What is the Average Retirement Savings?

Saving for retirement is one of the most important personal finance moves a person can make. Typically, people allocate part of their paycheck into a retirement investment account, like a 401(k) or individual retirement account (IRA). But not many people know how much their retirement savings goal should be or feel they aren’t on track to meet their goal. What is the average retirement savings amount, and is it enough for a successful retirement?

What Is the Difference Between Retirement Income and Retirement Savings?

Retirement income and retirement savings are related, but they are not the same things. Retirement income refers to how much income a retiree regularly receives in retirement. This includes money coming from retirement savings accounts but also includes Social Security and other sources. For example, if a retiree gets $1,500 per month from Social Security and takes another $1,000 withdrawal from their retirement savings, their retirement income is $2,500 per month.

Retirement savings refers to the lump sum a person has saved for retirement. So if a retiree has $150,000 in their 401(k), they have $150,000 in retirement savings.

401(k) and 403(b) Explained 

401(k) and 403(b) are two popular forms of retirement savings accounts. But what makes them different?

401(k)

401(k) plans are retirement savings plans offered and sponsored by an employer. Employees can defer pretax income into the account with every paycheck to grow the account. During retirement, withdrawals from the account will be taxed. A Roth 401(k) is the same, except it takes deferrals of after-tax income, like a Roth IRA. This way, withdrawals won’t be taxed. 

Many employers will also contribute a certain amount. For example, employers might match 50% of the deferral amount, up to 3% of the person’s income. Taking full advantage of this match will help grow retirement savings.

403(b)

The difference between 401(k) and 403(b) plans is the employers that offer them. It is another employer-sponsored plan, but it is offered by employers like nonprofits and public schools whereas a 401(k) is sponsored by private employers. Like a 401(k), a 403(b) allows employees to defer pretax income — or post-tax income in a Roth 401(k) — often with an employer match rate. 

Consider Both the Median and the Mean of Retirement Savings

When looking at average retirement savings, it’s important to consider the median and mean. The mean is the average of all sums while the median reflects the amount in the middle of all sums.These numbers are often very different.

According to the U.S. Census Bureau, the median retirement income for citizens 65 and older is $47,357. The mean is $73,288. Knowing these numbers is important, but it’s also important to know whether you’re on track to meet the savings goal that will allow you to retire comfortably. 

How Does Inflation Affect Your Retirement Savings Plan? 

Inflation is a concern for many near-retirees and retirees. Rising prices can reduce the purchasing power of retirement savings, meaning retirees need to save more to maintain their lifestyle. It can also cause economic turbulence, which can lead to underperforming investments. In November 2022, the inflation rate was at 7.11%, which is lower than it was earlier in the year but still much higher than the long-term average of 3.27%.

Ways to Measure Retirement Savings 

Looking at the total average retirement income may not be the best way to determine a person’s retirement savings goal. Average retirement savings amounts change based on many factors. Investors can use a retirement calculator or check out these averages based on different characteristics.

Retirement Savings by Age

One way to determine whether a person is on track for retirement savings is to look at average savings by age. People younger than 25 only have an average savings of $6,300. People 25-34 have an average savings of $37,200. Americans 35-44 have an average of $179,200 in retirement savings. People 55 to 64 years old have an average of $256,2oo. And investors 65 and older have an average of $280,000 in savings.

Retirement Savings by Degree

Another way to gauge is savings by education. In 2019, people with no high school diploma had about $20,000 in savings. Those with high school diplomas had about $40,000 in savings and those with some college education had $41,000 in savings. Investors with a college degree had $119,000 on average saved for retirement. These numbers may fluctuate based on access to retirement savings plans, education on retirement and ability to allocate income. 

Retirement Savings by Race or Ethnicity 

Retirement savings also varies by race and ethnicity. In 2019, white families held a median of $80,000 in retirement savings. Black, non-Hispanic families held about $38,300 in savings. Hispanic families held about $27,300. This disparity may be the result of a lack of education on retirement savings and access to retirement savings plans.

Retirement Savings by Net Worth

Typically, people with a higher net worth will have more money in their retirement savings because they have more expendable income to store away. Higher net-worth individuals will have the ability to save more than savers with a lower net worth. Americans ought to have about 10 times their incomes saved in retirement by age 67. For Americans that make hundreds of thousands of dollars a year, these savings will be much higher than for Americans with a lower salary.

Retirement Savings by Gender

Women, on average, are more likely than men to not have retirement savings. And when they do, they typically have less money stored away than men. For example, 29.6% of men have over $100,000 in personal retirement accounts compared to 22.1% of women. 

Saving On Track

Looking at the average retirement savings in the country and by different factors can help provide insight into how much a person should save. It’s important to remember that everyone is different, and goals will vary. The best way to ensure you are on track to retire comfortably is to use a retirement savings platform or professional who will provide key insights about how much you need to retire and how much you need to save to achieve that goal. Once you take control of your savings, you’ll ensure you’re saving on track for a happy and comfortable retirement.

Frequently Asked Questions