my family.

But then again you have to look at your lump sum savings and make estimates of what they will look like because at 70 1/2 years old you are required to start taking mandatory withdrawals from those accounts. And believe me you want to do that because the IRS mandated penalties for not doing it is 50% of the money you were supposed to take out. This means your income out of tax deferred savings and what you take out annually becomes government mandated when you turn 70 1/2.

The age for required withdrawals is now 72.

 

[fortwildernessishome]

I agree but I think for a not insignificant number of people making those statements are parroting out righteous indignation from pundits that they weren't allowed to do whatever they wanted whenever they wanted to do it. That was always the way I heard it worded. "I need to work so I can feed my family." Not "if I can't work I will struggle to buy groceries", not "i'm already struggling to make ends meet". No, it's always "I need to work to feed my family." A lot of those people were getting a lot of unemployment as well.

Don't get me wrong, I know a lot of people were hit hard by the pandemic, but I think a lot of people making that statement were exaggerating.

I completely agree!!

Back in the Springtime, so, so many people were posting that. I am sure the vast majority were exaggerating!

 

[John VN]

I remember when minimum wage was $4,25/hr

hahaha. I made $1.65 per hour when I started working in high school. That was the minimum wage. I had a summer job at the Chevy plant in Buffalo during my college days and I made $4.65/hour and that was big money.

I started at $1.30/hr pumping gas after completing my first year of college in May of 1969.

 

[barkley]

t depends on your whole retirement picture:
- If you're counting on SS for the lion's share of your retirement -- yes -- wait as late as possible to max out your benefit.
- On the other hand, if you have substantial savings that are increasing in value, it might be wise to tap into your SS earlier /keep your personal savings intact ... think about it: your savings remain yours, and they can be left to your heirs. SS, once you're dead, is gone.

another reason to consider taking your ss earlier vs. later is if you have a disabled child (whose disability occurred before the age of 22). if one of that child's parents is in receipt of ss retirement benefits then not only will the child be eligible as a minor to receive benefits, they will be eligible when they turn 18 and apply as a disabled adult to SSDI vs. SSI using that parent's earning records. may not seem like a big deal but-

average SSI payment for an adult is $551 monthly vs. average SSDI at $1258, AND

it starts the 2 year waiting period for that adult child to qualify for full blown medicare (tremendous benefit as compared to high cost disabled adult child coverage on private insurance/much inferior medicaid programs ssi only recipients tend to qualify for).

creating that eligibility for a disabled adult child can result in decades of superior financial and medical benefits.

 

[tzolkin]

My former employer didn’t even offer one. They sent out a feeler on how many would participate if they were to offer one (with no match) and I think 3 people out of 30 said they would.

That’s crazy. Most people don’t seek out investing on their own, so if they had no interest in participating in an employer plan then they likely weren’t saving at all.

My current company offers a good match. Not only does everyone participate, but everyone does the max contribution limit which is thousands above what the company will match.

 

[NannyBeBe]

Some people will never have an opportunity to save - never - not once.

Anyone who gets a paycheck can save. It may not be a lot, but every dollar counts. Many Americans could save much more if they did not have expensive cell phones, cable TV, high car payments on a car they cannot afford, etc. Savings should be a priority. But too many people depend on credit cards to get them the things they want in addition to the things they need, because they never saved a penny for a rainy day. Saving should be taught early, when a child begins getting an allowance or does little jobs for neighbors, etc.

 

[AlohaNow]

Anyone who gets a paycheck can save.

Um, no. Just no.

 

[mousefan73]

That was widely reported but is not true.

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

Interesting.. I dont count having to put a 400 emergency on a CC and then paying it off as Not being able to pay it off. Back in my 20s I had a while where I would hope put it on my CC and hope it went through. Back in my mid-20s I would often be in the situation where I had zero savings and my checking was just on the border of overdrawing.. I was living pay check to pay check.. I had a normal, but underpaid job in a big city. Single. Went out but not crazy. Between, mortage, assoc. fees, car payments, Student loans, there was really no money to save.. Heck I even cancelled cable to make ends meat. So count me in not being able to handle a 400 emergency.

REality is many people work hard jobs, have tons of expenses and are living pay check to pay check no fault of their own.. Granted I could have gotten a roommate to share on costs, but I was not doing anything "wrong" in working and having bills to pay.. simple math made it impossible to "save".. I also saved the minimum back then on my 401K as I needed EVERY penny.