Average is skewed by the wealthy. Look at median. Average vs median:
Average retirement savings balance by age
Age group Average retirement savings
balance amount
35-44 $141,520
45-54 $313,220
55-64 $537,560
65-74 $609,230
The actual 50th percentile:
Median retirement savings balance by age
Age group Median retirement savings
balance amount
35-44 $45,000
45-54 $115,000
55-64 $185,000
65-74 $200,000
Edit: formatting
Mines through a construction (multi employer) union so we don't get the individual value because there is no buy out option. I know total value of the entire pension. And that with my 11 years of service I get $800/month if I retire at 62. In the current contract that number goes up $110/yr of service. That $110 stays steady through the next 2 years as we have elected to up our IRA contribution.
You can make an assumption for how long you’ll live after you start the pension. Then use some discount rate (usually inflation) for a series and it should give you the present value. There are online calculators. You can compare that with your ira or other retirement account.
You can estimate by taking the annual payment and dividing by 4%. A $10k/year pension is worth ~$250k.
*Assuming the pension is inflation adjusted each year.
This is also very true. For example in my instance I have almost 500k in retirement accounts but it is split up across four different companies in two different 401ks an IRA and a Roth IRA.
One of them has almost 300k and another only has 6k so none of the reported numbers from those companies would actually capture my real situation. Average would indicate I have 125k. Median would say I have 101k. But we know that I have 4 - 5x those numbers.
So take everything with a grain of salt because stats can be used to say whatever the writers want to say and until each individual circumstance is reviewed the truth will likely be different.
I wonder how many coastal retirees downsize to a lower college area and cash out house equity? I would be tempted to do it.
I also wonder how many marriages have one spouse with large amounts and another with low amounts. Household mag be better situated.
Edited. Should have said lower col area but a Midwest college town may be more similar to what they are used to at a fourth of the price. It may not be a horrible way to retire
Well if you raised a family and owned a 4+ bedroom house and now it is just 2 of you then why wouldn’t you downsize? Having a larger house just means having a larger liability that requires more money to maintain and insure.
The house is paid off. You've lived the best years of your life there. Friends and neighbors near.
No asshole neighbors and no shared walls. No one upstairs.
You know where everything is.
Carry me out on a stretcher.
Downsizing doesn’t always work out how one might expect. Where I live, which I suspect isn’t unique, it’s a challenge. I would love to move to a smaller home with everything on one level in a few years. Very few such homes have been built in the last several decades. Most new and newish construction is for McMansions. I own a nice home in a good neighborhood in a great school district. To find the type of house that I would like, it would cost a good $100k more than I would get for my current house and it would be in a less desirable neighborhood. The other option is a house at least 60 years old that would require a large investment to make adequate.
> Retirement savings are not exclusively in retirement accounts.
Lots of people also use their primary home for retirement. You can downsize to a smaller place like a condo after retirement, then have a few extra hundred thousand spending money.
The source for the table that user is posting is the October 24, 2023 [Survey of Consumer Finances](https://www.federalreserve.gov/econres/scf/dataviz/scf/table/#series:Retirement_Accounts;demographic:all;population:all;units:median). Specifically just of retirement accounts.
So it appears to exclude any assets not in a 401k or IRA. Which seems pretty skewed. I’m not the average saver, but personally that would exclude both my home and my brokerage accounts. Which makes up the vast majority of my savings. Which is telling since I have maxed out my 401k contributions for over a decade now.
What this does tell us is that:
* the majority of Americans do not come close to fully taking advantage of the tax benefits of these investment vehicles
* that it is primarily the top income earners that do
* that 401k accounts **on their own** have essentially failed to prepare the median worker for retirement
* that for the median worker, 401k contributions did not replace pension contributions
I mean nothing beats a pension and it was very clear from the beginning. The average American doesn’t save enough/can’t afford to save enough. If pensions existed they wouldn’t have to and would stay with said companies regardless of how shitty they are.
Nothing?
This seems to ignore a few realities though.
First, a pension also keeps you connected to a single company to obtain the maximum benefit. The days of working for one company for 30 years are long gone. Hell, since I left the military I've worked for nine different companies, getting more money with each move. Even assuming that each place I worked actually offered a pension (several were very small companies) I'd hate to have small bennies coming in from nine sources. The portability of a 401k is far superior to any pension.
Second, I like that I have control over my retirement funds as opposed to a company that may or may not have my best interests in mind. I can move my money as I see fit, and invest in many different vehicles.
Third, this ignores how pensions are still reliant on the company for management, solvency and funding. One has only to look at failed pension plans at places like airlines and steel companies, where some people relied on the pension for their whole retirement and walked away with less than $100k to live on. (Obviously, this isn't a problem for state and federal pensions... yet.)
Aside from this, a properly constructed and managed 401k/IRA plan can outperform the hell out of most if not all pensions.
So yeah, pensions can be great, and yeah, 401ks were supposed to supplement retirement, but I definitely prefer more control of my own destiny. I'd say financial literacy is more the problem - I know way too many people who don't understand money handling in general, much less investment strategies and plans. This is one spot where education is woefully poor.
Excellent points. People romanticize ye olde good olde days of pensions, but no one stays at one company long enough to vest in the pension plans (even if they were offered).
Late 40’s here. None of my friends (who are within a year or two of my age) have worked more than 10 years at one company. The only “exception” is one guy I know who started his own landscaping company out of his parents’ house like 25-30 years ago (and is still going strong). He now owns that house.
Pensions are much less common today than last generation, but most government employees still have them. That's about 15% of the workforce.
There are many Americans with government pensions worth more than a million dollars.
My pension is a big reason why I'll never leave government employment. I could probably make more in the private sector, but I really enjoy the security of having a pension. I still max out my IRA, but I view that more as future fun money post-retirement.
Is this savings as in liquid or near-liquid items like retirement accounts, brokerage accounts, checking accounts, etc? Or is this net worth which includes housing? If it's the latter that's super concerning and very low.
For some reason, most current net worth calculators ignore housing and mortgages. I find this ridiculously ignorant, as it tends to be the primary factor of debt and if not paid will most certainly negatively impact one’s net worth.
If they're excluding home value and mortgage balances, then they aren't net worth calculators.
Even the calculation for liquid net worth excludes home equity but still subtracts mortgage debt.
I blame the education system. It is not set up for, and does not teach, basic finance handling to anyone in the U.S.
I have many friends who will tell me they love getting refunds because they can't budget during the year. Well no surprise there...
a LOT of people rely on their tax refund to make major purchases for year. In that sense it's basically treated as a windfall event rather than getting your own money back from a hostage taker.
I've had coworkers that have payroll deduct additional taxes so that they're forced to save. They then blow the tax return money on things frivolous hedonistic treadmill items like a new, marginally bigger TV.
I guess it's better than taking on debt...
Yea I bought a new system also . . One not repaired and it was 10K . . . so yea Like Dave Ramsey says, $1k is a starter emergency fund . . not a real one.
I mean… there are a tons of emergencies that can be fixed with 1k… not sure what you mean…
It won’t solve all emergencies, and there could easily be emergencies that require more than 1k, but let’s not pretend 1k can’t do shit
Agreed. Seems like probably closer to about $4-5k is needed in a pinch. Ideally, 6mo worth of bills saved would be the best, but really, how many people can actually save that?
>It's totally possible, but not a priority for most.
This is the real answer that most do not want to hear. I know sooo many people over the age of 35 that only save what they have withheld from their paycheck + any employer contribution. So somewhere between 4 - 6%? And those are the ones that are "Saving for our future!"
(Personal experience of only one example) And yet those same folks order Door Dash 2 - 3 times a day while husband is WFH. The wife doesn't work since hubby makes 6 figures and she doesn't *have* to. But they get Amazon deliveries on the daily. Make 2 or 3 Goodwill runs a year to donate new and almost new "stuff" they ordered because of boredom.
So, yeah, a lot of "we save what we can" is because of personal choices, not necessity/hardship.
Thank you.
That's a sooo much better way to phrase it instead of this same dumb factoid repeated over and over and over again to justify people's points.
Similarly, the common "living paycheck to paycheck" ones are usually deceptively defined as well.
Depending on where they set the terms you could have a person maxing out their 401k fall into that category.
That's not to say people aren't struggling, but there are more useful metrics that aren't so clickbaity.
"60% of Americans don’t have $1,000 in a savings account for emergencies."
I see those scare headlines all the time.
They usually are specifically talking about having $1k in a literal savings account.
Most people will have some money in a another type of account plus they have Credit Cards.
I've seen a lot of people posting that they are living paycheck to paycheck but omit they are maxing out their 401k and paying down a mortgage.
As for how many retire with $1MM liquid, I think it's 5% of American households.
That always makes me think, "If a husband and wife have a household net worth of $1 million, are they both millionaires?"
That's just parroting the typical yahoo finance article. "Dear Mr Yahoo, I am 56 years and have $3.6 million in my bank account. Is that enough to retire comfortably?". Answer: No way, you're completely screwed! Btw, did you know most billionaires invest their money in art using Art Finance (r) services? Take the free survey to find out how you can become rich as well!
I'm not sure that makes sense. Credit isn't money, it's just credit. Ideally you wouldn't use something with a 12% APR ever. If it's an emergency, doubtful that it would be paid off in a month. I wouldn't ever consider a credit card part of a financial strategy. That's like considering an airbag part of your everyday driving. Could save your life but it can break your nose and is generally not a good time. Last resort only.
$1M liquid was never the goal. The 401k and Roth aren't liquid.
The article might be skewed but the general message holds true: a lot of Americans don't have half of what they need to have saved or invested.
>If it's an emergency, doubtful that it would be paid off in a month.
Can confirm, the last 2 years I had an 'emergency' around the last week of november and first week of december both years, which wiped out my savings both times. So I've done the 'credit card christmas' thing two years in a row, and both times it took until mid February to pay them off.
Credit doesn't accumulate interest instantly and offers more purchase protection than cash/debit. Sub 2% savings account lead millenials to just have personal brokerages and checking basically.The time it takes to sell stock and move the money back to your checking account is shorter than credit card billing windows.
That’s why Social Security is so crucial. That at least gives people about $500,000 of retirement savings when they’re eligible when it comes right down to it. It’s still not enough to survive on.
Depending on their pension payments, they may have the equivalent of a million saved when you add their savings + the value of the pension. Maybe not, but interesting to calculate.
Where are they getting the disability as it’s unusual to get disability on top of social security and also unusual to get disability after 65.
My dad is a veteran and has the type of cancer that qualifies for something called “aid & attendance” I believe. It’s through the VA and I don’t understand how it all works completely. My younger brother set it up for them but he passed and I didn’t listen to all the details.
My old man is on his 30th year of retirement and he never saved anything. He lives on his pension and SS and lives just fine. Although, he's lucky that he's always had medical through his pension even though he's never really needed it.
Medical is the ONLY reason I cannot retire now or anytime soon.
And my insurance just cancelled its agreement with the major medical institution in my town, so I can’t even see the same doctor I have seen the last 10 years.
Also 40s -- not paying down home aggressively because that's a pretty huge loser if you secured a 3% mortgage.
I definitely qualify for saving aggressively though :-)
Yes, for us it has been a heart over head decision. On paper it’s not the most financially savvy choice but we’re trying to pay off the house before our son goes to college just to help cash flow those expenses when they come. We still have a 529 plan as well.
I get it. My plan was to pay off my mortgage before retirement back when I had a 5% mortgage. But a 3% mortgage, I can't justify it. So now I'm just aiming to have enough money lying around outside of retirement accounts (ie. brokerage) to pay off the mortgage if I wanted to. Got quite a ways to go still! :-)
There's always stuff up in the air, like my mom is in her 70s. If she sticks around until I'm ready to retire, I may use that money to buy out my siblings and take over her house.
Many people in the over 65 bracket receive pensions so I don't find it alarming many don't have huge amounts of money saved. Now if the next generation after them doesn't have money saved/no pension then it's a problem.
Well, first you need to anoint a silver sword with Demon Slaying, preferably up to +2. Then you need to actually slay some demons that take the form of your family and friends (assuming those exist). Lastly, you must slay an entire religion.
When i had my company maybe 15 out of over 100 people contributed to the 401K and took the match. They all saw reduced paycheck vs free money. Living for the weekend not the future.
I have 40 year old colleagues making 100-115k per year who do not have a 401k. These are otherwise fairly smart, goood people…who live paycheck to paycheck. Blows my mind
Let's not forget the 401k was invented ~45 years ago and it took some time for employers to swap from pensions.
I think these stats will be relatively useless for another 20 years. Then we will see how the 401k experiment plays out IMO.
This is a key point. My dad has a pension and didn’t have 401k matching for a bulk of his career. He invested on the side putting money into a Roth IRA, but a bulk of his wealth is in a regular brokerage account and not a retirement account.
It has nothing to do with investors doing anything wrong. Investors? Most Americans don’t even save money, let alone invest it. Ask the average person on the street today, you think they even know what an ETF is? A 401k? Roth IRA?
The USA is a large country and there are plenty of people who might only see $1.5 million in lifetime earnings. Saving for retirement can be an uphill battle. This is why programs like social security are important.
Portuguese here, social security will prob fail in my country in a couple of years. Our government is actively bringing hundreds of thousands of new unskilled workers just to contribute to our social security.
When low births and better outside opportunities drain our skilled workers the system will fail like a pyramid scheme.
I don't know the solution but social security is only a temporary solution that worked really well when the working class was larger than the non-working population
Demographics not looking good for Portugal:
[https://www.worlddata.info/average-age.php](https://www.worlddata.info/average-age.php)
The U.S. population is reasonably young and growing. Immigration of skilled workers will help out a lot in the U.S. over the next few decades.
The government should remove the cap on Social security.
Everyone should pay the same percentage. No matter how much they earn. This is not fair to low earners.
Easy fix, no one will say it.
And are you going to allow those that pay beyond the cap to get increased payments? Also your comment on paying the same percentage is wrong. They don’t pay the same now. Social security is already significantly skewed to where low earners get a much bigger chunk of what they pay back compared to what high earners do. Every dollar put in on the low end gets over 80% back while on the top it’s only about 15%. High earners may not pay for anything above the max but they also get no benefits for it.
The majority of Americans don’t have high salaries or jobs with good benefits. Raising a family is expensive. And there are lots of pitfalls like divorce that eats into wealth and medical bills from an illness. Cars are expensive and most cities don’t have adequate public transportation systems. In short, surviving and thriving by savings large sums of money is difficult for most people.
Besides you don’t really need a million bucks to retire. For many people, a paid off house, a small nest egg and social security is enough to get them by. They just have to make it to 65.
Large numbers of Americans work in low wage service or blue collar jobs. They dont save for retirement because they cant afford to.
There is a stereotype of them all being 40k millionaires living above their means. I work in a restaurant and I dont see very many people living like that. Most are frugal and still broke. I will only be able to retire because I had some lucrative head chef jobs when I was younger and saved like crazy when I was working them.
There are plenty of people that make good wages and don't think saving for retirement is important. I work in construction as a union plumber with a great retirement plan. I've worked alongside guys that are prevailing wage that are making $95/hr because they have no benefits or retirement. They still can't manage to save for retirement because they live like they make $150/hr.
I want a newer truck not gonna lie, a lot of my coworkers have them (blue collar here). But maxing out my retirement acct and a paid off ‘06 4Runner makes me sleep better at night
I do too. But I just can't bring myself to spend the money. I'm on my second truck I bought from Hertz. Both 1 year old, low miles, low level trim package and a solid price. I need a truck so I do it on a budget. I had an apprentice not long ago with a $900/month truck payment. 20y/o lives at home with his parents and could be setting himself up financially for a good life. But instead pissing away 50% of his income to drive a big ass diesel truck.
It's some of each. Certainly, there are Americans who can barely make it.
But I have also known plenty of people who think, for example, repeated Disney vacations on credit cards are "necessary", because "it's for their kids". (I don't know for certain they weren't also saving for retirement, but it's a mindset.)
I disagree with OP that poor budgeting is the main reason that most Americans lack adequate savings and retirement. Sure, it's a contributing factor but it's out of control income inequality and low wages that are the real problem.
It’s certainly a factor, some people live “paycheck to paycheck” only because they simply must have a McMansion, a new car every 4 years and two kids in private school. That is not the experience of most living paycheck to paycheck though. Americans are making painful financial compromises and investing for retirement is not always their highest priority.
I make 115k a year, plus another 10-15 on my consulting business. I live in MCOL area, save about 2k a month and am STILL terrified about retirement, even though it’s 30+ years away because I have two aging parents and my partner has a mom with some health issues that will probably get worse in the coming years. Both of us also have chronic issues.
It’s fucking asinine. I’ve done everything right. The world that was sold to me in middle school is a farce. And we’re happily ushering in autocracy while all this is happening.
Being terrified about retirement is a totally normal thing. There are two spectrums, unconcerned or terrified, and the other is saving enough or not. Few people thread that needle of feeling totally comfortable and also saving the right amount. Fortunately for you, your terrified feeling is going to likely ensure you are on the correct half of the savings spectrum. So, I guess you can find comfort in your terror.
I will say that $2k/month for two adults is only half what you could be saving in a tax-advantaged 401k. If your partner isn’t working or doesn’t have a 401k, then you can at least ensure an IRA is filled up annually. To ensure both are maxed, that’s between $30k-$46k annually, or up to $3.8k/month.
It's not that I never prioritized it. Every time made more money I had more expenses. And I never made a truly decent salary until my 40s bc I have been thru every economic downturn since the 90s which has reset everything lower. And not invested enough to benefit from those downturns in dollar cost averaging.
Then. College loans, graduate school loans, used cars, marriage(s), house mortgage and expenses, kids, daycare, few and far between frugal drive somewhere close vacations. When they finally got to grade school and high school I could start saving more.
But then realized I had to save for college which I thought would be 75k and is going to be between 150k to 200k per kid. Another one that is starting to creep up is helping my elderly parents and background planning for their care and possibly eventually living with us. Throw in a divorce (or 2 oops).
Yeah I will have some for retirement but nowhere near enough. On top of everything being eye watering expensive. House values have gone up but property taxes are insane where I live. All my insurance that I can't even use has skyrocketed (bc if you have a claim it becomes unaffordable).But I prob have to work to 75 (which is scary bc my body is already noticeably deteriorating) and hope somehow I pay off my house and maybe with extra from social security I can scrape by.
I figured my backup was my kids but now I have to assume they will get low paying jobs and maybe live with me forever since rent and houses are so expensive and good jobs scarce. But at least then they can contribute to household expenses.
I am normal practical no nonsense white collar middle age suburban midwest experience. Community college educated but from low middle class bg. I can't imagine a lot of people are in a different boat at the same level. And I am super budget conscious and frugal. Yeah those medians look very realistic. It's a bummer but you keep on going. What other choice does anyone have. At least I can pay my bills and buy food. That's what I tell myself.
AND at the end if I am unlucky and there is a huge market downturn right before or during my retirement you could be completely screwed even with what little you save. Everyone acts like those averages and medians are set in stone. Well they are not. At all. So yeah. It is difficult to plan for. Have to cross your fingers and hope for the best.
> Every time made more money I had more expenses.
That second line honestly sums up the American financial experience. Lifestyle creep is the real killer on finances. For me, I spent my first 10 work years at a stagnant helpdesk job because I lacked the drive to do something more. Through some hard work and a lucky break I had my first big pay bump in 2013 when my wage went from $11 an hour to $18.50.
I knew from watching family screw up their lives with lifestyle creep that this was dangerous. My wife and I had been perfectly happy the week before on $11 an hour, and I knew we could continue to be. So I got rid of that extra money by putting some in savings, but mostly attacking my debt (only debt was the mortgage).
I've followed that basic principle with every raise up until now, where I'm making about $115k and the wife has likewise grown from $9 an hour to $53k. Other than allowing ourselves a few splurges, we largely still live our lives on our 2013 wages.
I know we're definitely the extreme example in every possible way, but I've also watched a few close friends better themselves following my advice of "hide half of your annual raise from yourself every year".
Oh I agree 100%. But I def did not practice lifestyle creep. At least not in a material way. I am one of those spreadsheet track every dollar people that hang out on these subreddits. No fancy houses or cars or vacations or material items. But def LIFE expenses creep. They are unavoidable unless you commit to being single super saver fire freak. I was just trying to match the lifestyle I was brought up in. Lower middle class. And even that is difficult. Yes kids and divorces were my choice and fault. Just illustrating what I think is not a too far out there experience no matter what social strata you are in. Its hard. Is it harder. I dunno. My family struggled growing up too when everything was cheaper. I don't know what the answer is except to keep on keeping on.
I'll agree with this point and with the comments below. Many folks are strapped these days and believe they can't save. Unfortunately, that goes hand-in-hand with poor financial education. Multi-generational poverty is very real. It's easy to see when your entire extended family lives in lower income brackets. If everyone you know exists like this, then this can then be your reality.
The key to amassing a significant amount of savings is to start early. I'm not talking thousands or even hundreds of dollars. Small amounts per paycheck adds up over a longer time horizon.
I also believe that for older generations, their access to information, savings & investing options and overall financial planning was vastly different 40 years ago. Pensions, bank CDs and social security were the primary retirement vehicles until the late 80's(?). Then a flood of new stock market retirement dollars flowed into 401Ks. Unfortunately 401Ks also require and understanding of the market. How many times have we heard the story of panic selling and then keeping the remaining $$$ in non-interest bearing accounts. This locked in all those losses essentially permanently.
I guess my take-away is poor financial education leads to "less than desirable outcomes". Thanks for coming to my Ted Talk.
Yep, I resemble this remark. I was very lucky to have college paid for as my family heavily prioritized education. I learned value growing up in a lot of different ways.
My favorite that I still think about today is learning at 12 years old we could cash in my dad's retirement and get a Ferrari. But then we would have trouble paying the insurance on it along with our mortgage. All for something that only two of us could ride in (family of 6).
Our culture is based on buying the hot new thing and there's constantly a new hot new thing. Most people are more focused on consuming now than thinking about the future.
I won’t argue against that. The truth is, if most people were smart with their money my stock portfolio wouldn’t see big growth from all of that consumer spending driving up the stock price.
I was behind someone at the store yesterday who bought 1 lindor truffle, $20 in smokes and $20 in scratchers. People love to throw money down the toilet.
If you find it surprising that <10% of retirees have $1M in savings, you lead a very sheltered life with limited interaction with regular people.
Part of the reason there's such a big gap between how elected officials feel about "entitlement reform" and how voters feel about it is that Congress lives in the world where people get paid enough to max out 401k/IRA contributions and then some, and have white collar jobs in business and corporate management that you can still do when you're 70 if you want to.
1. Financial investing knowledge is the big problem. Most people don’t learn about investing or have fears about investing due to horror stories.
2. One real big emergency in America can significantly setback most peoples finances.
3. People aren’t earning that much money to live the idea of “buy a home, raise a family, and save big for retirement”.
It’s not budgeting. The only thing that matters is a persons savings/investment rate.
Society isn’t a pay yourself first culture, it’s run by consumer propaganda to keep you spending and thus keeping an economy very wealthy.
$100 per month may seem easy today. In the early 1980s, the minimum wage was only $3.35/ hr. If you had a decent job then, you made $8/ hr. Most people didn't have that kind of money to invest. Also, investing in an IRA was not easy because you couldn't easily buy any equities without a broker. There was no internet then. My first etrade account used a touch tone phone to make purchases. Finally, many companies still had pension plans. Whatever equity you built was in your home.
I can vividly remember my first stock purchase in the circa 1990. I wanted to buy 3 shares of something, total came out to be around $100. The commission for the trade was $35.
I got the message then that stocks were for rich people. It was literally impossible to put away $100 per month in the stock market back then because 30%-40% of it would be eaten by commissions.
Compound that with the fact for most poor people investing in the market is seen as a rich man’s gamble. My family is always scared for my savings “because the market can crash”. So they don’t invest. My mother has always kept the little she had on a bank account. Thankful I’m here to support her, but without me she’d be another statistic of a retiree living on $1000 a month and no savings whatsoever.
I work with the elderly, the 10% number matches my estimate.
Frankly it's pretty simple, from an American centric perspective. A lot of them just never saved, or never saved adequately. Most people are not good with finances. A lot of elderly folks thought they would get pensions and then got fucked. 401Ks didn't start to become popular until the '80s, do you think society magically became literate in them overnight?
Most people cannot budget for tomorrow because they're trying to pay their bills for today.
Many people think they're entitled to a higher standard of living than they can afford. Everyone wants to keep up with the Joneses, and our culture of our self value being determined by the things that we own. "Oh you don't have a new iPhone, ick."
And to add some relevance to today's economic situation. Do you think people working lower paying jobs can afford to put money away for retirement given the current state of housing costs? My brother-in-law in a seasonal town can't even rent a small two bedroom for less than $3,000 a month in the off season when its dead
I don’t know your part of town but in Southern CA, it seems to me everyone live and spend like a millionaire. This is why I believe most folks don’t have much savings.
The part you are missing is 401ks have really only been around since the 1980s. The vast majority of older people are *way* better off because many of them also have pensions in addition to absurd amounts of home equity. It's the people who are 50 and below who are hopeless with their current rate of savings.
I think a lot of people are very short minded. Investing can be scary and confusing and many people also figure they can use/need the money now and don’t want it tied up basically untouchable until they are 65. Which I somewhat understand but there’s a balance. Live a good life now but also prepare so you can live a good life later.
Budgeting is key and yes delaying a big purchase until the budget allows is ideal but there are a multitude of reasons why that’s not possible. Furnace taking a crap, hot water tank needs replaced, roof replacement, car breaks down, unexpected medical emergency, lose your job, divorce, death, natural disaster, etc., etc., etc.
In their minds they're still thinking of a time when 300-400K was a far more significant sum of money. Inflation has stolen the fruits of their labor and they don't realize it until it's too late. Misguided investors have sold them on bonds, annuities, and insurance products that fail to maintain purchasing power.
Well Shit! I just retired last week, and am over the freaking moon! I have no idea how wifey and I actually did it, but we saved, contributed to our 401K and did good with the sale of a piece of property that we've had for 40 years and retired with 3.1M. But I am still damn worried about where this country is going and can we make it to the end!
Not surprised at all.
Saving is an afterthought for too many… if they even think of it at all. And then with 401ks you have to be at least somewhat knowledge with what and how to invest the money.
Also — 401ks are a relatively recent thing. They started becoming popular in the 1980s. And not every company had them immediately.
So plenty of older people relied on pensions and would not have individual savings. Some companies or professions still do offer pensions.
And plenty of people are forced to rely on social security as well.
> What are investors doing wrong that causes this shortfall for so many people?
Nothing. Most people don't have enough money to save on this level, and many people prioritize living their lives, rather than having substantial savings when they are 75. This is not any evidence of "investors doing wrong."
> What are investors doing wrong
It's adorable that you think everyone is an investor.
When you hear about how many Americans live paycheck to paycheck, do you think that means what's left after maxing their 401k and IRA contributions?
>What do you think?
That you're quite ignorant of what life is like as one of the poors.
Congrats.
Concerning? Yes. Surprising? Not in the least.
Nobody is out there spinning straw into gold. To retire comfortably, you need two main things from what I can see (assuming you aren't simply relying on inherited wealth):
1. A source of income that is large enough so that someone can adequately save for retirement, and
2. The financial literacy to actually know what to do with that money so that it is there when they plan to retire.
Lots and lots of folks out there that have 1 or none of the above. And its not necessarily their fault, as cost of living has greatly out-paced wage growth. Previous generations had housing costs that were proportional to their income, and more folks had access to pension systems, which are now rare as hen's teeth. And someone correct me if I'm wrong, but I get the distinct impression that kids finish their schooling these days with no real education in how to manage money, unless perhaps if they actually went to school for finance.
Most retirement investing is rife with high fees. My 401k charges me $100 a year in fees for just investing in SPY. That's $10k, I'm just paying in a service fee over the lifetime of my portfolio. Add to that expense ratio of retirement products are 2x-3x more than their ETF counterparts and you can see how this can compound poorly for the average investor.
Without commenting on morality, the fact is that most people are poor and don't have an income sufficient to simultaneously have a viable life in the moment (ie providing themselves food and shelter) *and* to save so much as a single cent. When you have little to no money, investing it does not provide much value. 10% of the 100 dollars you manage to save in a year is a whopping $10. Meanwhile someone who has income sufficient to put away $30,000 a year gets $3000. Most households make less than $50k per year. A household is more than one person, which means that paltry income is spread across more than one person on average. Summing it up, its an income problem, not because people are failing to invest their nonexistent money. I mean c'mon, is this not common knowledge by now?
Brother, the average salary of a person in the US is like 60k, you seem a bit detached.
People don’t make shit for money because wages have stagnated and the cost of living has skyrocketed. Less and less people are going to get anywhere near that number by retirement age.
People retiring now are more likely to have things like pensions. You don't need $1m in the bank if you have a pension to live off of.
Most people working now rely on their own retirement savings and people are even more concerned with social security, so they prioritize retirement savings even more.
You’re watching the evolution of defined benefit retirement to self directed 401k based retirement. Depending on your age you should be worried about boomers electing politicians who will transfer your wealth to poorly planned boomers who vote.
Tough times are coming. Start planning
I think if you look at the demographic of retirees this tracks (baby boomers) they didn’t have the ease of access to the stock market and investment knowledge online. They largely relied on pensions and social security. I doubt their problem was trying to time the market as much as participation in the market throughout their lifetime. I’d venture to say most people beyond 65 today were not participating in the market until the later years of life if at all.
I have to agree. The way my parents talked, investing was not something "people like us" did. It wasn't readily accessible (in their minds, right or wrong) and/or it was for the wealthy.
I deal with the elderly on the daily in my profession, most people have next to nothing in savings and live off social security - disability. Even those that do have finances do not have enough save for a critical illness, especially if they are not 65 yet and cant access medicare.
I don't care what these studies show lol, most people are barely scraping by and its really fucking sad. Especially when they get sick.
I'm not sure what you are expecting as there are 330 million people and not everyone can be millionaires. The stats are the stats. I don't remember the exact number but only about \~12% of households are worth 1 million or more.
Most Americans aren't financial savy and there are other external issues that might have cause them money over their lifetimes. Divorce, deaths, medical conditions, job losses, etc.
Plus many big life "choices" are made in late teens our early 20s. Whether to extend schooling, and in what, where to live, and who to partner with and whether to have kids (or keep them).
All those decisjon essentially dictate a lot of the life you are going to lead from then on. I have a hard time judging a 25 year old, say, for any of these choices.
Most likely because most people don't start saving for retirement until after their 20s.... there was a survey done and something like 39% started saving for retirement in their 20s.
Then you add in that the average person is using a 401k as a retirement vehicle....and the average 401k return is ~4.9% annualized... you can start to piece the puzzle together.
Someone starting at age 30, with a 4.9% annualized return, would need to contribute over $800 a month for 37 years to retire with a million dollar portfolio. It's just not feasible for the average person.
I agree with you that it is not an investment problem, it’s a savings problem. No budget means no set amount aside to save/invest in the first place. People wait to save until they make more in their 30s and 40s, and by then you missed a lot of compound interest.
Curious if/how this accounts for pensions. My wife has a public school pension. We save a lot on top, but I could see a lot of folks with pensions not saving
This is what I’ve seen in my group of family and friends who are in their late 50’s-70’s.
They all work typical warehouse jobs and had multiple kids. So their income was always capped. They typically have paid into company 401ks but at low rates like 5-10%. They get close to retirement age and have 80k or so sitting in “ bad” investments. They get scared of losing their 80k because the market is “ gambling “ so it sets in money market or bond funds that they also don’t understand. So instead of growing their egg just a little, it just sits there with no real growth. About this time a parent dies and they inherit an old house or some small life insurance like 25k. They sell the house and have to split it with siblings so they get another 25k. So here they are at 62, scared of losing their 125k so they hold onto it like the devil. So all of those trips to Hawaii or moving to Florida plans never happen because they can’t make their self spend a dime. Because they can’t mentally spend it, they have to keep working and then start SS early to live.
They eventually die and their kids and grandchildren split the remaining 125k or whatever it is and swear they’ll never work until they die. But they do, the cycle just repeats.
Most people don't earn enough to make significant retirement contributions. You can save for retirement in a 401k your whole life but if you're only saving 100 bucks a month, you're not going to make it.
This article is just click-bait and not actually representative.
My 401k and cash are one thing. However, I have multiple properties that are worth much more than my cash. I plan on selling these properties one-by-one to pay for my retirement. I might only have $130k in 401k and cash, but I have $4MM in properties by the time I retire. I guarantee the majority of wealth is in other areas than 401k and cash. It's not the average you need to consider either, the majority of business owners who own the majority of wealth in the country have it not invested in the stock market. My wealthiest friend is majority owner of a few companies and none of that would be computed in this Yahoo article.
A lot of people live paycheck to paycheck or close to it. To have ample savings to never need to cash out your 401k for emergencies is a privilege denied to many. I think you're assuming everyone is upper middle class with six figure paychecks, and has had a role model or someone in their life teach them about the stock market. That's something that gets passed along in upper middle class familes.
I'm trying very hard to be polite with this comment, I hope it does not come off as too snarky OP... Have you interacted with a decent cross-section of people in their 20s to 40s lately? The general consensus I get from folks this age is that the costs of everything have risen far faster than their salaries have, a primary vehicle for wealth generation (home ownership) is getting increasingly out of reach, and companies continue to squeeze them on benefits such as medical coverage and 401k contributions.
While the last year or two have seen some of this damage undone on a few fronts, on others (like home ownership costs) its gotten far worse, and is now coupled with a burst of inflation that has done damage to them. If given the option between surviving to see another day, or socking away some money into a 401k, which option do you expect them to choose?
Again, not trying to be a jerk, just trying to get across the point that for a lot of people out there, despite the strong economy things still generally suck for them. Hell, I'm an educated, professional business owner, and things suck for me right now! Imagine what your typical low-income father of four is feeling like right now between food prices, rent, vehicle costs, etc. Not to mention that an increasing amount of the wealth that is being generated is being concentrated in the hands of the ultra-rich, rather than the rest of the country.
It's a very academic question that smacks of "why are the non-rich people not doing things that would make them rich?", and feels very disconnected from events on the ground.
Just in time for social security to face a 20% cut when the surplus runs out. Congress could pass a simple law that says social security is NOT income for federal income tax purposes and lift the overall quality of life of retirees without jeopardizing social security. Why exactly is my federal payroll tax being taxed again when given to someone else? This is stupid! It effectively gives the Fed government two bites of the same apple! Tax the same dollar twice!
These figures overstate the savings. Using average instead of mean distorts the outcome dramatically. The average net worth of you, me, and Warren Buffet is probably in excess of $30B. That doesn’t really paint the full picture does it?
Most Americans have no financial literacy and it’s not their fault, it’s not taught.
They have no idea how much they should save and what should go into their savings. They don’t know of their take home, what percentage should go towards what buckets.
I understand adopting the knowledge of investing from rich guys but why do so many people also adopt their social prescriptions?
Everyone could benefit from more discipline and education on investing, but most people retire with so little savings cause they are broke!!!
Wages have essentially been stagnant compared to inflation and cost of living. Housing and healthcare are luxuries to most people. There’s a reason the stock market is 90% wealthy people, the poor and middle class don’t have much if any leftover to invest.
People don’t understand investing and are scared by it. This causes a lot of people to just push off retirement saving until they are older. This is the worst thing to do since time is the best thing in the market
One of the reason that a lot of current retirees don't have that much money saved is because 401(k)s weren't really mainstream until the 1990's, which means that they generally weren't available until current retirees were midcareer or later.
This is somewhat made up for by the fact that a lot more retirees have actual pensions, making their savings less important.
Currently, 12% of Americans are millionaires, with that number increasing with age. 40-45% of college educated households aged 50-60 are millionaires for example.
>If the retiree has been diligent in investing in the stock market over their lifetime
Again, this was not something easily available to most current retirees the way it is today.
And there are also going to be a decent number of people who just make too little to save meaningfully for retirement.
Average is skewed by the wealthy. Look at median. Average vs median: Average retirement savings balance by age Age group Average retirement savings balance amount 35-44 $141,520 45-54 $313,220 55-64 $537,560 65-74 $609,230 The actual 50th percentile: Median retirement savings balance by age Age group Median retirement savings balance amount 35-44 $45,000 45-54 $115,000 55-64 $185,000 65-74 $200,000 Edit: formatting
For the first time in my life I'm above average. Only by $1500 but it's something. Luckily that doesn't include my pension.
Check out what the Net Present Value is for your pension, you will feel even better.
Mines through a construction (multi employer) union so we don't get the individual value because there is no buy out option. I know total value of the entire pension. And that with my 11 years of service I get $800/month if I retire at 62. In the current contract that number goes up $110/yr of service. That $110 stays steady through the next 2 years as we have elected to up our IRA contribution.
You can make an assumption for how long you’ll live after you start the pension. Then use some discount rate (usually inflation) for a series and it should give you the present value. There are online calculators. You can compare that with your ira or other retirement account.
You can estimate by taking the annual payment and dividing by 4%. A $10k/year pension is worth ~$250k. *Assuming the pension is inflation adjusted each year.
What's a pension.
Being above the average when it comes to savings is a good thing.
If these are just retirement accounts, it is biased downwards. Retirement savings are not exclusively in retirement accounts.
Nor in single accounts, necessarily.
This is also very true. For example in my instance I have almost 500k in retirement accounts but it is split up across four different companies in two different 401ks an IRA and a Roth IRA. One of them has almost 300k and another only has 6k so none of the reported numbers from those companies would actually capture my real situation. Average would indicate I have 125k. Median would say I have 101k. But we know that I have 4 - 5x those numbers. So take everything with a grain of salt because stats can be used to say whatever the writers want to say and until each individual circumstance is reviewed the truth will likely be different.
I wonder how many coastal retirees downsize to a lower college area and cash out house equity? I would be tempted to do it. I also wonder how many marriages have one spouse with large amounts and another with low amounts. Household mag be better situated. Edited. Should have said lower col area but a Midwest college town may be more similar to what they are used to at a fourth of the price. It may not be a horrible way to retire
Well if you raised a family and owned a 4+ bedroom house and now it is just 2 of you then why wouldn’t you downsize? Having a larger house just means having a larger liability that requires more money to maintain and insure.
The house is paid off. You've lived the best years of your life there. Friends and neighbors near. No asshole neighbors and no shared walls. No one upstairs. You know where everything is. Carry me out on a stretcher.
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Downsizing doesn’t always work out how one might expect. Where I live, which I suspect isn’t unique, it’s a challenge. I would love to move to a smaller home with everything on one level in a few years. Very few such homes have been built in the last several decades. Most new and newish construction is for McMansions. I own a nice home in a good neighborhood in a great school district. To find the type of house that I would like, it would cost a good $100k more than I would get for my current house and it would be in a less desirable neighborhood. The other option is a house at least 60 years old that would require a large investment to make adequate.
I think most people only contribute up to match on their 401ks in some default target date fund and have the majority of their wealth in their homes.
> Retirement savings are not exclusively in retirement accounts. Lots of people also use their primary home for retirement. You can downsize to a smaller place like a condo after retirement, then have a few extra hundred thousand spending money.
~~spending~~ *healthcare* money
Even just having a paid off house means no mortgage or rent. That is effectively the same as income.
As long as you are also making an income
These numbers don’t include assets or pensions though right? That seems like it could be a big factor
The source for the table that user is posting is the October 24, 2023 [Survey of Consumer Finances](https://www.federalreserve.gov/econres/scf/dataviz/scf/table/#series:Retirement_Accounts;demographic:all;population:all;units:median). Specifically just of retirement accounts. So it appears to exclude any assets not in a 401k or IRA. Which seems pretty skewed. I’m not the average saver, but personally that would exclude both my home and my brokerage accounts. Which makes up the vast majority of my savings. Which is telling since I have maxed out my 401k contributions for over a decade now. What this does tell us is that: * the majority of Americans do not come close to fully taking advantage of the tax benefits of these investment vehicles * that it is primarily the top income earners that do * that 401k accounts **on their own** have essentially failed to prepare the median worker for retirement * that for the median worker, 401k contributions did not replace pension contributions
I mean nothing beats a pension and it was very clear from the beginning. The average American doesn’t save enough/can’t afford to save enough. If pensions existed they wouldn’t have to and would stay with said companies regardless of how shitty they are.
Nothing? This seems to ignore a few realities though. First, a pension also keeps you connected to a single company to obtain the maximum benefit. The days of working for one company for 30 years are long gone. Hell, since I left the military I've worked for nine different companies, getting more money with each move. Even assuming that each place I worked actually offered a pension (several were very small companies) I'd hate to have small bennies coming in from nine sources. The portability of a 401k is far superior to any pension. Second, I like that I have control over my retirement funds as opposed to a company that may or may not have my best interests in mind. I can move my money as I see fit, and invest in many different vehicles. Third, this ignores how pensions are still reliant on the company for management, solvency and funding. One has only to look at failed pension plans at places like airlines and steel companies, where some people relied on the pension for their whole retirement and walked away with less than $100k to live on. (Obviously, this isn't a problem for state and federal pensions... yet.) Aside from this, a properly constructed and managed 401k/IRA plan can outperform the hell out of most if not all pensions. So yeah, pensions can be great, and yeah, 401ks were supposed to supplement retirement, but I definitely prefer more control of my own destiny. I'd say financial literacy is more the problem - I know way too many people who don't understand money handling in general, much less investment strategies and plans. This is one spot where education is woefully poor.
Excellent points. People romanticize ye olde good olde days of pensions, but no one stays at one company long enough to vest in the pension plans (even if they were offered). Late 40’s here. None of my friends (who are within a year or two of my age) have worked more than 10 years at one company. The only “exception” is one guy I know who started his own landscaping company out of his parents’ house like 25-30 years ago (and is still going strong). He now owns that house.
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Pensions are few and far between now. The last generation that knew such a thing
Pensions are much less common today than last generation, but most government employees still have them. That's about 15% of the workforce. There are many Americans with government pensions worth more than a million dollars.
My pension is a big reason why I'll never leave government employment. I could probably make more in the private sector, but I really enjoy the security of having a pension. I still max out my IRA, but I view that more as future fun money post-retirement.
I think it should be illegal to use word “Average” in personal finance.
"If you use the word 'average' in this financial report, I'm calling the cops"
The median is really eye opening and shows how much an average retiree depends on social security.
Comparing the median to the average shows the wealth disparity in this country
on average me and Elon are billionaires!!!
Is this savings as in liquid or near-liquid items like retirement accounts, brokerage accounts, checking accounts, etc? Or is this net worth which includes housing? If it's the latter that's super concerning and very low.
For some reason, most current net worth calculators ignore housing and mortgages. I find this ridiculously ignorant, as it tends to be the primary factor of debt and if not paid will most certainly negatively impact one’s net worth.
If they're excluding home value and mortgage balances, then they aren't net worth calculators. Even the calculation for liquid net worth excludes home equity but still subtracts mortgage debt.
Yeah...take away my house equity and I'm poor as shit on paper lol.
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Why does the article refer to tax refunds as "found money". It's an overpayment, interest free loan to the government. It's not found money.
This kind of framing around tax refunds pisses me off to no end.
Yep. And people who are excited to get a big refund. If I'm more than +/- $500 I'm mad that I gave the government free money all year.
I blame the education system. It is not set up for, and does not teach, basic finance handling to anyone in the U.S. I have many friends who will tell me they love getting refunds because they can't budget during the year. Well no surprise there...
a LOT of people rely on their tax refund to make major purchases for year. In that sense it's basically treated as a windfall event rather than getting your own money back from a hostage taker.
I've had coworkers that have payroll deduct additional taxes so that they're forced to save. They then blow the tax return money on things frivolous hedonistic treadmill items like a new, marginally bigger TV. I guess it's better than taking on debt...
60% of Americans don’t have $1,000 in a savings account for emergencies. It doesn’t surprise me at all that most have less than $1mil.
What's more crazy, even if they did, what modern emergency is $1k gonna solve?
A McDonald’s craving
Not after the delivery fees!
Stop getting fast food delivered… turns a $10 meal into a $28 meal.
Yeah but then I don't have to wear pants.
Cause you can’t afford them after the service fee, delivery fee, and tip.
Who needs pants when you're lovin' it?
McDonalds, hire this person
Can’t. He doesn’t own pants…
My A/C went out last year . . was $400 to fix. So $1K will take care of some things.
This. It’ll still buy things like a refrigerator, stove, washing machine, most car repairs,etc.
That was then, those items are now >$1k
I bought a new mini split AC system it cost $11,500
Yea I bought a new system also . . One not repaired and it was 10K . . . so yea Like Dave Ramsey says, $1k is a starter emergency fund . . not a real one.
I mean… there are a tons of emergencies that can be fixed with 1k… not sure what you mean… It won’t solve all emergencies, and there could easily be emergencies that require more than 1k, but let’s not pretend 1k can’t do shit
Hot water tank replacement if you can do the work yourself. Can possibly get you through an install if the tank is on the cheaper end.
Yep cost me $100 over the weekend since the water heater was still under warranty.
Agreed. Seems like probably closer to about $4-5k is needed in a pinch. Ideally, 6mo worth of bills saved would be the best, but really, how many people can actually save that?
It's totally possible, but not a priority for most.
>It's totally possible, but not a priority for most. This is the real answer that most do not want to hear. I know sooo many people over the age of 35 that only save what they have withheld from their paycheck + any employer contribution. So somewhere between 4 - 6%? And those are the ones that are "Saving for our future!" (Personal experience of only one example) And yet those same folks order Door Dash 2 - 3 times a day while husband is WFH. The wife doesn't work since hubby makes 6 figures and she doesn't *have* to. But they get Amazon deliveries on the daily. Make 2 or 3 Goodwill runs a year to donate new and almost new "stuff" they ordered because of boredom. So, yeah, a lot of "we save what we can" is because of personal choices, not necessity/hardship.
A set of new tires, a few scratch off tickets, and a new shirt for an interview at Wendy's
In 2022 the median family had $8000 in transactional accounts (which includes checking and saving)
Thank you. That's a sooo much better way to phrase it instead of this same dumb factoid repeated over and over and over again to justify people's points.
I have $0 in savings accounts because I put all my spare funds in stocks
You're minutes away from financial ruin then. (New MSNBC headline writer here.)
Similarly, the common "living paycheck to paycheck" ones are usually deceptively defined as well. Depending on where they set the terms you could have a person maxing out their 401k fall into that category. That's not to say people aren't struggling, but there are more useful metrics that aren't so clickbaity.
I live paycheck to paycheck with about 40% of my gross
That’s me! I max out my 401K and Roth so I do struggle a bit but I’m determined to get out of this grind and retire as soon as possible!
"60% of Americans don’t have $1,000 in a savings account for emergencies." I see those scare headlines all the time. They usually are specifically talking about having $1k in a literal savings account. Most people will have some money in a another type of account plus they have Credit Cards. I've seen a lot of people posting that they are living paycheck to paycheck but omit they are maxing out their 401k and paying down a mortgage. As for how many retire with $1MM liquid, I think it's 5% of American households. That always makes me think, "If a husband and wife have a household net worth of $1 million, are they both millionaires?"
“My savings rate is only 25% I’m literally drowning” - average /r/personalfinance poster
That's just parroting the typical yahoo finance article. "Dear Mr Yahoo, I am 56 years and have $3.6 million in my bank account. Is that enough to retire comfortably?". Answer: No way, you're completely screwed! Btw, did you know most billionaires invest their money in art using Art Finance (r) services? Take the free survey to find out how you can become rich as well!
I'm not sure that makes sense. Credit isn't money, it's just credit. Ideally you wouldn't use something with a 12% APR ever. If it's an emergency, doubtful that it would be paid off in a month. I wouldn't ever consider a credit card part of a financial strategy. That's like considering an airbag part of your everyday driving. Could save your life but it can break your nose and is generally not a good time. Last resort only. $1M liquid was never the goal. The 401k and Roth aren't liquid. The article might be skewed but the general message holds true: a lot of Americans don't have half of what they need to have saved or invested.
>If it's an emergency, doubtful that it would be paid off in a month. Can confirm, the last 2 years I had an 'emergency' around the last week of november and first week of december both years, which wiped out my savings both times. So I've done the 'credit card christmas' thing two years in a row, and both times it took until mid February to pay them off.
Credit doesn't accumulate interest instantly and offers more purchase protection than cash/debit. Sub 2% savings account lead millenials to just have personal brokerages and checking basically.The time it takes to sell stock and move the money back to your checking account is shorter than credit card billing windows.
Hell I’m surprised the number of millionaire retirees is that big with 10%
Including a home net worth and possessions, it seems olausible
It's almost directly proportional with the % of adults with $1M+ net worth (8.8% of US adults).
That’s why Social Security is so crucial. That at least gives people about $500,000 of retirement savings when they’re eligible when it comes right down to it. It’s still not enough to survive on.
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Depending on their pension payments, they may have the equivalent of a million saved when you add their savings + the value of the pension. Maybe not, but interesting to calculate. Where are they getting the disability as it’s unusual to get disability on top of social security and also unusual to get disability after 65.
My dad is a veteran and has the type of cancer that qualifies for something called “aid & attendance” I believe. It’s through the VA and I don’t understand how it all works completely. My younger brother set it up for them but he passed and I didn’t listen to all the details.
My old man is on his 30th year of retirement and he never saved anything. He lives on his pension and SS and lives just fine. Although, he's lucky that he's always had medical through his pension even though he's never really needed it.
Having medical is so huge. He’s very fortunate to have that. That alone is worth hundreds of thousands.
Medical is the ONLY reason I cannot retire now or anytime soon. And my insurance just cancelled its agreement with the major medical institution in my town, so I can’t even see the same doctor I have seen the last 10 years.
No, statistics say most of them are not prioritizing their retirement as you are.
Also 40s -- not paying down home aggressively because that's a pretty huge loser if you secured a 3% mortgage. I definitely qualify for saving aggressively though :-)
Yes, for us it has been a heart over head decision. On paper it’s not the most financially savvy choice but we’re trying to pay off the house before our son goes to college just to help cash flow those expenses when they come. We still have a 529 plan as well.
I get it. My plan was to pay off my mortgage before retirement back when I had a 5% mortgage. But a 3% mortgage, I can't justify it. So now I'm just aiming to have enough money lying around outside of retirement accounts (ie. brokerage) to pay off the mortgage if I wanted to. Got quite a ways to go still! :-) There's always stuff up in the air, like my mom is in her 70s. If she sticks around until I'm ready to retire, I may use that money to buy out my siblings and take over her house.
Many people in the over 65 bracket receive pensions so I don't find it alarming many don't have huge amounts of money saved. Now if the next generation after them doesn't have money saved/no pension then it's a problem.
"What are investors doing wrong that causes this shortfall for so many people?" Eating food, paying rent, having kids. Amateur hour shit.
Family, religion, friendship. These are the three demons you must slay if you wish to succeed in business.
I'm willing to sacrifice all three. where's my money?
Well, first you need to anoint a silver sword with Demon Slaying, preferably up to +2. Then you need to actually slay some demons that take the form of your family and friends (assuming those exist). Lastly, you must slay an entire religion.
Nothing. Investors are ok. It's the other people who aren't doing jack that are screwed.
It’s that the investors aren’t giving everyone money
When i had my company maybe 15 out of over 100 people contributed to the 401K and took the match. They all saw reduced paycheck vs free money. Living for the weekend not the future.
I have 40 year old colleagues making 100-115k per year who do not have a 401k. These are otherwise fairly smart, goood people…who live paycheck to paycheck. Blows my mind
Let's not forget the 401k was invented ~45 years ago and it took some time for employers to swap from pensions. I think these stats will be relatively useless for another 20 years. Then we will see how the 401k experiment plays out IMO.
I think they are meaningful for looking at the macro state of retirement for younger generations. Older generations it means nothing though.
This is a key point. My dad has a pension and didn’t have 401k matching for a bulk of his career. He invested on the side putting money into a Roth IRA, but a bulk of his wealth is in a regular brokerage account and not a retirement account.
It has nothing to do with investors doing anything wrong. Investors? Most Americans don’t even save money, let alone invest it. Ask the average person on the street today, you think they even know what an ETF is? A 401k? Roth IRA?
The USA is a large country and there are plenty of people who might only see $1.5 million in lifetime earnings. Saving for retirement can be an uphill battle. This is why programs like social security are important.
🎯🎯🎯
Portuguese here, social security will prob fail in my country in a couple of years. Our government is actively bringing hundreds of thousands of new unskilled workers just to contribute to our social security. When low births and better outside opportunities drain our skilled workers the system will fail like a pyramid scheme. I don't know the solution but social security is only a temporary solution that worked really well when the working class was larger than the non-working population
Demographics not looking good for Portugal: [https://www.worlddata.info/average-age.php](https://www.worlddata.info/average-age.php) The U.S. population is reasonably young and growing. Immigration of skilled workers will help out a lot in the U.S. over the next few decades.
Give every baby like 10k. Put in a mutual fund. By the time they retire it'll be a big amount.
Assuming they cant and wont access it before retirement.
The government should remove the cap on Social security. Everyone should pay the same percentage. No matter how much they earn. This is not fair to low earners. Easy fix, no one will say it.
And are you going to allow those that pay beyond the cap to get increased payments? Also your comment on paying the same percentage is wrong. They don’t pay the same now. Social security is already significantly skewed to where low earners get a much bigger chunk of what they pay back compared to what high earners do. Every dollar put in on the low end gets over 80% back while on the top it’s only about 15%. High earners may not pay for anything above the max but they also get no benefits for it.
The majority of Americans don’t have high salaries or jobs with good benefits. Raising a family is expensive. And there are lots of pitfalls like divorce that eats into wealth and medical bills from an illness. Cars are expensive and most cities don’t have adequate public transportation systems. In short, surviving and thriving by savings large sums of money is difficult for most people. Besides you don’t really need a million bucks to retire. For many people, a paid off house, a small nest egg and social security is enough to get them by. They just have to make it to 65.
I think most Americans don’t prioritize retirement savings.
Large numbers of Americans work in low wage service or blue collar jobs. They dont save for retirement because they cant afford to. There is a stereotype of them all being 40k millionaires living above their means. I work in a restaurant and I dont see very many people living like that. Most are frugal and still broke. I will only be able to retire because I had some lucrative head chef jobs when I was younger and saved like crazy when I was working them.
There are plenty of people that make good wages and don't think saving for retirement is important. I work in construction as a union plumber with a great retirement plan. I've worked alongside guys that are prevailing wage that are making $95/hr because they have no benefits or retirement. They still can't manage to save for retirement because they live like they make $150/hr.
Right. They choose not to, not can't.
Retire someday or buy a brand new f250 diesel King ranch edition with saddle bag seats NOW? I think we all know what is more important here.
I want a newer truck not gonna lie, a lot of my coworkers have them (blue collar here). But maxing out my retirement acct and a paid off ‘06 4Runner makes me sleep better at night
I do too. But I just can't bring myself to spend the money. I'm on my second truck I bought from Hertz. Both 1 year old, low miles, low level trim package and a solid price. I need a truck so I do it on a budget. I had an apprentice not long ago with a $900/month truck payment. 20y/o lives at home with his parents and could be setting himself up financially for a good life. But instead pissing away 50% of his income to drive a big ass diesel truck.
It's some of each. Certainly, there are Americans who can barely make it. But I have also known plenty of people who think, for example, repeated Disney vacations on credit cards are "necessary", because "it's for their kids". (I don't know for certain they weren't also saving for retirement, but it's a mindset.)
I disagree with OP that poor budgeting is the main reason that most Americans lack adequate savings and retirement. Sure, it's a contributing factor but it's out of control income inequality and low wages that are the real problem.
It’s certainly a factor, some people live “paycheck to paycheck” only because they simply must have a McMansion, a new car every 4 years and two kids in private school. That is not the experience of most living paycheck to paycheck though. Americans are making painful financial compromises and investing for retirement is not always their highest priority.
I make 115k a year, plus another 10-15 on my consulting business. I live in MCOL area, save about 2k a month and am STILL terrified about retirement, even though it’s 30+ years away because I have two aging parents and my partner has a mom with some health issues that will probably get worse in the coming years. Both of us also have chronic issues. It’s fucking asinine. I’ve done everything right. The world that was sold to me in middle school is a farce. And we’re happily ushering in autocracy while all this is happening.
Being terrified about retirement is a totally normal thing. There are two spectrums, unconcerned or terrified, and the other is saving enough or not. Few people thread that needle of feeling totally comfortable and also saving the right amount. Fortunately for you, your terrified feeling is going to likely ensure you are on the correct half of the savings spectrum. So, I guess you can find comfort in your terror. I will say that $2k/month for two adults is only half what you could be saving in a tax-advantaged 401k. If your partner isn’t working or doesn’t have a 401k, then you can at least ensure an IRA is filled up annually. To ensure both are maxed, that’s between $30k-$46k annually, or up to $3.8k/month.
It's not that I never prioritized it. Every time made more money I had more expenses. And I never made a truly decent salary until my 40s bc I have been thru every economic downturn since the 90s which has reset everything lower. And not invested enough to benefit from those downturns in dollar cost averaging. Then. College loans, graduate school loans, used cars, marriage(s), house mortgage and expenses, kids, daycare, few and far between frugal drive somewhere close vacations. When they finally got to grade school and high school I could start saving more. But then realized I had to save for college which I thought would be 75k and is going to be between 150k to 200k per kid. Another one that is starting to creep up is helping my elderly parents and background planning for their care and possibly eventually living with us. Throw in a divorce (or 2 oops). Yeah I will have some for retirement but nowhere near enough. On top of everything being eye watering expensive. House values have gone up but property taxes are insane where I live. All my insurance that I can't even use has skyrocketed (bc if you have a claim it becomes unaffordable).But I prob have to work to 75 (which is scary bc my body is already noticeably deteriorating) and hope somehow I pay off my house and maybe with extra from social security I can scrape by. I figured my backup was my kids but now I have to assume they will get low paying jobs and maybe live with me forever since rent and houses are so expensive and good jobs scarce. But at least then they can contribute to household expenses. I am normal practical no nonsense white collar middle age suburban midwest experience. Community college educated but from low middle class bg. I can't imagine a lot of people are in a different boat at the same level. And I am super budget conscious and frugal. Yeah those medians look very realistic. It's a bummer but you keep on going. What other choice does anyone have. At least I can pay my bills and buy food. That's what I tell myself. AND at the end if I am unlucky and there is a huge market downturn right before or during my retirement you could be completely screwed even with what little you save. Everyone acts like those averages and medians are set in stone. Well they are not. At all. So yeah. It is difficult to plan for. Have to cross your fingers and hope for the best.
> Every time made more money I had more expenses. That second line honestly sums up the American financial experience. Lifestyle creep is the real killer on finances. For me, I spent my first 10 work years at a stagnant helpdesk job because I lacked the drive to do something more. Through some hard work and a lucky break I had my first big pay bump in 2013 when my wage went from $11 an hour to $18.50. I knew from watching family screw up their lives with lifestyle creep that this was dangerous. My wife and I had been perfectly happy the week before on $11 an hour, and I knew we could continue to be. So I got rid of that extra money by putting some in savings, but mostly attacking my debt (only debt was the mortgage). I've followed that basic principle with every raise up until now, where I'm making about $115k and the wife has likewise grown from $9 an hour to $53k. Other than allowing ourselves a few splurges, we largely still live our lives on our 2013 wages. I know we're definitely the extreme example in every possible way, but I've also watched a few close friends better themselves following my advice of "hide half of your annual raise from yourself every year".
Oh I agree 100%. But I def did not practice lifestyle creep. At least not in a material way. I am one of those spreadsheet track every dollar people that hang out on these subreddits. No fancy houses or cars or vacations or material items. But def LIFE expenses creep. They are unavoidable unless you commit to being single super saver fire freak. I was just trying to match the lifestyle I was brought up in. Lower middle class. And even that is difficult. Yes kids and divorces were my choice and fault. Just illustrating what I think is not a too far out there experience no matter what social strata you are in. Its hard. Is it harder. I dunno. My family struggled growing up too when everything was cheaper. I don't know what the answer is except to keep on keeping on.
I'll agree with this point and with the comments below. Many folks are strapped these days and believe they can't save. Unfortunately, that goes hand-in-hand with poor financial education. Multi-generational poverty is very real. It's easy to see when your entire extended family lives in lower income brackets. If everyone you know exists like this, then this can then be your reality. The key to amassing a significant amount of savings is to start early. I'm not talking thousands or even hundreds of dollars. Small amounts per paycheck adds up over a longer time horizon. I also believe that for older generations, their access to information, savings & investing options and overall financial planning was vastly different 40 years ago. Pensions, bank CDs and social security were the primary retirement vehicles until the late 80's(?). Then a flood of new stock market retirement dollars flowed into 401Ks. Unfortunately 401Ks also require and understanding of the market. How many times have we heard the story of panic selling and then keeping the remaining $$$ in non-interest bearing accounts. This locked in all those losses essentially permanently. I guess my take-away is poor financial education leads to "less than desirable outcomes". Thanks for coming to my Ted Talk.
The biggest factor is having parents who prioritize education and can help out financially.
Yep, I resemble this remark. I was very lucky to have college paid for as my family heavily prioritized education. I learned value growing up in a lot of different ways. My favorite that I still think about today is learning at 12 years old we could cash in my dad's retirement and get a Ferrari. But then we would have trouble paying the insurance on it along with our mortgage. All for something that only two of us could ride in (family of 6).
Hard to prioritize saving for retirement when you make 15 bucks an hour and the cost of everything around you continues to skyrocket.
Our culture is based on buying the hot new thing and there's constantly a new hot new thing. Most people are more focused on consuming now than thinking about the future.
Consumerism is so ingrained in American culture.
I won’t argue against that. The truth is, if most people were smart with their money my stock portfolio wouldn’t see big growth from all of that consumer spending driving up the stock price.
I was behind someone at the store yesterday who bought 1 lindor truffle, $20 in smokes and $20 in scratchers. People love to throw money down the toilet.
A sensible purchase. Lottery tickets are a form of retirement savings, and smoking cuts down on the number of years you’ll need retirement income!
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If you find it surprising that <10% of retirees have $1M in savings, you lead a very sheltered life with limited interaction with regular people. Part of the reason there's such a big gap between how elected officials feel about "entitlement reform" and how voters feel about it is that Congress lives in the world where people get paid enough to max out 401k/IRA contributions and then some, and have white collar jobs in business and corporate management that you can still do when you're 70 if you want to.
1. Financial investing knowledge is the big problem. Most people don’t learn about investing or have fears about investing due to horror stories. 2. One real big emergency in America can significantly setback most peoples finances. 3. People aren’t earning that much money to live the idea of “buy a home, raise a family, and save big for retirement”.
It’s not budgeting. The only thing that matters is a persons savings/investment rate. Society isn’t a pay yourself first culture, it’s run by consumer propaganda to keep you spending and thus keeping an economy very wealthy.
$100 per month may seem easy today. In the early 1980s, the minimum wage was only $3.35/ hr. If you had a decent job then, you made $8/ hr. Most people didn't have that kind of money to invest. Also, investing in an IRA was not easy because you couldn't easily buy any equities without a broker. There was no internet then. My first etrade account used a touch tone phone to make purchases. Finally, many companies still had pension plans. Whatever equity you built was in your home.
I can vividly remember my first stock purchase in the circa 1990. I wanted to buy 3 shares of something, total came out to be around $100. The commission for the trade was $35. I got the message then that stocks were for rich people. It was literally impossible to put away $100 per month in the stock market back then because 30%-40% of it would be eaten by commissions.
Compound that with the fact for most poor people investing in the market is seen as a rich man’s gamble. My family is always scared for my savings “because the market can crash”. So they don’t invest. My mother has always kept the little she had on a bank account. Thankful I’m here to support her, but without me she’d be another statistic of a retiree living on $1000 a month and no savings whatsoever.
This is true. My grandparents would only buy savings bonds. They didn't even trust the banks
Thanks to most Americans, some can retire super rich 😀
I work with the elderly, the 10% number matches my estimate. Frankly it's pretty simple, from an American centric perspective. A lot of them just never saved, or never saved adequately. Most people are not good with finances. A lot of elderly folks thought they would get pensions and then got fucked. 401Ks didn't start to become popular until the '80s, do you think society magically became literate in them overnight? Most people cannot budget for tomorrow because they're trying to pay their bills for today. Many people think they're entitled to a higher standard of living than they can afford. Everyone wants to keep up with the Joneses, and our culture of our self value being determined by the things that we own. "Oh you don't have a new iPhone, ick." And to add some relevance to today's economic situation. Do you think people working lower paying jobs can afford to put money away for retirement given the current state of housing costs? My brother-in-law in a seasonal town can't even rent a small two bedroom for less than $3,000 a month in the off season when its dead
I don’t know your part of town but in Southern CA, it seems to me everyone live and spend like a millionaire. This is why I believe most folks don’t have much savings.
The part you are missing is 401ks have really only been around since the 1980s. The vast majority of older people are *way* better off because many of them also have pensions in addition to absurd amounts of home equity. It's the people who are 50 and below who are hopeless with their current rate of savings.
I think a lot of people are very short minded. Investing can be scary and confusing and many people also figure they can use/need the money now and don’t want it tied up basically untouchable until they are 65. Which I somewhat understand but there’s a balance. Live a good life now but also prepare so you can live a good life later. Budgeting is key and yes delaying a big purchase until the budget allows is ideal but there are a multitude of reasons why that’s not possible. Furnace taking a crap, hot water tank needs replaced, roof replacement, car breaks down, unexpected medical emergency, lose your job, divorce, death, natural disaster, etc., etc., etc.
In their minds they're still thinking of a time when 300-400K was a far more significant sum of money. Inflation has stolen the fruits of their labor and they don't realize it until it's too late. Misguided investors have sold them on bonds, annuities, and insurance products that fail to maintain purchasing power.
10% is a lot of people actually.
The real question is do they even get to spend it? Seems like everyone I know dies within a few years of retirement.
Well Shit! I just retired last week, and am over the freaking moon! I have no idea how wifey and I actually did it, but we saved, contributed to our 401K and did good with the sale of a piece of property that we've had for 40 years and retired with 3.1M. But I am still damn worried about where this country is going and can we make it to the end!
Not surprised at all. Saving is an afterthought for too many… if they even think of it at all. And then with 401ks you have to be at least somewhat knowledge with what and how to invest the money. Also — 401ks are a relatively recent thing. They started becoming popular in the 1980s. And not every company had them immediately. So plenty of older people relied on pensions and would not have individual savings. Some companies or professions still do offer pensions. And plenty of people are forced to rely on social security as well.
> What are investors doing wrong that causes this shortfall for so many people? Nothing. Most people don't have enough money to save on this level, and many people prioritize living their lives, rather than having substantial savings when they are 75. This is not any evidence of "investors doing wrong."
> What are investors doing wrong It's adorable that you think everyone is an investor. When you hear about how many Americans live paycheck to paycheck, do you think that means what's left after maxing their 401k and IRA contributions? >What do you think? That you're quite ignorant of what life is like as one of the poors. Congrats.
This reply exactly. OP starting with a frame of reference that it’s “investors” doing wrong is comical
Concerning? Yes. Surprising? Not in the least. Nobody is out there spinning straw into gold. To retire comfortably, you need two main things from what I can see (assuming you aren't simply relying on inherited wealth): 1. A source of income that is large enough so that someone can adequately save for retirement, and 2. The financial literacy to actually know what to do with that money so that it is there when they plan to retire. Lots and lots of folks out there that have 1 or none of the above. And its not necessarily their fault, as cost of living has greatly out-paced wage growth. Previous generations had housing costs that were proportional to their income, and more folks had access to pension systems, which are now rare as hen's teeth. And someone correct me if I'm wrong, but I get the distinct impression that kids finish their schooling these days with no real education in how to manage money, unless perhaps if they actually went to school for finance.
Most retirement investing is rife with high fees. My 401k charges me $100 a year in fees for just investing in SPY. That's $10k, I'm just paying in a service fee over the lifetime of my portfolio. Add to that expense ratio of retirement products are 2x-3x more than their ETF counterparts and you can see how this can compound poorly for the average investor.
Without commenting on morality, the fact is that most people are poor and don't have an income sufficient to simultaneously have a viable life in the moment (ie providing themselves food and shelter) *and* to save so much as a single cent. When you have little to no money, investing it does not provide much value. 10% of the 100 dollars you manage to save in a year is a whopping $10. Meanwhile someone who has income sufficient to put away $30,000 a year gets $3000. Most households make less than $50k per year. A household is more than one person, which means that paltry income is spread across more than one person on average. Summing it up, its an income problem, not because people are failing to invest their nonexistent money. I mean c'mon, is this not common knowledge by now?
Does this include pensions? I think a lot of current retirees might have pensions since that originally was more common to have instead of a 401k.
Brother, the average salary of a person in the US is like 60k, you seem a bit detached. People don’t make shit for money because wages have stagnated and the cost of living has skyrocketed. Less and less people are going to get anywhere near that number by retirement age.
Right… I’d honestly be surprised if more than 10% of retirees had +$1 mil in savings
Most Americans retirement fund is their house.
People retiring now are more likely to have things like pensions. You don't need $1m in the bank if you have a pension to live off of. Most people working now rely on their own retirement savings and people are even more concerned with social security, so they prioritize retirement savings even more.
You’re watching the evolution of defined benefit retirement to self directed 401k based retirement. Depending on your age you should be worried about boomers electing politicians who will transfer your wealth to poorly planned boomers who vote. Tough times are coming. Start planning
I think if you look at the demographic of retirees this tracks (baby boomers) they didn’t have the ease of access to the stock market and investment knowledge online. They largely relied on pensions and social security. I doubt their problem was trying to time the market as much as participation in the market throughout their lifetime. I’d venture to say most people beyond 65 today were not participating in the market until the later years of life if at all.
I have to agree. The way my parents talked, investing was not something "people like us" did. It wasn't readily accessible (in their minds, right or wrong) and/or it was for the wealthy.
Precisely. It’s the rise of the internet and investing apps that have made it so accessible to the average person.
What are investors doing wrong? For the most part, they aren't doing anything wrong. Most people are not investors; they are spenders.
I deal with the elderly on the daily in my profession, most people have next to nothing in savings and live off social security - disability. Even those that do have finances do not have enough save for a critical illness, especially if they are not 65 yet and cant access medicare. I don't care what these studies show lol, most people are barely scraping by and its really fucking sad. Especially when they get sick.
From my own and my parents’ experiences, catastrophic medical expenses can have a huge impact on finances.
While there's some truth in budgeting, it's a whole lot easier to save a higher percentage of income when you make more. Source: teacher to engineer.
I'm not sure what you are expecting as there are 330 million people and not everyone can be millionaires. The stats are the stats. I don't remember the exact number but only about \~12% of households are worth 1 million or more. Most Americans aren't financial savy and there are other external issues that might have cause them money over their lifetimes. Divorce, deaths, medical conditions, job losses, etc.
Plus many big life "choices" are made in late teens our early 20s. Whether to extend schooling, and in what, where to live, and who to partner with and whether to have kids (or keep them). All those decisjon essentially dictate a lot of the life you are going to lead from then on. I have a hard time judging a 25 year old, say, for any of these choices.
Divorce, destroyer of retirement accounts.
Most likely because most people don't start saving for retirement until after their 20s.... there was a survey done and something like 39% started saving for retirement in their 20s. Then you add in that the average person is using a 401k as a retirement vehicle....and the average 401k return is ~4.9% annualized... you can start to piece the puzzle together. Someone starting at age 30, with a 4.9% annualized return, would need to contribute over $800 a month for 37 years to retire with a million dollar portfolio. It's just not feasible for the average person.
4.9 is low. Good to use as a relatively conservative assumption but in reality much higher
It really matters where in the US are you living. A million dollars is very different in Alabama compared to California.
I agree with you that it is not an investment problem, it’s a savings problem. No budget means no set amount aside to save/invest in the first place. People wait to save until they make more in their 30s and 40s, and by then you missed a lot of compound interest.
Curious if/how this accounts for pensions. My wife has a public school pension. We save a lot on top, but I could see a lot of folks with pensions not saving
This is what I’ve seen in my group of family and friends who are in their late 50’s-70’s. They all work typical warehouse jobs and had multiple kids. So their income was always capped. They typically have paid into company 401ks but at low rates like 5-10%. They get close to retirement age and have 80k or so sitting in “ bad” investments. They get scared of losing their 80k because the market is “ gambling “ so it sets in money market or bond funds that they also don’t understand. So instead of growing their egg just a little, it just sits there with no real growth. About this time a parent dies and they inherit an old house or some small life insurance like 25k. They sell the house and have to split it with siblings so they get another 25k. So here they are at 62, scared of losing their 125k so they hold onto it like the devil. So all of those trips to Hawaii or moving to Florida plans never happen because they can’t make their self spend a dime. Because they can’t mentally spend it, they have to keep working and then start SS early to live. They eventually die and their kids and grandchildren split the remaining 125k or whatever it is and swear they’ll never work until they die. But they do, the cycle just repeats.
Most people don't earn enough to make significant retirement contributions. You can save for retirement in a 401k your whole life but if you're only saving 100 bucks a month, you're not going to make it.
There are adults working at McDonald’s. I don’t think it’s lifestyle creep that’s holding them back.
This article is just click-bait and not actually representative. My 401k and cash are one thing. However, I have multiple properties that are worth much more than my cash. I plan on selling these properties one-by-one to pay for my retirement. I might only have $130k in 401k and cash, but I have $4MM in properties by the time I retire. I guarantee the majority of wealth is in other areas than 401k and cash. It's not the average you need to consider either, the majority of business owners who own the majority of wealth in the country have it not invested in the stock market. My wealthiest friend is majority owner of a few companies and none of that would be computed in this Yahoo article.
A lot of people live paycheck to paycheck or close to it. To have ample savings to never need to cash out your 401k for emergencies is a privilege denied to many. I think you're assuming everyone is upper middle class with six figure paychecks, and has had a role model or someone in their life teach them about the stock market. That's something that gets passed along in upper middle class familes.
I'm trying very hard to be polite with this comment, I hope it does not come off as too snarky OP... Have you interacted with a decent cross-section of people in their 20s to 40s lately? The general consensus I get from folks this age is that the costs of everything have risen far faster than their salaries have, a primary vehicle for wealth generation (home ownership) is getting increasingly out of reach, and companies continue to squeeze them on benefits such as medical coverage and 401k contributions. While the last year or two have seen some of this damage undone on a few fronts, on others (like home ownership costs) its gotten far worse, and is now coupled with a burst of inflation that has done damage to them. If given the option between surviving to see another day, or socking away some money into a 401k, which option do you expect them to choose? Again, not trying to be a jerk, just trying to get across the point that for a lot of people out there, despite the strong economy things still generally suck for them. Hell, I'm an educated, professional business owner, and things suck for me right now! Imagine what your typical low-income father of four is feeling like right now between food prices, rent, vehicle costs, etc. Not to mention that an increasing amount of the wealth that is being generated is being concentrated in the hands of the ultra-rich, rather than the rest of the country. It's a very academic question that smacks of "why are the non-rich people not doing things that would make them rich?", and feels very disconnected from events on the ground.
Just in time for social security to face a 20% cut when the surplus runs out. Congress could pass a simple law that says social security is NOT income for federal income tax purposes and lift the overall quality of life of retirees without jeopardizing social security. Why exactly is my federal payroll tax being taxed again when given to someone else? This is stupid! It effectively gives the Fed government two bites of the same apple! Tax the same dollar twice!
These figures overstate the savings. Using average instead of mean distorts the outcome dramatically. The average net worth of you, me, and Warren Buffet is probably in excess of $30B. That doesn’t really paint the full picture does it?
It's almost like companies getting rid of pensions, not rewarding loyalty, and forcing people to rely on 401ks and Social Security is a problem.
Most Americans have no financial literacy and it’s not their fault, it’s not taught. They have no idea how much they should save and what should go into their savings. They don’t know of their take home, what percentage should go towards what buckets.
I understand adopting the knowledge of investing from rich guys but why do so many people also adopt their social prescriptions? Everyone could benefit from more discipline and education on investing, but most people retire with so little savings cause they are broke!!! Wages have essentially been stagnant compared to inflation and cost of living. Housing and healthcare are luxuries to most people. There’s a reason the stock market is 90% wealthy people, the poor and middle class don’t have much if any leftover to invest.
People don’t understand investing and are scared by it. This causes a lot of people to just push off retirement saving until they are older. This is the worst thing to do since time is the best thing in the market
One of the reason that a lot of current retirees don't have that much money saved is because 401(k)s weren't really mainstream until the 1990's, which means that they generally weren't available until current retirees were midcareer or later. This is somewhat made up for by the fact that a lot more retirees have actual pensions, making their savings less important. Currently, 12% of Americans are millionaires, with that number increasing with age. 40-45% of college educated households aged 50-60 are millionaires for example. >If the retiree has been diligent in investing in the stock market over their lifetime Again, this was not something easily available to most current retirees the way it is today. And there are also going to be a decent number of people who just make too little to save meaningfully for retirement.