Doesn’t it seem that, as we get older, we’re faced with more and more news articles and stories about our impending retirement? And a lot of the advice can either be contradictory or overwhelming. You need X amount for a 20-year retirement. Contribute X amount to your 401(k). Pay off all of your debt but make sure you have enough liquidity for emergencies.
Retirement is arguably the biggest financial milestone you’ll reach in life, but how do you know if you’re on track? When will you be financially ready? Much of our financial strategies throughout life focus on working toward a comfortable retirement that meets our lifestyle needs. Despite knowing how important retirement is, most people don’t know how much is necessary to maintain their lifestyle. You may be asking yourself this question.
While there’s no one hard and fast rule for determining your particular retirement income needs, we can see how you compare to others in a similar situation. Here, let’s take a look at the US Government Accountability Office’s 2015 report on how well prepared American workers are for retirement, based on their age range.
Households Age 55-64
If you have at least $25,000 saved, you’re in the top 45% of households age 55-64, according to a report from the U.S. Government Accountability Office. If you have anything at all saved, you are doing better than 41% of those surveyed. But this doesn’t mean you’re in the clear. It will take a lot more than $25,000 to survive in retirement.
So what do those people with minimal savings plan on doing? Most likely, they will have to rely on Social Security or pensions, for those luckiest enough to have them. Otherwise, they will have to depend on family and friends for support.
The table below lays out the resources that households in this age group have available to them, separated by those with retirement savings and those without. How do you compare?
For those without retirement savings, it doesn’t look like they have a lot to fall back on. Low incomes, low net worth, and only a third with pensions. Based on the numbers, It looks like these folks will have a tough road ahead of them in retirement.
The other group is doing better, but their numbers aren’t that impressive either. They have high homeownership rates, but most of them still carry a mortgage. The average retirement savings are only about $104,000. Because this category includes everyone with $1 to $10 million saved, it would be helpful to break the group down further, as you can see below.
In this age group, it seems that only the highest tier of savers are ready for retirement. Most of them are still working, though.
Households Age 65-74
65 is a popular retirement year, though more and more people are now extending this date so they can catch up with their retirement savings. Like the previous group, this age bracket doesn’t have much in savings. Here is a chart showing the exact same information as the previous age bracket.
In this age group, people are a little more prepared but with only a slightly larger nest egg. However, the median net worth has increased and homeownership rates are higher. Let’s look at their savings breakdown.
If you’re in the 90th percentile, you may feel pretty confident about your retirement. But the 75th percentile is a pretty big drop. If you’re in this or a lower percentile, you may need to take a good look at where you are, how you’re saving and spending, and how it aligns with your retirement goals.
How Much Do You Need For Retirement?
It’s an age-old question, but unfortunately I can’t give you an answer, and neither can any charts or studies. But as we see from this study, it’s not the best idea to base your confidence on your peers, as we can see that many aren’t well prepared.
While comparing your retirement savings to your peers and using online calculators can help contribute to your knowledge, the only way to know what you, personally, need for retirement is to sit down with a professional who can analyze your unique situation.
For an accurate number, you need to factor in your health history, retirement plans, family obligations, and more—something a report or calculator can’t do. An experienced financial professional can help you come up with a retirement strategy that will give you peace of mind and concrete goals to work towards.
How We Can Help
You may think that if you don’t have much saved you don’t have enough to work with an advisor. The truth is, you can’t afford not to work with an advisor. You need to build wealth and partnering with an experienced professional is the best way to do that.
At Beacon Wealth Management, our mission is to help you make smart decisions about your money. We provide retirement planning and can do a comprehensive analysis unique to your personal situation. Call us today at (304) 626-3900 or email firstname.lastname@example.org to set up your complimentary consultation.
John is the founder and owner of Beacon Wealth Management. He specializes in helping entrepreneurs, professional practitioners and retirees overcome the 5 major challenges facing affluent families.
As a trusted and friendly financial partner, John delivers a collaborative client experience that empowers and guides people to reach a greater purpose for their wealth and pursue their financial dreams. He understands the multifaceted set of financial worries people face as they become more successful and get within 15 years of retirement.
John is well-regarded throughout the business community for his expertise. He has appeared as an expert guest on the “Brian Tracy Show” and “Hollywood live with Jack Canfield”, is the co-author of the book, Masters of Success with Brian Tracy, is the host of the WDTV News 5 segment, “Solutions 4 Financial Independence,” and has conducted hundreds of educational events on Retirement and Investment Advisory, Tax Reduction and Wealth Transfer Planning. These include many Universities, Federal Employees, Professional Associations, Large Energy and Utility Company’s throughout the state of WV.
With more than two decades of experience, John is credentialed as a Certified Wealth Strategist, Accredited Investment Fiduciary, Certified Estate Planner, Chartered Federal Employee Benefits Consultant, Plan Provider Consultant and Registered Financial Consultant. He is also a past member of Ed Slott’s Master Elite IRA Study Group.
A native of Weston, West Virginia, John served in the United States Air Force prior to becoming a Wealth Advisor. Today, he resides with his family in Clarksburg, West Virginia. He and his wife, Lisa, have been married since 2005 and have three amazing children. A family-oriented man, he enjoys giving back to his community, coaching youth sports, landscaping, architectural design and playing racquetball.