The Federal Reserve’s 2022 Survey of Consumer Finances revealed that almost half of Americans do not have a dedicated retirement savings account, such as a 401(k) or IRA. Only 54.4% of American families reported having these accounts, with very few holding other investments like stocks or bonds. This lack of dedicated retirement savings could leave many Americans heavily reliant on Social Security benefits during retirement, which may not provide enough income to maintain a comfortable standard of living.
The average monthly benefit for a retired worker from Social Security is $1,907, which amounts to $22,884 per year. This is only slightly above the 2022 poverty threshold for a person over 65 in a two-person household. Age is a significant factor in determining how much individuals should be saving for retirement. The Fed’s data shows that the percentage of people with retirement accounts increases until the 55-64 age bracket, with savings typically increasing with age until people reach 75+.
For those concerned about how their retirement savings stack up against their peers, the Fed’s data provides a breakdown by age bracket of the median value of retirement accounts and the percentage of people with such accounts. While falling behind in savings compared to others in the same age bracket might be a cause for concern, the amount of savings needed for retirement can vary greatly by individual circumstances.
Developing a retirement savings plan involves determining how much money will be needed for retirement based on factors like age, expected retirement age, location, spending habits, and dependents to support. Different strategies, such as the 4% rule or relying on total returns, can be used to plan for retirement expenses and withdrawals. It’s possible to catch up on retirement savings by paying off debts, investing wisely, and exploring additional sources of income, even if starting late in the game.
A 2023 study by Northwestern Mutual found that Americans believed they would need $1.27 million in savings to retire comfortably, highlighting a gap between retirement savings expectations and actual savings. Working with a financial planner can help individuals map out a strategy and stay on track to reach their retirement savings goals. It’s important to remember that everyone’s retirement savings plan will be unique, but as individuals age, their nest egg should ideally be growing. If falling behind in savings, now is the time to create a plan to catch up and secure a comfortable retirement.
