Average retirement savings

[tvguy]

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”.

But even just 4% a year over a career of 40-45 years will add up to a tidy sum if invested wisely.

 

[dclpluto]

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

what hit? Ya if you panicked and moved your 401k after it went down sure you took a big hit. If you didn’t panic you would of been ok.

 

[spiders]

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!

The market, overall, is fantastic. 2020 has been no exception. A lot of money was made this year by those who were risk tolerant.

 

[TLSnell1981]

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.

The limit for "catch up" contributions for those over 50 is now $26K.

 

[Sjm9911]

The contributions are mandatory and SS is considered a supplement..NOT a retirement plan. If both spouses receive benefits and one dies the surviving spouse may keep the higher of the two amounts. If only one receives a check and the other spouse dies the benefit is reduced. If you die before you collect...money stays in the fund unless you have a disabled child or children under 18 years of age. A spouse may received payments as long as they haven't remarried AFTER they reach retirement.

For most but not all, police and fire allong with railroad workers ( at least in nj) do not pay into SS nor do they recive it. Thats why they have pensions.

 

[TLSnell1981]

what hit? Ya if you panicked and moved your 401k after it went down sure you took a big hit. If you didn’t panic you would of been ok.

It's been suggested we should expect a 5% correction by the end of the year. January could go either way.

 

[dclpluto]

It's been suggested we should expect a 5% correction by the end of the year. January could go either way.

yes but whatI replied to the person wasn’t talking about the future.

 

[TLSnell1981]

yes but whatI replied to the person wasn’t talking about the future.

My point was to expect another bump. They happen all the time. Folks don't need to panic but plan accordingly.

 

[JoeA]

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.

its 55 and you can do a “catch up”.

 

[TLSnell1981]

its 55 and you can do a “catch up”.

According to the IRS...it's 50.

 

[Starport Seven-Five]

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?

I really don't like goals that are off of income because they assume your expenses. If you save 5% you are living off a considerably higher amount of spending than if you are saving 25%.. yet an income based target would give you the same amount.

The early retirement community usually uses 25x expenses as a target and while that seems like a big jump, it has the bonus of being able to reduce your number by cutting spending. 40k in annual spending is 1 million which is achievable on a 6 figure salary at a relatively young age (in a non-HCOL area) if you make it a priority.

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!

The 104k number was median, not average. I can see the average being skewed by people with high balances while the median is probably more representative of the general population.

Good illustration of this disconnect would be 5 balances of 20k, 30k, 50k, 100k, and 750k.
Median: 50k
Mean (average): 190k

 

[tex1989]

Catch up is an additional $6,500 a year for each person so $13,000 for a couple. Fidelity reminds me all the time. Highly compensated employees of companies are also limited in what they can put in. I worked in Energy Trading and had a good year and instead of our bobus coming in January of the next year they paid it in December. We were part of a utility where pay was not that high for a lot of management. It was my first year there and I did pretty well. The following year I was maxing my contributions when in about April I received an e-mail that in May I would max out my 401(k) for the year. That seemed strange but in checking I found out that I was limited to the average percent of contributions of all employees in the prior year. It was a tad below 4%.

 

[disneychrista]

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”.

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.
My daughter just started a new job with a 401k. I told her she needed to contribute up to the employer match. I guess I’ll need to reminder her / talk to her about that again.

 

[MillauFr]

One huge problem that isn't mentioned here is that many of the 401k plans only offer some high priced mutual funds. I've seen plans where people were paying 1-2% management fees for stock funds and 1%+ fees for bond funds. Outrageous. I'm not sure how a bond fund can have positive returns if they are charging 1% management fees. The plans should offer a S&P 500 index funds with close to 0% management fees.

 

[sk!mom]

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’ll agree that many who have the income don’t prioritize retirement but when we talk minimum wage workers...it becomes a “do we eat or save” discussion. The privilege of a vacation board shines through if we don’t recognize that struggle.

 

[sk!mom]

what hit? Ya if you panicked and moved your 401k after it went down sure you took a big hit. If you didn’t panic you would of been ok.

Yep, in the spring, I told DH to quit telling me how much we had lost. Just today, he was like, “wow, our funds are killing it!” It’s a ride for sure.

For most but not all, police and fire allong with railroad workers ( at least in nj) do not pay into SS nor do they recive it. Thats why they have pensions.

I’m a teacher in a state that doesn’t have teachers pay in so...no SSI for me. It sucks because I had a prior career and have all of my quarters.

 

[DisneyHardin]

DH and I are both government employees (I'm a teacher and he's a Sheriff Deputy), so we have pretty good pensions. 12% of our paycheck goes toward the pension. We have about $50,000ish in additional retirement right now. About $15,000 in a Roth IRA and about $35,000 in a 403B with additional being added every month. Our combined income is about $115,000 and our house will be paid off right about the time we retire. I feel pretty good about our situation.

 

[TLSnell1981]

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.
My daughter just started a new job with a 401k. I told her she needed to contribute up to the employer match. I guess I’ll need to reminder her / talk to her about that again.

 

[kymom99]

I've had this conversation with many over the years (bolded part of your post). When I was in HS (about 100 years ago) we had a lesson on how to balance a check book (I think it was home ec or something). I doubt seriously if they even teach that now. Schools should spend time teaching kids "finance 101". And parents, if able, should also include kids in part of the financial discussions.

I know this is a gross generalization, but how many kids today have no clue? They just think you take out a credit card and BAM! New iPhone 12 Max and Playstation whatever shows up courtesy of some dude in an Amazon van.

They do offer those classes

 

[starry_solo]

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