How Does Your Retirement Savings Compare to Your Neighbors’?Submitted by Farrall Wealth on February 17th, 2022
By Greg Farrall, PPC®, CWS®, CPFA®
Humans are hard-wired to compare ourselves to benchmarks. (1) When those don’t exist, or the benchmarks are ambiguous or confusing, we compare ourselves to others. This is true in the age of social media and it’s especially true when it comes to retirement.
We all want to know that we’re on the right track for a happy, healthy, and well-funded retirement. And while how you’re stacking up to your neighbors shouldn’t be your number-one focus, it certainly helps to know if you’re at least in the ballpark of retirement savings success. After all, the last thing you want is to work hard your whole life only to find out you didn’t save enough as you’re crossing your career finish line.
In some aspects, the desire to compare can be a good thing. Learning from your peers can help you plan ahead and make the necessary adjustments to set yourself up for success. Here’s how you can tell where your retirement nest egg stands amongst your peers.
Let’s Compare the Numbers
We reviewed The Federal Reserve’s most recent Survey of Consumer Finances (SCF) so you don’t have to. (2) This publication offers a wealth of information about financial trends among all age groups. From income, retirement savings, assets, and debt, SCF provides invaluable insights into how your retirement nest egg compares to your neighbors’. Let’s take a look.
This is the age in which many families are just starting out. They are paying down student loans, auto loans, mortgages, and saving for shorter-term goals like weddings, vacations, and emergency funds. Retirement savings tend to take a back seat in this phase of life.
As such, the average retirement savings for households in this group is $30,000. This may sound like a respectable amount, but the average savings statistic tends to be skewed by outliers (extreme over- or under-achievers). Because of this, the median value is often a more accurate measurement. In this case, the median retirement savings is just $13,000. Of the families surveyed in this group, only 45% actually have a retirement account.
People in this age group tend to have higher incomes, but also higher expenses, and many find it difficult to save as much as they should. In this phase, families begin bulking up their savings, but they are still looking toward shorter-term goals like current childcare expenses and college tuition funding for the future.
In families with a head of household between the ages of 35 and 44 years old, 56% have a retirement account, the average savings is $132,000, and the median savings is $60,000.
In the 45-54 category, incomes are still high, and we tend to see a jump in savings. Most big-ticket expenses (cars, mortgages, etc.) have been paid down or paid off entirely and a solid emergency fund has been built. Retirement saving becomes more of a priority.
In this group, 58% have a retirement account, with an average savings of $255,000, and a median amount of $100,000.
This category consists of “pre-retirees.” With retirement right around the corner, this group should be focusing all their excess cash flows toward retirement savings. According to the SCF, only 55% of those surveyed reported having a retirement account. The average household retirement savings in this group is $408,000, with a median of $134,000.
Traditionally, the 65-74 age group has represented the start of retirement. But in this case, the SCF shows that many have either delayed retirement or started a phased retirement in an effort to save more. In this group, about 48% report having a retirement account, with an average savings of $426,000, and a median amount of $164,000.
By age 75, most, if not all, households have definitively entered retirement. We see a significant decrease in savings as families begin drawing from their accumulated retirement assets in order to meet expenses. According to SCF, only 38% of households have a retirement account, with an average savings of $358,000, and a median amount of $83,000.
What’s the Benchmark?
So now that we know what the average person has saved, is it enough? According to Fidelity Investments, you can gauge your progress by comparing your retirement savings to your annual salary. (3) They suggest saving the following amounts toward retirement:
- 1x the amount of your salary by age 30
- 3x the amount of your salary by age 40
- 6x the amount of your salary by age 50
- 8x the amount of your salary by age 60
- 10x the amount of your salary by age 67
Assess Your Savings Today
In the end, knowing how you compare to your peers can give you an idea of how you’re doing, but it’s better to understand how your savings compares to the cost of the retirement you plan to live. There are plenty of online retirement calculators available, but they are usually generic and don’t take into account the specific factors that will impact your unique situation, including location, lifestyle plans, and medical expenses.
The best way to assess your savings is to work with a professional. At Farrall Wealth, we cater our services to help divorced and widowed women and female business owners conquer their unique financial challenges so they can work to secure their financial future. We have the tools, technology, and experience to analyze your potential retirement outcomes and increase your odds of success. If you’re ready to take a look at how your savings stack up and what you can do to better position your wealth, call our office at 219-246-2516, email email@example.com, or schedule a complimentary consultation online. Be sure to visit our website to learn more and connect with us on LinkedIn, Facebook, Twitter, and YouTube.
Greg Farrall is CEO and owner of Farrall Wealth, an independent, boutique wealth management firm that is dedicated to helping women and business owners create customized financial plans that allow them to grow, protect, preserve, and distribute their wealth. Greg is known for being a professional problem-solver who walks his clients through whatever life throws at them. He prioritizes building long-term relationships and is passionate about going the extra mile for his clients so they can pursue their goals and live the lives they want. Greg has a bachelor’s degree in international business from the University of Wollongong in Australia and a bachelor’s degree in finance and marketing from Indiana University Bloomington. He is a Professional Plan Consultant® (PPC®) and a Certified Wealth Strategist® (CWS®) professional. And he recently received his Certified Plan Fiduciary Advisor (CPFA®) designation. You can listen to him on his financial literacy and business topic podcast, Money Matters with Greg, on iTunes, Google and Spotify. He’s also on YouTube, Twitter, and Facebook at @FarrallWealth.
Greg is a pillar of his community and served as the 2013-14 co-chair for the United Way campaign, through which he helped raise $1.8 million for 38 nonprofit organizations across Porter County, Indiana. He also served as president of the Valparaiso Rotary Club. Currently, he is on the advisory board for the Kelley School of Business and Dean of Students’ board at Indiana University. He also holds a position on the Culver Academies parents’ board.
When he is not working, you can find Greg spending time with his family or investing in one of his many passions, which include cooking, Spartan races, fly fishing, and meditation. To learn more about Greg, connect with him on LinkedIn.
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*Retirement savings factors are hypothetical illustrations, do not reflect actual investments, results, or actual lifetime income and are not guarantees of future results. Targets do not take into consideration the specific situation of any particular user, the composition of any particular account, or any particular investment or investment strategy. Individual users may need to save more or less than the savings target displayed depending on their inputs of retirement age, life expectancy, market conditions, desired retirement lifestyle, and other factors.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.