If you are wondering how your retirement savings compare with your peers as you approach your retirement deadline, the Federal Reserve Bank of St. Louis publishes economic research, which might surprise you. In 2016, the average Social Security benefit for retirees was $1,294 per month. For many, this benefit amount is only part of their retirement income and in order to create an additional income, they have been saving in Individual Retirement Accounts (IRAs) for many years. According to the Transamerica Center for Retirement Studies, in 2016, the top 10 percent of retirement savers had $274,000 put away for retirement.
Many workers are able to put retirement money away through IRA’s including Roth IRA’s and 401 K programs, some of which provide an employer match up to a certain percentage of income. But more than half of Americans have far less than what the top ten percent have saved.
Mean or Median Retirement
In 2016, the median was $147,000 in retirement savings for Baby Boomers and $69,000 for members of Generation X, according to the Transamerica Center for Retirement Studies.
Although the numbers are improving each year, it is still concerning that according to some surveys, 57 percent of Americans have less than $1000 in savings and of that 57 percent, 39 percent have no savings at all. Although a retirement goal is an arbitrary and highly personal one – it doesn’t take a financial wizard to know that this amount of retirement savings is not enough.
In 2016 the Federal Reserve Bank published a Report on the “Economic Well-Being of US Households” and one of the telling things that came out of the survey they developed was that not only do many people have no retirement savings but that of those who are saving regularly, over half are uncomfortable in their ability to make the correct investment decisions.
The retirement savings average was $274,000 in 2016
So let’s take that $274,000 figure from 2016 and see where it can put us if we are looking forward to retiring in the next year or two.
Using the retirement calculator of the Transamerica Center for Retirement Studies, let’s put a hypothetical case together. Let’s say you have worked hard to put that 10 times salary figure together over the last several decades. You are age 68 and hope to retire fully at 70. Currently you make $27,400.
If your income goal is 80% of your final year’s salary or $22,805, for the next 20 years, your current retirement savings is $274,000 and you are contributing 3% of your income annually, at an inflation rate of 2% and assuming a 6% return on your investments, compounded monthly — adding in Social Security income of $1294 and no other retirement income – in 2 years – hurrah! You could actually produce a retirement income that is more than 95% of what you earn today.
Now if you are a Boomer about to hit retirement and you are doing much better than the typical wage earner – think about that ten times figure. Where is your nest egg going to put you in terms of projected annual retirement income?
Whatever the reason for our retirement savings habits, some quick lifestyle adjustments may be in order. Whether it’s scaling down the size of the car or housing, reversing our placement of short term wants over long-term necessity or eliminating our credit card debt, it’s never too late to save more.
A retirement checklist may help you figure out how close you really are to meeting your goals.