Average Retirement Savings by Age

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Tradeking - Discount Online BrokerI don’t put much stock in most “averages,” whether they’re rules of thumb or average net worth, but every once and a while it’s good to know where you stand.

So where do we find the average retirement savings by age? We are forced to rely on the internet. Unfortunately, with the recent stock market crash, writing about nest eggs and average retirement savings hasn’t been very popular. To get data, we turn to the Employee Benefit Research Institute’s latest report on Individual Account Retirement Plans (August 2009).

The EBRI’s report has a ton of detailed information on almost everything you might want to know about retirement savings and participation, from defined contribution plans to IRAs. For the purposes of our comparisons, I’ll just look at the age breakdown (2007 figures adjusted to 2009):

  • < 35: $6,306
  • 35 – 44: $22,460
  • 45 – 54: $43,797
  • 55 – 64: $69,127
  • 65 – 75: $56,212
  • 75+: (sample size insufficient)

Some words of warning after you read this:

  • Remember that this data is just data, you can’t draw any conclusions of what’s right or wrong from the statistics alone.
  • If you’re “below average,” you shouldn’t feel bad about it. Age is not a good indicator of where you are in your life. Some people get a later start and others have a more inflated lifestyle, how much you’ve saved by when should only give you a bar to reach.
  • If you’re “above average,” you shouldn’t rest on your laurels and think you’re doing great. Much like the words I wrote for those who are below, being above doesn’t mean you’ll have enough for retirement. You have a few years until retirement, a lot can happen then, so keep at it.
  • Average doesn’t mean someone in their 20s that has more than $6,306 is set in retirement (or that someone with less is screwed). It’s estimated that you should spend about 4% of your nest egg each year. At 4%, your nest egg should last long enough. How does that 4% figure translate to your estimated yearly expenses? Divide how much you think you’ll spend by 0.04 and you have your target (based on that rule of thumb) – $50,000 a year requires a nest egg of $1.25M.

Much like average net worth, it’s useful to know where you stand but don’t put too much stock in it.

How do you stack up? 🙂

{ 284 comments, please add your thoughts now! }

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284 Responses to “Average Retirement Savings by Age”

  1. Tak D Nomura says:

    Jim, I’m getting emails on current postings, but it doesn’t show up on the blog when I click on the link from my email. What gives?

  2. Tak D Nomura says:

    Author Jean wrote this:
    “Author: Jean
    Mike, I subscribe to your way of thinking too. A car was never viewed as an asset but more of a commodity in our household. We have always budgeted for a leased car payment but we also have a side business that we write off the payments against. Since you’re nearing retirement it might be nice to free up the extra cash and get a reliable car that will last the next 15 years such as an Acura TL or RL. I do not recommend any other car not even Toyota. Acura cars are reliable just like Honda and every dealer I’ve worked with across the nation has provided excellent customer service.”

    My Response:
    I also have a 2006 Acura TL; it’ll probably be the last car I’ll ever buy. It’s a little noisier than the Lexus I had, but it’s a stable car without any mechanical problems. It tells me when I need an oil change or when my tire needs more air. It has seat warmers that we don’t need in California, but the back-view mirror adjusts automatically when a car behind you has their lights on to minimize the glare.

    I’ll be 75 in July, and I hope this car will be my last. I’ve owned a Ford, Chevy, Toyota, Cadillac, Lexus, and this Acura.

    • JoeTaxpayer says:

      May you live long enough that you need one more car. I have an uncle who is still driving at 90.

      • Tak D Nomura says:

        Still driving at 90? I’ll worry about that when I reach that age, and can still negotiate a car safely.

        Maybe, I’ll be able to buy that MBZ sports model then. LOL

        • phil says:

          My mother in law ,90, is still driving herself to church, grocery, and the hairdresser if someone else can’t take her.

  3. Tak D Nomura says:

    Here’s the issue; The Euro countries are going to help Greece with a huge loan, but Greece doesn’t have any real economic system that exports its goods and services to earn real income. How will they pay back the loan, and how will those countries loaning Greece this money expect to be paid back?

    What happens to Spain, Portugal, and England? Their economy is in the pits, but their bond ratings are about equal to the US whose economy is diverse – and slowly growing.

    The interest rates on US bonds are low; it provides our government with “cheap” money while they continue to increase the national debt. How long can this go on? When will our country’s debt resemble that of Greece?

    • phil says:

      debt is good and we can inflate our way out so it is better to own stuff. Gold is good stuff and so is property. Cars not.
      The difference I see with Greece and us is that we make stuff, have oil and other commodities where greece has not. Most those Southern European countries seem to rely on tourism and some manufacturing.
      Was in Italy last year and everything so old and the roads so narrow. Our street out front is 3 times as wide as most streets and roads I saw there but then most EU countries are the size of states here.
      And yes, I see no way out for Greece and no way to every pay back the loans.

  4. MIKE says:

    Unfortunately there only seem to be a very few that are now using this forum. Seems like only a few of you are responding to each other out here. I agree with most. Oslama Obama needs to be voted out of office asap. We need our country back. I support what Arizona is doing with the immigration laws. Actually they aren’t doing anything but enforcing the law that was already written. Illegal immigrants need to be sent back where they came from. This alone will relieve much of our health care and welfare problems. Get rid of them sooner than later.

  5. Tak D Nomura says:

    I posted this on 5/19, but didn’t receive any response so will repeat it here:
    “Tak D Nomura says:
    05/19/2010 at 11:12 am

    Mike, You claimed you had close to one million in your 401k/IRA. My question to you is, what’s your balance today, May7 19, 2010?

    My funds ratio changed from 55/45 to 60/40 since this slide in the market, but I’m still ahead for YTD.

    With your exposure to more risk, I’d like to know where you stand?”

    • phil says:

      Tak, most that I talked to pulled much of their money out of the market at a loss on the way down in 2008. I didn’t listen to Crammer’s advise and get outin Oct. But I am in the possitive now as the market has corrected my losses. Now it seems to be a struggle as returns are flat. I feel that companies are doing well but most investors are scared and playing the sideline and keeping the market flat.

  6. Tak D Nomura says:

    Jim, Are you deleting my posts? If so, I’ll discontinue with your blog.

  7. Tak D Nomura says:

    I’d like to hear from others about their 401k’s/IRA’s and the effect it’s had in the past ten days, and what they think will happen during the next several months. T.

    • Scott says:

      I’m a conservative investor with most of our 401k’s in guaranteed. We’ve missed out on the recent crazy up rally, but we also missed out on the crap that killed the rest. We just want to get our nest egg to give us living income to make up for the pension & S.Security shortfall.

      We’re well on our way for that.

  8. MIKE says:

    Tak D…I haven’t been on here in a bit. I am responding to your 5/21. I am just over the $1 million amount as of 6/4/2010. I am four years from reaching 62. I am very diversified between my wife’s account and mine. I have been using my account as a the leverage for tough times. During the downslide we had 95% of my funds in a fixed income getting about 4%. In the next few weeks I will start moving back my funds to a 30/70 ratio over time where my wifes is about 80/20 and has been that way and will stay that way for some time. I am right on track and should be where I want to be in 4 years to reach our retirement goal. Our intent is that I will only need 2% of my 401 in the first 4-5years of retirement then kicks up to about 3-4% the remaining years. This will last me about 30 years. Again I am taking into account my wife’s pension and both collecting some SS. Of course SS could disappear in 10 years the way our government is spending money. I think this country is for it’s toughest times yet. The debt Obama is getting us into won’t be fully realized for another year, then the bottom may fall out of the market. With the Israel and N. Korea situations this will cause even more havoc. Once our forces leave IRAQ, Russia will then team up even more closer to IRAN and become a major problem. We are in for DIRE times. Then it may not matter how much we have saved. It could become worthless. MY OPINION ONLY.

    • Tak D Nomura says:

      Mike, Be careful about re-balancing your equities to 30/70. The reason I say this is based on several issues that are facing us today; (a) the value of our currency increasing against all other major currencies which will handicap our economy, (b) the increasing tax rates beginning January 1, 2011, (c) Germany cannot bail out Greece’s financial problems because Greece has no real economy to pay back any loans, and (d) 1. we’re facing more deflation in the next several years while we continue to struggle with this high unemployment, 2. wages for those who have jobs are stagnant as governments and companies cut back on work hours, and 3. most of the economic stimulus this year was the result of government spending.

  9. MIKE says:

    I disagree with so many of the retirement calculators that are on websites that state that you need at least 80% of your current household income. That is such a fallacy. What you need is a budget then figure what you need. If my wife and used our current income we would be have to much money coming in every year to maintain our retirement budget.
    Example. Both working we Gross $120k year. 80% is $96k year. I only need between $67-$77K. Thats roughly 55% to 60%.
    We paid off all debt outside of car leases.

    Our avearge expenses is averaging $41K year (incl 2 car leases pymts) over the last 5 years. This includes 1-2 vacations per year.

    In reality in 4 years with additional Health Care costs that $41k will move to maybe $51K.
    Although I may not need this much in my beginning years I am figuring it in.
    TOTAL INCOME NEEDED = $77k(covers Fed/St taxes)

    [Myself $20k/yr SS.]
    [Wife $13K/Yr SS.]
    [Wife $19K/yr Pension]
    $25K of my 401/IRA/Savings..
    In reality we may not need that much as our expenses do not reflect reduced cost such as going to 1 car, lower Maint costs by moving into a 55+ community.

    This is living a very decent life style. Keep in mind we search for deals and negotiate for all potential opportunities to save extra.

    Also we my wish to work part time for minimal amounts just for something to do but this is not included.

    My advice to all nearing retirement in the next 3-5 years. Keep a very accurate and detailed list of expenses monthly and yearly. Then you can make a life style budget very easy. This will help you determine what you need to retire with.

    We track every expense. Going out to dinner, fast foods, gifts, charity, etc. everything. It’s worth the effort.

    Its working for us and hopefully you.

    • JoeTaxpayer says:

      Mike – let me start with “you are right.” As with many rules of thumb, the 80% is a start. It’s not 100%, and for most not 50%.
      A back of napkin says add your current saving rate (hopefully 10-15% or greater), what your mortgage is costing you (20%), and FICA withholding 7%. Funny, that leaves the 60% or so you’re at.

      Your advice for the pre-retiree is dead on. I’d only add to it a bit – in retirement, the eating out may go up along with the vacations.
      Also, assuming social security is still around, people at higher incomes will find a lower replacement rate than at a lower income. One needs to take this into account as well.

    • Tak D Nomura says:

      Mike, I can see that you have arrived at conclusions about retirement calculations to be inaccurate, and I agree with you!

      To begin with, most spend about 30% plus on their mortgage loans while most are in the work force, and that disappears in retirement. We can then assume that it takes about 70% to retire, but that ignores the other savings as we retire from work, especially commuting costs. Income and FICA taxes disappear although its replaced by capital gains taxes, and we pay more in taxes because social security benefits are also taxed, but it doesn’t come close to the taxes we paid while we earned income. We can safely assume that those taxes amounted to approximately 20% (and that’s minimum!) of our income. From the 70%, we can now reduce that another 20%, and arrive at 50% of pre-retirement income to live.

      I’ve been retired since 1998, and have lived off my retirement savings without much impact on my IRA. In addition to my “frequent” world travel, we spent $100,000 in 2008 for major renovations on our home.

      Even with the downturn in the market since 2008, we can still live “comfortably,” and I continue to travel to my heart’s content.

      Finally, our net equity is now worth more than 80% of our combined income from work.

      We are comfortable and secure in our retirement, and as you say “live a decent lifestyle.”

    • Scott says:

      I’m right there with you Mike. My wife and I have combined $210k. We live on appx. $75-80k, so our % is about 38%.
      I think those guys just look at the “average” family income of $80k (+/-).
      We’re only in our 40’s, so we have a ways to go, but are saving like a mad man / woman right now. If we happen to lose one of our jobs, we’ll be o.k. too.
      We only spend extras on vacations (usually 2 with the kids) and thats about it.
      No debt is awesome too…

  10. Retired in CT says:

    If anybody is concerned with the recent downturn in the market, then you are not truly retired. Yes, we are in a correction that will last who knows. Dividends will still be paid. Bond coupons will still be honored.

    All the evidence points to the demise of the Euro within a few years. The test of any system is always when things go bad. Germany, a hard working industrious country is forced to bail out Greece, a not so industrious country. Will the Germans keep bailing the Greeks or other lesser EU countries forever? I think not. The fundamental issue is that there is no way to force the Greeks to work as hard as the Germans.

    We have our own issue with national debt. In total, we owe 90% of GDP. We must elect leaders to tackle the issue with solid plans, not hot air. Taxes will go up which will affect spending and consequently the stock market.

    • Scott says:

      Dividends will still be paid. Bond coupons will still be honored.

      Tell that to BP shareholders and bank stock holders. These really sting those people. I know they should be diversified in many sectors that pay dividends, but seem more and more “stable” sectors & companies are doing this. I personally bought some TOT and looking at VZ or T for the divy’s…

  11. Tak D Nomura says:

    Retired in CT, I agree with you that Germany cannot save Greece; they are only sinking their own economy trying to save a country that has no real economy to pay back any loan.

    The biggest problem with Germany is their aging population. They are struggling with their generous social programs while their tax base continues to decrease as their costs increases.

    How they think they can rescue a country like Greece is a mystery under these circumstances.

    The Euro will continue to lose their value as more countries in the Euro zone fails to meet their deficit goals.

    France is a basket case where they work the least and demand the most from their economy.

    It’s all downhill for them.

  12. Tak D Nomura says:

    SCOTT, You and your wife are on the right track; long-term savings is the key to successful retirement.

    My wife and I started saving 15 to 20% of our earnings early in our marriage, and can now enjoy retirement without worries about money.

    Our investments have always been conservative and in funds that have produced very well over the long-term. I consolidated all of our investments into Vanguard funds and bonds.

    I’m now 75 years old, and engage in world travel and photography for my hobbies.

    • Scott says:

      Thanks, hopefully this will pay off sooner than the traditional age of retirement. We’ve been socking away 50+% for a few years now and it brings a satisfaction knowing we’ll have to go back to the “normal” 15-20% some day…

      Wife is wanting to hang up the hat soon and I wouldn’t mind her doing so…

  13. Tak D Nomura says:

    It will. I told my wife she could have retired earlier, but she wanted to work a few more years at the new hospital that was built one block from our home before hanging her hat. That was her choice, so that was okay with me!

    I’ve been spending my money on world travel, but she’s only spent money very conservatively, so she’s “richer” than I am when it comes to retirement savings.

    I believe in enjoying my retirement.

  14. Stan K says:

    Hmmmm the wife and I are both 52 and have a combined income of 140k. If we both retire at the end of the year our retirement income will be about 114k with 2% annual COLA’s. If we wait for 4 more years our retirement income will be about 125k per year. These figures include full paid blue shield preferred insurance which is worth about 14k per year.

    • Scott says:

      Sounds like you have an awesome pension. You from California? We hear a lot about the pension benefits out here that are far and above the commoners out here.

      Either way, good for you…

  15. Andy says:

    We do not have a pension and need to rely on our investments to supply our retirement income. Due to the Fed driving interest rates near zero — safe fixed rates of return are terrible. Does anyone have investment ideas that are both safe and can provide 6-7% rate of return. It feels like the current investment environmemt offers no good choices — CD rates are too low — both bonds and stocks carry plenty of risk and too much greed and corruption to know where to turn. Any ideas so I can get some sleep?

    • Scott says:

      Not really. I just got into some TOT with a 5-6% dividend. I figure the weakness due to BP gave me an entry point and a divided to prop up the current price.

      I’ve also noticed JNJ having a nice divy and is kind of weak here too, so may be a safety play with a 3.7% divy…

  16. Anonymous says:

    Andy, Look into Vanguards intermediate and long-term bond funds. Mine are mostly intermediate, and it’s current rate is over 4%, but the actual return is over 7%.

    I transferred a good portion of my equities into bonds two years ago when I felt that our economy was headed for trouble, but also feel it’s a good idea to keep some in equities.

    My wife has more in her retirement funds, but has more in equities. For YTD, my funds heavy in bonds have outperformed her funds.

  17. fro says:

    tax all you at 70% and let Obama rule

    • Scott says:

      Feds – 35%
      State – 10%
      Gas – 15+%
      Sales tax – 9.25%-10%
      Cell phone, Cable, Utilities, Car tags…if you have anything or need anything, you’re taxed.

      Money you make from the money you’ve been taxed already, taxed.

      Pay Caesar’s things to Caesar…Caesar must need a new palace…Feels like 70%, huh?

  18. Anonymous says:

    fro, We do not have any control over our tax rates. Obama is already going to increase capital gains tax by 33%, and there’s nothing we can do about that!

    • Jim says:

      If the Bush tax cuts expire, long term capital gains would increase to your marginal tax rate. If you’re in the 33% tax bracket, you earn over $171,850 – most Americans don’t earn that much. Short term capital gains is always taxed at your marginal tax rate.

  19. Andy says:

    Anonymous — thank you for your comment on Vanguard bond funds bonds.
    Does anyone else have ideas for lower risk / “safe” investments with decent returns?
    fro — you need not respond.

  20. Anonymous says:

    Scott, Although the tax rates you posted may be correct, they are taxed differently for consumer goods. Federal and state taxes are taxed on total income, but consumer taxes are paid when products or services are purchased. The 9% sales tax only applies when you purchase items that are taxable; most often food is not taxed.

    • Scott says:

      Yeah, I know. It just feels like it some days…my true tax rate on gross is probably 19-20% federal and 9% state…

      For those paycheck to paycheck and drive through crazies, it literally is.

      We don’t eat out much anymore as the true cost (tax, tip, cost) of eating out is kind of depressing when you get less service every day. I can make a pretty mean ribeye on the grill and the way I like it.

  21. Anonymous says:

    Scott, Is your state tax deductible on your federal? Your actual rate may be lower.

    We live in California, and rarely pay any state income tax; I think our federal rate runs about 12%.

    • Scott says:

      Pretty sure it is. We do not have any other deductions other than charitable contributions (we rent), so we pay a bit more than most.

      The standard deduction is around 10,500; State taxes around 20k-ish & cont. of 8k-ish, so this only reduces our fed pay by around 6k. Our first year out here, we paid over 100k in state and fed combined as moving / relocation expenses were reimbursed by the company on top of our salaries… just a little shell-shocked when they asked for 5k more that year.

  22. Anonymous says:

    Scott, Here’s some interesting info on Turkey and Greece where I visited recently. Turkey’s average income is around $10k, and Greece’s average income is around $30k. Their tax structure is higher than ours in addition to their VAT taxes that adds 11% to products and food, and 23% to (alcoholic) beverages.

    On my way home, I had a layover at the Istanbul airport where I had a burger and beer, and it cost me US$29. While in Greece, I paid $18 for a fruit drink, and about $3.75 to $4.50 for local beer. Greek salad runs about $12-$13. What I’m getting at is that the math just doesn’t compute. How can Turks and Greeks survive in their own country with that kind of cost for food and drink? Their gas costs over $7/gallon.

    I’m really confused, because their income and cost to live just doesn’t seem possible.

    • Scott says:

      I looked at Turkey & here’s some things that I look at.
      Poverty is 17% there. Makes you wonder what is poverty if the avg. GDP per person is $11,200…

      Inflation is 6.3% & 10.4 for the past 2 years respectively.

      Currency has devalued against the USD for 5 years (Turkish liras (TRY) per US dollar – 1.5548 (2009), 1.3179 (2008), 1.319 (2007), 1.4286 (2006), 1.3436 (2005))

      By comparison, the US is 12% below the poverty line & the GDP per person is $46,400.

      I know that many countries regulate the basic staple food costs for their people that may make a difference. If one’s healthcare is picked up by the state, that’s money you don’t need to worry about. I would imagine you & I would adjust to our own surroundings and figure out how to survive on whatever salary we make; you have to assume they’ll do the same.

      I grew up with one parent in the 70’s & 80’s and all we got from the other parent was $300 / month & my mom worked for $8 / hr to provide. Strangely, we never felt extremely poor based on the others in town. You eventually live better & many end up living on the higher salaries as they progress.
      Now we have to learn to live on a little less and everyone is up in arms & walking away from homes.

      Interesting times to watch.

  23. imposter222 says:

    I agree with your assessment about learning to adjust to one’s environment – which applies to most on this planet.

    What I also believe is that tourist places like the Istanbul airport will gouge the tourists, because “they can get away with it.” It’s very unlikely that the native Turk will spend $29 for a burger and beer.

    My siblings and I grew up in essentially a one parent household; our mother lived on welfare with four children.

    However, this being America, we have all done very well as adults. My older brother became an Administrative Judge in CA, my younger brother an Ophthalmologist (and a three term legislator in CA), and my sister an RN.
    I earned my college degree late in life, but worked in management positions in 40% of my 30 year career. Last in my family to earn a degree, but first to retire from work.

    Most of our children are also doing very well in the professions, but opportunities today are not as good as it was for our generation.

    • Scott says:

      Same here on our lives; we’ve done fine, but our kids seem to have tougher row to hoe. They’re surviving and saving a little, so thats saying a lot lately. They’re still young and no kids, so that helps too.

      Unfortunately, I’ve noticed the successes of non-college folks sometimes do better financially due to the hard work and educating themselves as they go. I have “hobbies” that have taught me probably more than any college could anyhoo. Not to mention the financial hole you have to dig your way out of with debt incurred.

  24. imposter222 says:

    All my siblings and I had to work ourselves through college, because our mother was in no position to help with college tuition. When my younger brother finished medical school, he owed $8,000 in loans. When my nephew graduated from dental school about ten years ago, he owed $125,000.

    I think places like Stanford costs around $50,000/year for undergraduates. Not many parents can afford that cost, but they have scholarships with little or no cost to the student or parents.

  25. PR says:

    At 55 with a TSP of 272,000 and debt free with 5 years left will get a pension and SS, What do you think about this?

    • Scott says:

      Depends on your pension amount…You’ll get appx. 10-11m annually with the $272m @ 5% return + 9m (4% drawdown on principal).
      That comes to appx. $1700 monthly. After taxes, around $1450 monthly (15% tax bracket?)…at least you’re thinking about it and looks like you’re doing well. Sock away as much as you can in the next 5 and you should do fine.

      We live in a pricey part of the country, so our monthly expenses are around $5m, so we would need around $3m in income, in addition to a small pension & SS (I’m a bit on the conservative side). Not really sure what healthcare will cost when we take the plunge (our biggest unknown cost).

      Hopefully, there will be a little clarity in the next few years on that.

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