You’ve been busting your butt, scraping by, trying to save as much as you can into your retirement accounts, but you never feel like it’s enough.
Money is such a taboo subject that most of your co-workers don’t feel like opening up about how much they have saved (or how much they wish they would have), so it’s tough trying to gauge if you’re even in the ballpark of actually retiring one day.
How do you know how you compare to the average retirement savings figure?
According to a recent survey, 51% of workers over the age of 55 have less than $50,000 saved for retirement. And 39% in that same age group have less than $25,000 in retirement savings. Those are frightening numbers if you consider that those people are very close to the typical age of retirement.
Guide to Retirement Savings
The Employee Benefit Research Institute regularly publishes the average retirement savings of different age groups. Recent findings look like this:
- Workers under age 35 barely have $6,000 in savings.
- Those between the ages of 35 and 44 have roughly $22,500.
- Workers ages 45-54 have saved just under $44,000.
- Baby boomers, those aged 55-64, have approximately $65,000 in savings.
- Those 65 and over have saved $56,000.
If you actually do the calculations, you will discover that these are scary findings indeed.
Half of all Baby Boomers don’t have enough money saved for retirement just to cover basic needs.
What can you do? First, you need to figure out how much money you will need for your retirement. There are many variables that must be considered including:
- At what age do you plan to retire? If you are thinking about leaving the workforce early, you will need more money for retirement as you will be retired longer. Consider how long you will be retired. Not a thrilling thing to ponder, but crucial nonetheless.
- How much of your current income do you feel you will need on a yearly basis once you retire? A common percentage range is 65-75%. Be sure to think about whether you will want to travel or relocate. Some people would like to have money to leave to their children. If this is true in your case, you might want to work with a percentage closer to 100.
- Don’t forget inflation. Figure about a 3% per year inflation rate. Say you make $100,000 yearly and have decided that you require 65% of that per year during retirement. It is not sufficient to multiply $100,000 by 65% and come up with a neat amount of $65,000. Adding in inflation means you need to multiply your yearly salary by 1.03 and then take 65% of that. Remember you’ll have to factor a 3% growth each year! Although, honestly, inflation could be so much more by the time as you get closer to retirement. A sobering thought.
How to Get Your Retirement Savings Above Average
Once you come up with a rough estimate of what you will probably need for retirement, you need to start saving more. Seriously. With the average savings figures what they are, chances are you are not saving enough. Here are a few simple tips to kick your savings into gear:
- Save more. Add to whatever you are currently putting aside. Even a small amount, over a number of years, will add up. Put aside the most you possibly can.
- Take advantage of any plans your employer may offer. If you haven’t already, find out if your place of work offers 401Ks. Many companies contribute matching funds up to a certain percentage of your salary. But make sure you know how your money is being invested. Just because Dave Ramsey says to “get your free money first” doesn’t always mean it’s a good idea, especially if your clueless in how it’s invested.
- Open an Individual Retirement Account. Even if you have a 401K you can usually put aside extra funds into an IRA.
Remember, you may think you are prepared for retirement. But statistics show you probably aren’t.
Best Places to Kickstart Your Retirement Savings
It is never too late to kick your retirement savings into high gear. Getting started isn’t difficult.
All you need:
- a brokerage account to hold your Traditional IRA or Roth IRA
- the discipline to save each week or month
Here are some great places to open your Individual Retirement Account:
E*Trade
E*Trade is one of our favorite brokerage firms. With E*Trade, you get access to tools that can help both novices and seasoned investors reach their retirement goals. E*Trade is one of the best in the business, offering Traditional IRAs, Roth IRAs, and 401k rollovers.
When it comes to trades, E*Trade’s costs are extremely competitive at $0 on stocks, options, and ETFs.
Open an account with E*Trade to enjoy the perks of having an account with one of the best online brokers.
TD Ameritrade
TD Ameritrade makes the process of opening and funding your Roth IRA very easy. It can take you less than 15 minutes to open up a brand new IRA.
(That means you can’t say “I don’t have time to open a Roth IRA!”)
Even better, TD Ameritrade is willing to pay you to open an account with them. Bonuses range from simply being able to trade free for 60 days to up to $600 in cold hard cash deposited into your account.
Open an account with TD Ameritrade and get up to $600 just for opening an account.
Betterment
Betterment takes the issue of analysis by paralysis out of retirement accounts.
One of the common complaints people use as an excuse for not saving enough for retirement is that it is too difficult to choose investment options.
Deciding between ETFs and stock mutual funds, bond funds, and the like can be very confusing.
Not so with Betterment. The company uses a sliding scale of risk to balance your portfolio between two baskets of investments: a bond ETF basket and a stock ETF basket.
It’s incredibly simple and makes having to decide what to do a lot easier.
Plus, you get $25 if you open an account with at least $250.
Open an account with Betterment to kickstart your retirement savings.
Best Places to Open a Roth IRA (and Get Sign Up Bonuses, Too!)
Want to look at all of your options for brokerage firms? We’ve culled the list of major retirement account providers down to show you which ones are the best. We also want to make sure you are getting the most bang for your buck — brokerage firms offer big sign up bonuses for you to open an account with them.
If you’re going to open an account, you might as well get a bonus, right?
Here are the two resources we’ve created:
What are you waiting for? Stop putting off saving for retirement, get your saving into gear, and open a great account today to help you get there.
My wife and I have saved $2.6M (not including $600K of equity in home) we need $12K a month from retirement. How long will $2.6M last?
Depends on how you are currently invested.
My wife and I are 57 and 61, respectively. We have around $1.2 million set aside for retirement. I think one of the best decisions we ever made was over 20 years ago when we purchased a house that was about half of what we qualified for. It was financed for 15 years and paid off early and we still live there. As we look at our circle of friends, many of who have bought homes at double the cost of ours, we realize that it’s not just the cost of the house, it’s all the increased expenses that go with it – utilities, taxes, furnishings, etc. – that have increased their cost of living. My advice to folks would be if you’re willing to not “keep up with the Joneses” and “buy in” way below what you “can afford,” and then put aside the difference, you will be rewarded exponentially down the road. It’s worked for us.
Hi Danny – What you and your wife did with your house is the most basic path to financial success – as your situation proves. Only by living beneath your means can you accumulate real wealth. And you’re absolutely right, the house you buy sets the tone for your general spending levels. Some houses, in certain neighborhoods, affect your entire spending pattern. Cars, furniture, what schools your kids attend, even the vacations you take. You and your wife made a very smart money decision, and it didn’t even have anything to do with investing! Good for you both!
I am soon to be 69, still working but planning to retire in 15 months. My wife is 67, retired and has a city pension and is taking social security. I am taking the
spousal benefit. Net Worth is North of 500K, which should place us in the top
15% of those prepared for retirement, yet I am still feel less then confident.
I have always feared a wolf at my door, but we have been prepared and
weathered the rough patches.
They do not need to raise SS taxes, they need to raise the ceiling on income
that can be taxed for SS
kevin
Hi Kevin – I think everyone has some reservations about retiring. It’s natural since you’re about to give up what has been a reliable income source for a very long time. But you and your wife are well prepared, so try not to worry too much.
I agree that we all should save as much as possible and I did all my life. I grew up in a very poor family but not because my parents didn’t work and manage, it was because of my mothers health in the mid fifties with no health insurance. My dad lost the family farm because of hospital debt. I grew up working at a young age at what ever work I could get. I had determination to claw my way out of poverty. We all should realize that there are some things that just happen and its not always because of mismanagement. Today at age 70, I am in the top 10% of people with a decent savings account and still watch it closely. Also, after you save it, you have to learn how to keep it!! There are PLENTY of scams out there and many of them are STOCKBROKERS!!!! BE CAREFUL of the people you let handle your money!!!!!!!!!!!
I am ahead of the curve, but given that these numbers are dismal, being ahead of it is only slightly encouraging. I have 9 years before I’m eligible and currently ok, but no where near where i wish to be.
Linda, you sound like one smart cookie!! I am a guy who is retired and I am sure glad that I scrimped and saved when working because I have had a secure retirement so far. I watched many co-workers squander money and make fun of me for being “Tight” , but now their retirement is from one pension check to the next! So many people have no common sense when it comes to money. GOOD LUCK to you, hope you have a wonderful retirement!!!!!!!!!!!
Wow…average retirement savings amounts are scary! I suppose that is why the average person works until 65 or beyond. Our family is dedicated to putting at least 50% of our income into savings, retirement, college, and other investments. Totally agree with you…and we are living proof that the more you put away, the greater your success! Cheers.
Those are scary stats indeed! I love the calculator above, it is the best I have seen!
Although I haven’t saved a ton of money in my 401k at this point, 12k, and wished I would have started contributing more earlier, I feel like I am in really good shape. I have a full military retirement, plus I will have another pension at age 62; working 20 years at the VA. I can add my 401K to that, contributing 15% (now and increasing each year), with employer matching 5%. If Social Security is still, there I can also grab that at age 62.
my wife and i will be both 55 years this year. she worked as an accountant for more than 20 years and has been laid off work 3 years ago and she does real estate which has been on and off. i retired from the military with a current retainer pay of $3600/month. we have a paid off condo and $275000.00 in savings… i just got laid off due to DoD reduction in workforce and it doesn’t look much rosier in the coming years. i am not sure how much will be our social security benefits, what do i do to get by? i still want to contribute to the society rather than just sit home
What may have happened to some baby boomers like myself is they lost retirement funding several times in their working lifetime. It seems I would almost start over. I would start to get a nest egg via IRA investments and then I would take a big loss. I knew that social security was not going to take care of me and so even as a single parent saved. Unless you were an investment guru you used a financial planner. I know that I saw my funds plummet 3 times in my years I am 59 now. If we are going to have a recovery make it soon!
Age 54 & 56 . Saving as much as possible for 27 years in 401k , and for college (2 kids ) then added Roths and outside investments . House downsized and paid cash for when youngest was a freshman in college . Upped savings again at that time – 8 years ago (yes we thought we had too much at risk in housing equity and that the market might correct) .
Net worth broke 1 million about 5-6 years ago and hit double that earlier this year (we hung tight after the crashes and kept investing . We moderate buy cars new and keep them until they are a mechanical nuance.
(currently they are 12 & 8 years old with no plans to get a new car now ) .
We currently live on about 1/3 of husbands paycheck (I have been a stay at home wife for 28 years. ) pay about 1/3 in taxes and save the other 1/3 .
Considering retirement . We can live on our nest egg , but worry about inflation, poor investment returns , family needs (parents – the kids have been on their own and are well educated and independent) and the possibility we may live another 40+ years.
Husband looking at part time work – enough to cover expenses so we don’t have to touch the savings . No pension no health care provided . We are healthy and insurable but I am concerned the new laws will drive our costs through the roof. (We have done out best to maintain or health equity – when I worked I was an R.N- and have always considered a good diet and exercise non optional even when pinching pennies . )
Ready to get off the high tax and 24/7 on call work schedule
I posted before, My wife and I are now having a baby early next year.
Its going to be a big change. My wife is planing to work 4/5 time and that means we are going to take a 20% pay hit for her, plus have to pay 20% of her benefits. So its going to cost us $1600 a month, plus we are going to have some day care expenses and kid stuff. So that right there is going to be a big impact.
Interesting comments by all.
How many of you had children? If you did, how did you save and also save for their college?
If you didn’t, do you think not having the expense of having children helped in helping you save for retirement?
I find all this very interesting.
My wife and I are 68 years of age, retiring at 62. We always spent less than we made, saving in the range of 12 to 20% of our gross income each year, investing in a self-managed, balanced portfolio. We bought new cars about each ten years with cash, paid off our mortgage at age 58 and have paid in full for most everything we have purchased, including a recent reroofing of our home from savings. We have nearly $1.9 million on our retirement portfolio and are living comfortably off of Social Security income and the income from three pensions right now, not spendng anything in our retirement portfolio to date. We expect that that will come later as health problems in old age take their toll. We have no plans to downsize our housing for now as we live in north GA where our costs are really low compared to WI were we lived until we were age 56. When we do downsize, it will likely be a condo back in WI to be with relatives and friends.
Great job Allan! You are an inspiration to the rest of us! I try and teach my kids about personal finance, investing in a 401K and avoiding debt. I wish my parents would have stressed the importance of investing, but I didn’t have very good role models. In my opinion, every high school should make personal finance classes mandatory. Our country would be much better off.
I am not surprised by these numbers. Most people I know tend to live for the day instead of tomorrow. My wife was a stay at home Mom and we struggled to save. We are both in our mid fifties, our home is paid for, we have no debt at all. Our total retirement savings is $450K and I think we are not where we need to be yet.
My wife is 60 and I am 55. We have a combined retirement savings of $700,000 in 401ks, 403bs, Roth IRAs. We contribute about 20% of our income into savings and have for the last 20 years. Our combined pensions and Social Security will be about $48,000 a year (if we retire at age 62-65). Given what I see with other people, I fear our savings still won’t be enough. Medical costs, potential long-term care costs, and inflation are a big concern to us. Our house will be paid off in about 7 years and we owe no other debt. Some say we are “Looking GOOD”. I’m not so sure.
Some money wizards are suggesting anywhere from $1,500, 000 to $2,500,000 as being a goal for retirement savings in our case. We are not going to make that kind of money in this market over the next ten years. I guess we will either work until we drop dead or live on what we have until it runs out, then it will be to the streets and a tent. How are people at age 60 today going to make it when they only have a tenth of what we have accumulated?
51% of workers over 55 have less than $50k saved for retirement?
Wow, that’s sad. Not unexpected data, but still unfortunate. I truly wonder how those people are going to survive in their old age, not only with daily expenses but also with health care. Even though a number of these people might have simply been totally negligent, I still feel bad for their plight – if they realize how bad it actually is.
Save early, save often, and avoid big mistakes!
I agree this is such a touchy subject. No one wants to talk about it.
Scary stats indeed! We have a nice start to our retirement savings, but I can’t wait until we are debt free so we can max out our Roth IRAs.
I’m not in bad shape, but certainly not where I’d like to be at 35. If only I could get the Delorean running so I can go back in time and smarten my younger self up!
My wife is 29 and i’m 28. We each have over 100k in 401ks and 40-50k in IRAs. Then we also have liquid savings/stocks of about 50k.
I know my mom does not have much <10k and is dependent on PERS and SS. At least her house is paid off and she doesn't have debt.
@Ken Great job bro on such an awesome job on your savings! Especially since it sounds like you didn’t have the best role models to follow.
At your age I had more in savings and in my retirement accounts than my father did when he passed away. He was the epitome of what “not to do” with their finances.
It’s crazy to think about it though. Most people are completely dependent on SS.
I imagine in my life they will increase the SS tax to pay for people that did not save and I will get punished because I did and lived below my means.
I am ahead which is good news for me. However, I don’t think being ahead mean I’m well off. I really hope that people start taking retirement seriously and start saving major money as early as possible. Time is your best friend.
I’ve got about $12 in a Roth IRA and $3k in my 401k. I am 26 years old. I could have MUCH MORE if I wasn’t an idiot with money when i was younger. Oh well. Seems like I’m technically ahead of the curve right now. With dismal numbers like the ones above, I wonder how people even eat when they retire, let alone go anywhere…? Must be good ol’ pensions and Social In-Security.
Meant to say $12k, not $12, haha!
[email protected], At least you woke up to the fact that you needed to save more! MANY DONT!! Trust me Jacob, Social Security is not much to try to live on and it probably be cut in the future. I am retired and I know how it is. During my working life, I always scrimped and saved every dime I could. I always bought good used cars instead of new ones because of depreaciation and never charged anything, no credit cards. The whole time, I watched co workers squander most of what they made. Today those same coworkers live from one SS check to the next.
Stats like that are useless to most people. You need to compare based off of your lifestyle and standard of living.