The State of Retirement in the U.S.
Across the country, individuals have not saved enough for retirement.
Here is a Pop Quiz:
For workers aged 55-64 (close to retirement age!) with a 401k retirement plan, what is the median account balance in that 401k plan? (median means half of workers have a higher balance, and half of workers have a lower balance).
28,318 b. 51,878 c. 71,168 d. 96,327
The answer is C. Let’s think about that. Since the median household income in the U.S. is about $75,000 annually, that means the average fifty-something-ish worker (very close to retirement) has a nest egg equal to less than one year’s worth of annual income. Sure, they may have other accounts, but generally, a 401k is the largest retirement account an individual owns.
And note: this is the norm! So don’t feel bad if you are scrambling to figure out how retirement planning works. What follows is an approach to retirement planning boiled down to a few key concepts. And we will explain them to you in plain-English. Work your way through this and you won’t get left behind.
Ok, let’s challenge you again with one more question about the bumpy retirement landscape in the U.S.
So, how many people are actually saving for their retirement?
Pop Quiz:
What percentage of workers in the U.S. have NO savings in retirement accounts?
6% b. 15% c. 41% d. 54%
The answer is D. In 2022, about 54% of households reported NO savings in any type of retirement account. A big part of the reason is that retirement planning is something that falls through the cracks for most people. You don’t learn about it in school. It’s hard to find easy-to-understand, comprehensive guidance. So again, don’t feel bad if you’re clueless with this stuff. On the contrary, congrats to you for being here and wanting to take control of a very important part of your life!
So, as a quick and easy summary of the situation: Most people are NOT saving for retirement, and the ones who are saving don’t have nearly enough to live comfortably in retirement. And we have also learned that this is NORMAL.
Next up: Let’s focus on the MOST IMPORTANT driver behind retirement success, and that is your savings rate. This refers to the percentage of your annual income you are saving for retirement. Nothing else even comes close to making the same impact on your retirement planning progress.
Stay tuned!
Friendly request: This whole blog is an endeavor aimed at helping folks improve their retirement situation. My goal is to post content that folks like you find useful in planning their retirement. Please comment below with feedback and think along the lines of “Was this helpful? What else would you like to know? Any burning topics or steps related to retirement planning on your mind right now?” Thanks!
Sources: Vanguard 401k study 2023. Bureau of Labor Statistics (.gov) https://www.bls.gov › opub › ted March 2023.
