By Jeremy Wallace and Andrew Hart
From a young age we compare ourselves to our peers—constantly. As children, we fought about who had the better toys. As teens, we bragged about who had the coolest and most unique music tastes. As adults, we compare ourselves to others based on who has the nicest car or the most successful children. Making comparisons can be a negative thing, but comparing your retirement savings progress to others can help you learn from your peers and improve your retirement strategy.
If you want to know if you’re setting yourself up for a happy, healthy, and well-funded retirement, seeing how you compare to others in your age cohort can help you figure out your odds of retirement success. Here’s how you can tell where your retirement savings stand 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. (1) 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.
Under 35
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.
Between 35-44
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.
Between 45-54
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.
Between 55-64
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.
Between 65-74
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.
75+
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. (2) 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, although knowing how you compare to your peers gives you an idea of how you’re doing, 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’re typically 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 Wallace Hart Capital Management, 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 maximize your odds of success. If you’re ready to take a look at how your savings stack up and what you can do to maximize your wealth, contact us at 859.300.3030 or request an appointment online today!
About Jeremy
Jeremy Wallace is founder and chief investment officer at Wallace Hart Capital Management, an independent financial services firm committed to offering comprehensive advice and customized services. Jeremy has 20 years of experience in the financial industry and is passionate about helping clients preserve and enhance their wealth so they can pursue their passions. Jeremy graduated from Emory University with a degree in international economics and a certificate in financial planning. Outside of the office, Jeremy spends most of his free time with his wife, Julie, and their three children, Isabel, Lincoln, and Reid. He is an avid Chicago Cubs baseball fan, and he enjoys golfing with his wife and traveling with his family. Learn more about Jeremy by connecting with him on LinkedIn.
About Andrew
Andrew Hart is the co-founder and chief planning strategist at Wallace Hart Capital Management, an independent financial services firm committed to offering comprehensive advice and customized services. Andrew has 15 years of experience in the financial industry and strives to provide new and better strategies and processes to improve his clients’ lives. Andrew graduated from Wittenberg University with a bachelor’s degree in business management and holds a certificate in financial planning from Georgetown University and the CERTIFIED FINANCIAL PLANNER™ designation. When he’s not working, you can find him enjoying the city of Lexington, KY and spending time with his wife, Susan, twin sons, George and Ted, and daughters, Merritt and Philippa. To learn more about Andrew, connect with him on LinkedIn.
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(1) https://www.federalreserve.gov/econres/scfindex.htm
(2) https://www.fidelity.com/viewpoints/retirement/how-much-money-do-i-need-to-retire
*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.
3/23/2022