A topic that most Americans tend to ignore, sometimes until it’s too late, is the subject of retirement savings. For this post’s purposes, we will put people into several buckets based on their age. The important age groupings here are:
- Retired, we will assume 65 or older (16.5% of US population)
- Approaching retirement, age 50-64 (19.2%)
- Adult, age 25-49 (32.9%)
- Getting Started and School Age, age 5-24 (25.5%)
- Child, up to age 4 (6.0%)
These percentages are based on data from the US Census Bureau, and the age groupings were done for our purposes, to make discussion points easier and to put people into blocks of ‘what should you be doing.’ If you’re retired, you will hopefully have had ample time to accumulate assets, pensions (receivables), housing, etc., so that you can have a comfortable retirement.
The other blocks are important because there are many things that you should be doing during these years to make sure that you have as comfortable a retirement as you can. In the Approaching Retirement age group, you really should be maximizing how much you are putting aside for retirement as you can. It would be best if you were putting as much money as you can into 401(k) plans, SIMPLE-IRAs, 403(b), investment accounts, paying off your home, and so on. In the ‘Adult’ years, these are the years where you should be putting aside what you can for retirement while you are accumulating assets like a home, furniture, money for children’s education — really, these are the years when you are “living.”
The Getting Started and School-Age group is where several things should be formed, largely from learning from parents or mentors that can help you…. get started. It is best to start saving for your retirement as soon as you can because your investments accumulate significantly more the longer you hold them. These are the years when you are finishing your education or are starting in your career, so you can and should set aside what you can (particularly if you have a job and are living with someone else, like your parents).
Where Should Your Retirement Savings Be
There are many different sources for how much people typically have saved for retirement at various ages. This should be used as a general gauge for how you are (or were) doing compared to the average person that has some retirement savings. We have always felt that many of the guidelines put forward by financial professionals and financial companies are not only scary but may be overstated, but we will cite them anyway.
Data available from the Federal Reserve and summarized by DQYDJ.com, average retirement savings by age can be summarized as follows:
- Age 20-24: $4,700
- 25-29: $8,445
- 30-34: $19,340
- 35-39: $45,219
- 40-44: $106,857
- 45-49: $165,825
- 50-54: $159,058
- 55-59: $200,890
- 60-64: $181,048
- 65-69: $147,342
While this information illustrates what the average person has saved, it has to be understood that people in states with higher costs and higher incomes should be bigger than these numbers. In contrast, lower-income and cost states should/could be lower than these numbers. Most importantly, how much you have depends completely on how much you will need.
In the financial world, a closely monitored data point is the Aegon Retirement Readiness Index. This index uses a scale from 0 to 10 to illustrate how financially prepared Americans are for retirement. This survey is based on a sample of 16,000 workers and retirees. This index illustrates that despite the pandemic, peoples’ view on their readiness to retire is better than in each of the last two years.
We are really just getting started with this section of the site and will have a lot more content on getting ready for retirement and a retirement calculator that we have under development, so stay tuned.