Average Retirement Savings By Age: Are You Behind the Curve?
The Average Retirement Savings By Age May Surprise You
Saving for retirement is an important financial goal and ideally, your nest egg should follow a steady upward trajectory over time. As you save, it can be helpful to have a benchmark for tracking your progress. For instance, you might compare your savings against the average retirement savings for your age group to see if you're falling behind, or getting ahead of the curve. But just how much do Americans of all ages have tucked away for their later years?
Perhaps less than you think.
Average Retirement Savings for 20-Somethings
Between stagnating wages and heavy student loan debt burdens, millennials face some of the biggest challenges to saving for retirement. But, according to a 2017 Bankrate survey, millennials are taking the lead when it comes to proactively contributing to a retirement plan.
In terms of how much they have saved, the Transamerica Center for Retirement Studies estimates the median retirement savings for millennials at $31,000. According to Fidelity, the typical saver should aim to have one year's worth of salary saved by age 30. Following that reasoning, a 25-year-old should expect to have 25 to 50 percent of that number.
Data from the Bureau of Labor Statistics shows that the average 25-year-old earns a median annual salary of $40,352. Using that number, a 20-something with a median of $31,000 in savings could reasonably be on the right track to reaching a year's worth of salary saved by age 30.
Average Retirement Savings for 30-Somethings
Once you enter your 30s, your financial picture may begin to shift. You might be earning more but life changes, such as getting married or having children, could increase your expenses. Higher expenses could make saving for retirement more difficult.
According to the Economic Policy Institute, the average retirement savings of Americans aged 32 to 37 is $31,644.
That figure increases dramatically for savers in their late 30s and early 40s. At this point, the average retirement savings grows to $67,270 among Americans aged 38 to 43.
That's a significant jump but are older thirty-somethings keeping up the pace? The median annual salary for 35 to 39-year-olds is $50,752, according to the BLS. Fidelity recommends that the average thirty-five year old have twice their salary saved for retirement, raising that to three times their salary by age 40. Based on the EPI's numbers, thirty-somethings are missing the mark.
Average Retirement Savings for 40-Somethings
By your 40s, you may be heading into your peak earning years and carrying less debt. But the prospect of paying for your children's college education may put pressure on your ability to save for retirement.
Americans in the early 40s have a median of just over $67,000, as the EPI numbers show. For 44 to 49-year-olds, the average savings checks in at $81,349. Money is beginning to add up but overall, savers in their 40s still have their work cut out for them.
Average Retirement Savings: 50s and Beyond
By the time you reach your 50s, you may anticipate having a sizable cushion of funds set aside for retirement.
Turning 50 also affords an opportunity to supercharge your savings, since you can begin making catch-up contributions to your employer's 401(k) or your individual retirement account. But, the EPI data suggests that 50- and 60-somethings still have a long way to go.
According to the research, the average retirement savings for families aged 50 to 55 is $124,831. For families aged 56 to 61, it's $163,577. Those figures are far less than the $1 million that many experts recommend as a target for retirement savings. While Social Security can supplement existing retirement savings, the average monthly retirement benefit of $1,329 may not be enough to fill the gap.
Keeping the Average Retirement Savings in Perspective
In terms of how using savings by age as a benchmark impacts your own retirement strategy, it's important to consider the bigger picture.
Across all age groups, the average retirement savings is $95,766, according to the EPI. Overall, the data suggests that Americans are simply not saving enough for retirement, regardless of age.
As you evaluate your own plan, it's important not to let the average retirement savings by age distract you from your goals. While it can be a useful way to compare your savings, the more important issue is whether what you're saving now will allow you to have the kind of retirement you desire.
If your savings are below the average for your age group, it's time to reconsider your plan and what you can do to get back on-course. For instance, if you're not saving enough in your employer's plan to get the full matching contribution, you may consider increasing your elective salary deferrals. Or, if you don't have access to a 401(k), you could use an IRA to grow your savings.
Being realistic about your retirement timeline is also necessary. If you have less saved than you'd like, you may have to consider staying in your full-time job longer or working part-time after you retire to make up any shortfall. Calculating how much you need to retire, looking at what you already have saved and determining how much you'll need to reach your goal can help you shape your plan more effectively.