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Average Retirement Savings–All Measurements Lead to the Same Conclusion

(Click here if you seek different information on retirement savings)

The “baby boomer” generation are those people between 45 and 62 years of age (as of 2008). This generation has saved on the average retirement savings of $38,000, excluding pensions, homes, and social security. However, “baby boomers” with qualified retirement plans has an average retirement savings of $88,000. The $88,000 of average retirement savings will generate an annual retirement income of about $5,000 yearly. Not many people would be satisfied with this level of retirement income. To get an exact amount, based on your age and retirement savings, you can use the retirement income calculator. But there is ample evidence that these retirement plan accounts are mismanaged with approximately half invested in under-earning money market funds rather than long term growth investments.  Its clear not many baby boomers will retire rich.
Source: http://chaz11.blogspot.com/2008/05/baby-boomer-retirement-dilemma-how-much.html

Here is additional data on average retirement savings and attitudes. Allstate has conducted a Retirement Reality Check annually. The survey measures Americans’ attitudes toward, and savings for, retirement. In the 2006 version, respondents were asked, “If saving for retirement were like driving on the highway, where would you be?”

By far, the majority of respondents– 48% — said they are “in the middle lane, keeping up.” More confidence was shown by 20%, who said they are “in the fast lane, passing others.” And everyone else was rather timid. “On the on ramp, still getting started” came in at 14%; “in the slow lane, watching others go by,” notched 13%; and “lost and looking for a map” held strong at 5%. Obviously, retirement is one area where many of us are perfectly content thinking of ourselves as average and the average retirement savings sounds to be pretty dismal. The dismal facts mean that most baby boomers will need to annuitize their nest egg and will have nothing to leave to their children (use the fixed annuity calculator for estimates).

It’s estimated that the average projected post-retirement income replacement needed among employees of large U.S. employers is 126 percent of final pay, a level only about 19 percent of employees are expected to satisfy, according to a Hewitt Associates report released July 1. If we assume that the average person earns $40,000 annually, they would need about $50,000 in retirement income, requiring an average retirement savings of $833,000 (not taking into account any social security income).

In fact, according to the report, Total Retirement Income at Large Companies: the Real Deal 2008, about 67 percent of the more than 1.8 million employees of 72 large U.S. employers tracked in the study are expected to have accumulated less than 80 percent of their projected needs at age 65. Despite the gloomy projections, the report’s authors concluded that employees can make a big difference in their retirement readiness by making small changes in their savings rates, investing smarter, paying lower fees, and delaying their retirement – all great actions to increase the average retirement savings in America.
I think in particular the last point is what we are going to see more and more of: individuals working well into their 70’s just to pay their bills and survive. Unless savings rates make a big change, average retirement savings by retirement date will be too low.
Source: http://www.typepad.com/t/trackback/89778/31259398

Economist and humorist Ben Stein set out to answer the question, ‘Why won’t the baby boomers save?’ According to Stein, the average baby boomer needs to save about $400,000 to have sufficient interest income to make up the difference between Social Security and what he or she needs for retirement.
Yet the average retirement savings of baby boomers has saved only $50,000—or $110,000 if you
include equity in their homes. He called this a crisis in the making.

Humorously exploring the question of how we got to this point, Stein suggested a number of possible causes for a low average retirement savings. First, he suggested, baby boomers have ‘always had it too good.’

Never having lived through economic hard times, they lack the discipline to save. He also proposed
a Freudian explanation: the false sense that mommy and daddy—or the government—will always
bail them out if they get in trouble. A third possibility drew on the theories of behavioral psychologist
B.F. Skinner: saving offers no immediate gratification, while spending provides immediate positive reinforcement such as a flat-panel plasma TV set or a new car. The final theory suggested that baby boomers felt compelled ‘to obey the media consumer spending machine.’

Whatever the cause, Stein concluded, many baby boomers in retirement will have to cut their
standard of living drastically, while others will simply run out of money. The baby boomers may
actually have saved more than the previous generation of Americans, but because fewer of them have DB pension plans, they are worse off.  In other words, because baby boomers must save on their own whereas their parents largely had company retirement plans, this generation’s average retirement savings rate is lower.

No matter who you listen to and what statistics are used, the average retirement savings of baby boomers is inadequate.

Average Retirement Savings Update 2011


50 thoughts on “Average Retirement Savings–All Measurements Lead to the Same Conclusion

  1. Dowdee Thomas says:

    I question your stated estimates for post retirement income of 126%.
    Most retirees spend less in retirement – Mortgage paid off, clothing and transportation costs have dropped, they no longer contribute to a 401(k)
    lower tax bracket.

    Most financial professionals estimate the average retiree can get by without much sacrifice on about 75% to 80% of their post retirement income.

    That would significantly alter your required savings figures.

  2. Jill says:

    I didn’t even begin to start to save for retirement until about 3 years ago when ING offered to put $40.00 in an account if I opened one. I was 48 and now almost 51. I have managed with bascially scrimping to put away close to $20,000.00. I have gotten some refunds be it taxes, stimulus checks, on insurances etc that were larger chunks of money but most of it is a litlte by little. I opened up two other bank accounts and received $250.00 for that. I save $5,00 everyday and a $100.00 every month. I estimate my utilities bills and whatever I over estimate goes in the pot. I got $15.00 for doing a survey. Any extra unplanned money goes in the pot. Any work I do on a Saturday goes into retirement. A little at a time seems almost silly but I think it will matter when I retire. Of course I plan to work until 70, have my house close to being paid off as well as student loan etc. I’m suppose to get almost 1,600 on SSI which I could probably live off of if house and student loan paid. Any extra I save will supplement. So basically get creative on whereever you can save. It seems hopeless to start late with nothing but any amount helps. I would like to share ideas from others on how they may be saving for retirement.

  3. Savings says:

    I agree people have a very low net worth these days the emphasis seems to be to much on spending. The economic climate is not helping this with many people refinancing their mortgage, this is going to push the retirement age higher and could result in a crisis.

  4. Jun says:

    This Retirement Income Calculator surely help me overlook my income sooner when I retire. I will save it, I hate spending which led us to crisis.

  5. Todd says:

    I have to agree with Dowdee about actually needing less money in retirement than we do when we are younger and working. But that is really a minor point…we have to do a better job of planning for those golden years.

  6. John says:

    when i was younger, i was dreaming of retiring at the age of 30 and have a lot of money by then. it was just a dream as it really is hard to reach. retirees these days have a little retirement rate or income. i guess the cost of living these days make the income appear like just a little bucks, so small amount. how much more the younger generation on their future.. they will surely feel an increase cost of living and increase of expenses and lesser income. the expenses nowadays are greater than the income which is really difficult.

    for retirees, i guess investments are good way to save up the income and grow it a little more.

  7. HPMICR says:

    In todays market it is hard to save anything for retirement. It will be even harder to save what retirement funds we have collected. With investment firms losing your money annually I’m starting to think the only thing in the long run might be real-estate.

  8. Jay Woo says:

    Do you have the statistics on the median savings instead of the average? The median might be a lot lower actually. I don’t believe that people save much these days really…

  9. [email protected] says:

    Actually if you want to retire younger you have to choose the right career for you where you can earn money to spend for about years. Your retirement savings will only be your earnings.

  10. Martin Preisler says:

    I felt quite comfortable in that I had both created a low risk pension invested in mutual funds. Have a house where I am dutifully paid of my mortgage over the years, and am yearly investing in a tax free ISA. However, with the recession it appears I am in negative equity on the house and the pension has lost a lot of its value. I guess it is touch and go from here on in.

  11. Martin Preisler says:

    I felt quite comfortable in that I had both created a low risk pension invested in mutual funds. Have a house where I am dutifully paid of my mortgage over the years, and am yearly investing in a tax free ISA. However, with the recession it appears I am in negative equity on the house and the pension has lost a lot of its value. I guess it is touch and go from here on in.

  12. Case says:

    In today’s financial climate I think it is dangerous to state that retirees spend less in their ‘golden years’. More and more governments will be offloading benefits to senior citizens and therefore the financial burden associated with health care, utility bills etc will fall to the individual.

    It is in the latter years that people need a financial security blanket for when things turn for the worse. Don’t assume that you will spend less when you retire. It is always better to save for your latter years. Just in case. IMHO.

  13. Bear says:

    Stupid hippies. smoke some more pot and just believe that your bankrupt “rich” uncle Sam can continue printing money to make everything ok. It is amazing that a generation that “didn’t trust the government” has so much blind trust that somehow the Government can make this all work out. Dopes.

    You 20 and 30 year olds will be paying the SS payments for the boomers because our wonderfully irresponsible government has already spent every dollar the next two generations will ever even make. If you guys don’t rise up and lynch these bastards you will be slaves to their corrupt system that has bankrupted our country. Your standard of living is going to look like a depression in the 1830’s. Without horses.

    The morons running our country are about to spend us into hyperinflation printing money to hire non productive government employees who are naive enough to tell us that the recession is over. Wake up people.

  14. Lee online at home says:

    I really need to sort my pension out, i lost most of it with the recession and my company went under thanks for the advice.

  15. Savings Guy says:

    The link to the retirement calculator was excellent. I think the truth is that for those of us in our thirties we will all be working longer before we can afford to retire. The days of retirement at 50 or 55 are long gone.

  16. The best way to determine how to have a successful retirement is to use a retirement savings calculator. This will show you the growth in your retirement savings during your working years as well as the value of your savings during the years you withdraw money after retirement.

  17. brittany says:

    I don’t expect to have much of a life after retirement; all I’ve ever really known was to be working for the people that are entitled to a life without working hard, whether they are jobless-poor or the blissful progressives that ruined this great nation. As for now I’ll continue to save 50% of my earnings and maybe provide for my beloved spouse when my knees and back finally crumble.

  18. brittany says:

    The harsh reality is that the average Baby Boomer is retiring with a nest egg of only about $88,000 that they have saved. Many have worked very hard for 30 years to get to that golden day of retirement, to be able to enjoy life, to do the fun things you have always dreamed about doing.

  19. Steven says:

    So basically get creative on where ever you can save. It seems hopeless to start late with nothing but any amount helps. I would like to share ideas from others on how they may be saving for retirement. Your retirement savings will only be your earnings. Thank you.

  20. John says:

    I agree you’ll need as much if not more income in retirement. Don’t assume you will have lower expenses as a result of having your mortgage and other debts paid off. More and more seniors are entering retirement with credit card debt as well as turning to reverse mortgages in an attempt to finance their retirement. Sky rocketing healthcare costs and cost of elderly care can easily outpace how much you spent in your pre-retirement years.

  21. Sara says:

    We all know that social security alone will not be enough to retire on comfortably. And a lot of people don’t have a 401k or a large savings to help supplement themselves after retirement. So what is it we can do to insure we will be able to support ourselves in the manner we are accustomed to? A great way I have found is to start my own little business online and set the income from that aside. When I save up enough I then invest it for retirement. A site that helped me out with this is called (Starting Your Own Company). This site helps entrepreneurs start their own small business online in just a few easy steps. Anyway, great post and I hope everyone thinking about retirement finds a way to generate the money they need to do so.

  22. Khon Kaen says:

    Retire in Thailand and you will only need about 1/2 of what you would if you stay in America.

  23. Baby boomers has a still lucky days in their life. Advertisers wants to take their retirement money. For a golden day this type of money is not enough i think.

  24. Baby boomers has a still lucky days in their life. Advertisers wants to take their retirement money. For a golden day this type of money is not enough i think.

    Thank you…
    Firma Rehberi

  25. Sounds fishy to me. Retired people don’t buy too much. most are content with their lives, have paid off their mortgage, etc. They rarely buy new clothes, and only splurge on cruises every few years.

  26. Lisa says:

    I found this article very helpful. It’s sad that with the recession it appears my pension has lost value. I’m not in the same financial situation I was awhile ago. I have decided to look at other avenues of income. Opening a small business is the key to financial freedom. You are in control of your income and hours. I want my retirement years to be GOLDEN not tarnished.

  27. Lisa says:

    I found this article very helpful. It’s sad that with the recession it appears my pension has lost value. I’m not in the same financial situation I was awhile ago. I have decided to look at other avenues of income. Opening a small business is the key to financial freedom. You are in control of your income and hours. I want my retirement years to be GOLDEN not tarnished.

  28. Many of the people are retired in the end of the 60 years. but its too. difficult to all of the chose a perfect retirement plan, i don`t know what will the future value of the money. and how long this will be stable. so its too difficult for me select a better plan.

  29. andamios says:

    Many people wonder how their 401k and other retirement savings compare to others. Age is an important consideration in making such comparisons. The more time that a person has until reaching retirement (i.e. the younger), the greater the opportunity to make additional contributions and for investment earnings to build up his or her retirement account balance.

  30. john says:

    Unfortunately, the best retirement savings by age data available predates the 2008-09 financial meltdown. The following table shows average and median retirement account balances for 2001 and 2004 as reported in the Survey of Consumer Finances (SCF). 1 Note that the figures are adjusted and shown in 2007 dollars to allow meaningful comparisons across year. andamios

  31. People’s saving behavior is influenced by their expectations about future benefits. To the extent that baby boomers believe they will receive all of the government benefits to which they would be entitled under current law, that expectation may induce them to work or save less than they would otherwise. Conversely, to the extent that they recognize the looming difficulties in funding those programs, they may increase their saving or retire at a later age than they had originally planned.

  32. Retirement income can be great if you invest in property to rent and stocks and shres. I have no complaints.

  33. Manuela says:

    So basically get creative on where ever you can save. Or even invest a little time in forex. It seems hopeless to start late with nothing but any amount helps. I would like to share ideas from others on how they may be saving for retirement. Your retirement savings will only be your earnings. Thank you.

  34. italya turları says:

    I tried the retirement income calculator and it worked for me. And as my idea it is right that its clear not many baby boomers will retire rich.

  35. Baby Gates says:

    I don’t understand when people say that you don’t need more retirement money. So they retire early. Arter you retire you’re getting older and your health is going down.

  36. Tim says:

    I feel starting a business on the side is the best way to make the extra income you need to to invest in your retirement. I Started Arizona-Wedding-Videos just for that purpose. I canwork a normal job and scedule weddings to shoot on the weekends. It works out great. Consider it.

  37. John says:

    Focusing on the future is very important. I see need to supplement your income to insure your retirement. No one wants to retire on welfare. We have worked to darn hard all our lives to do that. So consider a small business on the side. Thanks for the post. John R&R Images

  38. Guitar Picks says:

    The best advice anyone could ever give about retirement is that we simply shouldn’t. It’s a well known fact that retirees have a higher mortality rate, suffer from depression, and are physically ill more frequently than the working. Partial employment in later life is beneficial not only to the worker but society as well, as those with accrued wealth may be paid discounted prices for their services and knowledge, passing them to the next generation. Employment for life! It worked for the Japanese!

  39. Many baby boomers are approaching retirement age and are actively planning for their retirement. Mutual funds are a frequent investment choice because of their relative safety and lower costs when compared to investing in individual stocks and bonds. Plus, the benefits of professional management make mutual funds attractive to those who do not have the time or knowledge to actively manage their own investments.

  40. brittany says:

    The mass majority of boomers will retire as their companies are forcing the issue. The real question to ask is ‘will they be able to live the same lifestyle in retirement as they did pre-retirement?” Soberly, the answer is no. Baby boomers live a luxurious life currently. If the do not increase their personal savings they will not be able to live the same lifestyle.

  41. Tom Rooney says:

    I know different types of boomers (65 years +) and even pre boomers (born before 1948). One that comes to mind whom I work with has a pension from the local school disctrict where he worked for years plus another pension from his current job, social security, and his current salary! Not bad huh? This gentlemen has no savings what so ever and is even paying down his son’s college debt. Very undisciplined financially, but has all the “perks” from belonging to the boomer generation where pensions were once the norm. and govt. benefits when you retire were guaranteed. This is not the case with Gen X and after. We know that we have to save and invest for our retirement. I have been doing that and you know what? I believe that I will do much better than my friend mentioned above because I am much more disciplined and knowlegeable about finances. When they begin to lower SS benefits is when I will be “retiring” and if my friend is still alive he will feel the pinch too. Living below your means when you are younger is key and learning to invest is as well. I started in earnest 6-7 years ago and have saved $55,000 within the last year!

  42. افلام says:

    I don’t understand when people say that you don’t need more retirement money. So they retire early. Arter you retire you’re getting older and your health is going down.

  43. Limo says:

    most of the people after retirement start their own business 😀

  44. Plasma hire says:

    If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. Start small if you have to and try to increase the amount you save each month. The sooner you start saving, the more time your money has to grow.

  45. Kevin Keperling says:

    Baby boomer and savings being inadequately funding is nothing more than a mirror image of the government’s own bankrupt Social Security system. Kicking the can down the road even further is not the answer. Printing more fiat money does not create wealth. On a personal level, a much wiser approach is to tighten the belt and create a savings plan that will basically become self-funding. It is always wise to stick with an approach of pay yourself first just like any other monthly bill since you are the one that in fact has earned it, right? By a self-funding plan…think about well diversified monthly dividend paying closed end funds that pay at least a 10% yield. Basically, the way that these funds work is they hold a large array of company stock in many sectors, countries, and so forth that pay out dividends. They use these pooled dollars to buy these dividend paying stocks and equities and then distribute them to their shareholders on a monthly basis. If done correctly like with Scottrade, you can easily have dividend checks arrive in your mailbox twice per month since Scottrade mails them out on the 2nd and last Wednesday of each month from St. Loius, Missouri. Some great examples of these stocks would include ticker symbols: AOD, AGD, IGD, IID, ZTR among several others. Then simply accrue these dividends and use them to buy more shares of these types of stocks. Just like Warren Buffet, you then will have the small snowball and can commence to rolling it down a mountain of great packing snow (creating even more dividends). At first you might think it is not worth it if only dividends of $5 per month have been created. But keep doing this each and every month and in time (which is the most critical element of compound interest) you will have a very nice dividend stream (any amount under $5000/mo). Eventually, you can create dividend rivers, amounts of of $5000/mo I actually wrote a book about this very same thing I titled : $tream$ To River$ only have not editied or published it and am not sure I ever will since written books are a dying industry and the topic matter is not exactly of a Harry Potter appeal since the subject is deemed boring by many people.

    By the way, needing less in retirement might just be a mirage considering as we age out health tends to become frail and health care costs increase exponentially as we age and can quickly devour even a sizeable nest egg extrememly quickly. Hence, the 126% of final pay (though I am not sure if they are talking gross or net) will even be enough either. Create a tracker chart using references as a percentage of your net monthhy income . For instance if you net $3,500 per month and receive say $100 per month in dividends, then you are saving at a rate of 2.85% of net. As your mothly dividends increase, than so will your monthly net savings rate. One of the really awesome things of this system is the fact of having an additional 24 paydays (dividend check receipt days) on top of your regular pay days be them weekly, bi-weekly or even if militray style, the2x mo on the 15th and 30th of each month. If it is social secutiry, then that is just one check per month and most pensions only issue checks once per month as well. All of my immediate family members are on this plan including my 7 year old grand-daughter who because of her young age will benefit the most from it. To see the impact of what I am talking about go to the website: Dr calculator.com Once there, go to the section marked comopunding caluclator and fill in the blanks with realistic numbers that work for you and your budget. Good luck and may God bless you!

  46. Jay Walker says:

    My 401K took a hit the past 2 years. I talked to several financial investors. Tried a few strategies but finally found one that worked for me. Right now I am into annuities and got a strategy from safemoneyalternatives . So anyone interested in a sound retirement plan should definitely check them out.

  47. Plasma hire says:

    I guess, it’s time to throw a retirement party after all the years hard work and great achievements. Don’t forget get someone, let’s say a stage hire for instance, to make your party livelier, enjoyable and memorable.

  48. Hobie says:

    I’m 68 and my wife & I still are working (because we want to) We plan on retiring at 70. We have been saving all our lives but still managed to put 2 kids through collage & paid for two weddings. Our retirement funds are around $700,000. I have a small pension & we both started taking SS at 66. My question is how to best transition our savings into safe retirement income and still stay ahead of inflation. I’m concerned about lose of controll & fees. I’m thinking of a split of $500,000 in a Hybrid type of annity & keep $200,000 in REIT, energy type bonds & dividend type of stocks. I don’t want to get into something that we will regert later on.
    Can anyoen give me some feedback?

  49. Baby boomers has a still lucky days in their life. Advertisers wants to take their retirement money. For a golden day this type of money is not enough i think.

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