Average Retirement Savings Revealed:
Are You Normal?
Many Americans worry they’re not saving enough for retirement, and rightfully so.
A 2020 Northwestern Mutual study found that 71% of U.S. adults admit their financial planning needs improvement. However, only 29% of Americans work have a plan they are working on.
The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests people who work with a financial advisor feel more at ease about their finances and could end up with about 15% more money to spend in retirement or so they say.
A recent Vanguard study found that, on average, a hypothetical $500K investment would grow to over $3.4 million under the care of an advisor over 25 years, whereas the expected value from self-management would be $1.69 million, or 50% less. In other words, an advisor-managed portfolio would average 8% annualized growth over a 25-year period, compared to 5% from a self-managed portfolio.
Honestly the best way to plan for retirement is to get involved in a timely opportunity that can create wealth quickly. They do pop up from time to time, but the challenge is noboday is really looking. Here is a great example.
Assuming 5% annualized growth of $500k portfolio vs 8% annualized growth of advisor managed portfolio over 25 years.
SmartAsset’s no-cost tool simplifies the time-consuming process of finding a financial advisor. A short questionnaire helps match you with up to three fiduciary financial advisors that serve your area, legally bound to work in your best interest. The whole process takes just a few minutes, and in many cases you can be connected instantly with an advisor for a free retirement consultation.
Shocking Savings Statistics
The National Institute on Retirement Security reports that almost 40 million households have no retirement savings, while the Employee Benefit Research Institute estimates Americans have a retirement savings deficit at $3.68 trillion.
But it’s not all doom and gloom, and many Americans are saving for retirement.
In fact, Fidelity reported in May 2022 that the total 401(k) savings rate for the first quarter of 2022 reached a record 14%, while the total number of Fidelity IRA accounts increased 11% over the first quarter of 2021. The average 401(k) balance for those who’ve been saving for over 10 years averaged over $380,000.
General Guidelines for Retirement Savings
You should have saved the equivalent of one year’s salary by the time you hit 30, according to Fidelity research, but saving more certainly won’t hurt. By their estimates, you should aim to 3x by 40, 6x by 50, and 8x by 60 with the hopes of having 10x saved when it’s time to retire.7
These recommendations are based on a person saving 15% of their income beginning at age 25, investing at least 50% in stocks and a target retirement age of 67. Of course, saving for retirement is different for everyone. If you feel like you’re behind in savings, want to make sure you’re on track, or want to find investment vehicles to help you save more. Making more money on the side, and planning for your retirement must be a goal, no a passing thought!
Each advisor has a unique strategy. Some advisors may suggest aggressive investments, while others are more conservative. If you prefer to go all in on stocks, an advisor that prefers bonds and index funds is not a great match for your style. Personally if you are going to decide to become financially educated you cannot ignore the Crytpo Market in today’s world. Like most financial sectors crypto, is down now, but do you really feel that in the future Bitcoin and other prominent crypto currencies are not goig to return to their all time highs?
Empowering yourself to make smart financial decisions is something that doesn’t happen by accident.
An October 2020 study by the Center for Retirement Research calculated median retirement account (401(k)/IRA) balances by age from Federal Reserve survey data. Here are the numbers:
- 35 to 44: $51,000
- 45 to 54: $90,000
- 55 to 64: $120,000
Boosting Your Retirement Savings is a decison you must personally make. The truth is most people are too busy making a living to worry about, creating real wealth, but the opportunities are out there to do that, if you just take the time to open your mind, and look! People are skeptical of side gig opportunites and for good reason, but throwing the baby out with the bath water is never a good idea. At least that was what my grandmother always told me.
Regardless of where your retirement savings stand right now, one way that you can help get a retirement plan by making a decison to make changes.
Chances are, there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one. I believe the first move is to educated yourself, read a few books, listen to a few webinars, read a few articles, and then make a decision to make retirement planning a priority.
Here is a great commons sense article that is worth the read, no matter your age. Investing in your twenties.