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What Does Average Really Mean When it Comes to Retirement Savings?

//What Does Average Really Mean When it Comes to Retirement Savings?

What Does Average Really Mean When it Comes to Retirement Savings?

Maybe it has to do with the aging population in the US, or maybe it has to do with the fact that I scan personal finance/investment headlines like most people check their email, but it seems to me that there is an obsession with discussing how woefully unprepared the average American is to retire.  A google search of “Average American Retirement Savings” brings up 1,200,000 results and a news search limited to the past month brings up hundreds upon hundreds of results.  Worst part about it? NONE OF THEM MATCH! 

Just taking a few very recent examples:

10/22/2014 – US Today

Middle-class people in the USA have a median of $20,000 saved for retirement, far short of the $250,000 they think they’ll need during that time of their lives, a new survey shows.

A third (34%) of working middle-class adults aren’t contributing anything to a 401(k), IRA or other retirement savings plan, according to the survey of 1,001 adults, ages 25 to 75, with a median household income of $63,000. The survey was conducted by Harris Poll for Wells Fargo (WFC).

10/29/2014 – CBS News / MoneyWatch

The median account value for Americans aged 35 to 44 is just $42,700, while the median value for Americans aged 55 to 64 years old is $103,000. If you’re within one of those age groups and you’re outsaving your peers, then congratulations.

10/31/2014 – US News:

According to the National Institute on Retirement Security, 45 percent of working-age households have no retirement savings at all. Among people 55 to 64, average household retirement savings total only $12,000. For those near retirement who have savings, the average balance is $100,000 – still not much money to finance the next 20 to 30 years.

1/10/2015 – Motley Fool:

The median account value for Americans aged 35 to 44 is just $42,700, while the median value for Americans aged 55 to 64 years old is $103,000. If you’re within one of those age groups and you’re outsaving your peers, then congratulations.

3/15/2015 – NY Times

On average, a typical working family in the anteroom of retirement — headed by somebody 55 to 64 years old — has only about $104,000 in retirement savings, according to the Federal Reserve’s Survey of Consumer Finances.

Not so shocking there are more examples.

The obvious problem is that the methods used are wildly different and then the mainstream media runs with it.  Some of the studies/surveys cared about age and some didn’t.  Most of the studies cared about lifestyle/net worth while others didn’t…yet main stream organizations just ran with the number.

Whether a 30 year old has $2k or $100k is not as important to society as whether a 55 year old has $2k or $100k.  Similarly, if a person with a net worth of a few million has $500K is as important information to society as if someone with a net worth of $500K has $400k in retirement accounts (obviously, an extreme example).

I am clearly not adding any answers the topic! just annoyed by the sensationalist headlines.

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By | 2016-03-07T22:49:45+00:00 April 27th, 2015|Qualified/Retirement|6 Comments

About the Author:

Evan is the owner of My Journey to Millions which was started to track his journey from a broke debt ridden law school graduate to building a positive balance. Need more Evan? Follow him on Twitter, Contact him or get new posts directly to your email

6 Comments

  1. Lazy Man and Money April 27, 2015 at 10:18 am - Reply

    It seems like examples 2 and 4 from above are the same news story… you quoted the same lines.

    Also, the 5th example of $104,000 for 55-64 is trivially close to the $103,000 for the same age group mentioned in examples 2 and 4. It is close enough that I think one news source might have chosen to round differently.

    I get the overall point you are making. It seems there should be a standard, but then you’d get people fighting over what that standard should be.

    Until we get to something like that, I just throw out data that doesn’t seem helpful, such as average savings across a wide range of age groups.

    I think I might be most concerned that after a 7-year bull market these numbers should be skewed to the high side. Where would the numbers be if we didn’t have that bull market? If we hit a significant bear market, it could erase 1/3rd of the account value quickly.

    I’d like to see these numbers in conjunction with projected Social Security checks and costs of living. If a majority are close to having paid off 30-year mortgages, that’s a big difference as well.

    • Evan May 1, 2015 at 11:34 am - Reply

      “I think I might be most concerned that after a 7-year bull market these numbers should be skewed to the high side. Where would the numbers be if we didn’t have that bull market? If we hit a significant bear market, it could erase 1/3rd of the account value quickly.”

      Honestly, IF those numbers are as low as they seem to be then erasing one-third of nothing doesn’t really matter with regards to an actual retirement where a person ceases to have earned income.

      “I’d like to see these numbers in conjunction with projected Social Security checks and costs of living. If a majority are close to having paid off 30-year mortgages, that’s a big difference as well.”

      This is the reason that people who are not personal finance nerds, like ourselves, should meet with a professional financial planner!

  2. Eric April 27, 2015 at 3:21 pm - Reply

    I totally agree with you. I think I caught all those articles when they were published and my reaction was the same. Taken from several metrics, you could take my own stats and I would seem woefully unprepared for retirement. My 401k balance is essentially zero right now (because I rolled it over to an IRA). I have “only” $300k saved for retirement (but I just turned 30).

    It’s impossible to take one metric and apply it universally when it comes to retirement. There are simply too many paths to retirement and lifestyles within retirement (many of which generate income), to call anything a crisis or otherwise.

    The best-of-the-worst metric is probably median total retirement savings among those within five years of retirement. And even thought leaves a lot to be desired, given the amount you need is entirely dependent on your level of lifestyle.

    Thanks for collecting this all together.

    • Evan May 1, 2015 at 11:38 am - Reply

      $300K in a retirement account at the age of 30 is unbelievable! and I bet if you believe these types of stories then you’d probably be in the top 1% of the country in terms of retirement accounts lol

      “It’s impossible to take one metric and apply it universally when it comes to retirement. There are simply too many paths to retirement and lifestyles within retirement (many of which generate income), to call anything a crisis or otherwise. ”

      – Fantastic point! Who cares if someone has an IRA/401k of $0 if they have 4 buildings that are paid off.

  3. PK May 2, 2015 at 3:22 pm - Reply

    Hey bud, does this help? http://dqydj.net/net-worth-by-age-calculator-for-the-united-states/ <- Federal Reserve SCF data, so it isn't just some financial firm only listing accounts held with them.

    I might do something with the question: "What if people are saving enough?". I think that might be interesting – capitalizing Social Security has to be worth something, since annuities have a cost you can look up.

    • Evan May 5, 2015 at 10:56 am - Reply

      PK that is an awesome calculator! If anything all the above articles should just be based on your data? and not whoever they are quoting.

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