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Unless you’re an actuary, you probably have only a vague idea of how much money you should have saved for future expenses and retirement -- and whether or not you are on the right track. The amount you should be saving each year is a complex calculation, economists say, so there’s no right answer. Still, knowing Americans’ average retirement savings by age can help you gauge your progress.

The Economic Policy Institute (EPI), a non-profit, non-partisan think tank specializing in research on the economic situation of low- and middle-income workers, published a revealing 2019 report called “The State of American Retirement Savings.” Using data from the Federal Reserve Board’s Survey of Consumer Finances, conducted every three years, the institute arranged the retirement savings statistics by six-year cohorts. The study looks at families headed by someone age 32 to 61 – a 30-year period before the Social Security early eligibility age of 62 when most families should be saving for retirement.

EPI researchers found increasingly inadequate retirement savings for successive generations and large disparities by income, race, ethnicity, education, and marital status. Retirement wealth has not grown fast enough to keep up with an aging American population and other changes, and the shift from traditional pensions to individual savings has widened retirement gaps, the report said. The mean amount of retirement wealth for all families in 2016 was $120,809. The EPI analysis broke it down by age range. The mean is found by adding up all the assets and dividing by all of the participants, so it is skewed somewhat by people with very large amounts of assets. The median retirement savings, which is the point where half of the participants have more and half have less, is only $60,000 for all families with retirement savings.1

Average savings by age 30

Everybody’s situation is unique, but many people in their 30s are facing a lot of expenses. These could include paying off student loan debt, getting married, buying a home and starting a family. But they have also gained work experience and are likely enjoying a higher income compared to their 20s. When considering average savings by age 30, data shows you should have at least $14,115 to $28,230 in savings and $61,937 in retirement savings.2

If your employer has a retirement plan, your first step should be to sign up. If you are already signed up, see if you can contribute a little more money to it – even an extra few dollars from every paycheck will add up. Aim to save 15% of your salary for your retirement. If that’s not feasible, consider starting with a lower percentage and adding 1% each year until you reach 15%. If you do not have a retirement plan at work, investigate such alternatives as individual retirement account (IRA) plans or annuities.2

Average savings by age 40

Individuals in their 40s have probably paid off student debt but are still working their way through mortgages and the expenses that come with a family, ranging from daycare to college tuitions. But the good news is that they’re also in the prime of their career, having worked their way up the ladder over the past two decades. When considering average savings by age 40, data shows you should have at least $17,799 to $35,599 in savings and $185,811 (or 3 times your income) in retirement savings.2

If you are behind on your savings, don’t worry. You can still catch up and reach your retirement goals. Paying off your debt and funding your 401(k) at the maximum amount is a great start. Consider maximizing your savings through tax advantages that come with an IRA if your employer doesn’t offer a 401(k), or in addition to your 401(k).3

Average savings by age 50

The biggest expenses for people in their 50s are often college tuition payments for their children and rising medical bills. But they also have their eye on the prize, retirement, and that means more aggressive saving. When considering average savings by age 50, data shows you should have at least $18,846 to $37,693 in savings and $309,685 (or 5 times your income) in retirement savings.2

Realizing you’re behind on retirement savings in your 50s may induce some panic, so take advantage of this wakeup call and the catch-up opportunities available to others in your situation. Go for the max on your 401(k) contributions in addition to whatever “catch-up” contributions are allowed. And make that money work for you! It can grow tax-deferred until you withdraw it, so so consider investing in a mix of stocks, bonds and cash. An independent financial professional can help you determine what level of risk is appropriate, if you’re unsure. You may also consider adding an IRA, if you haven’t already, or saving in a regular brokerage account.4

Average savings by age 60

Individuals in their 60s are often in the home stretch for retirement and it’s time to put the pedal to the metal to reach those financial goals. The focus on retirement is reflected in the average savings by age 60, with data showing you should have at least $16,554 to $33,108 in savings but $433,559 (or 7 times your income) in retirement savings.2 This may seem lofty, but stay on track and it will be well worth it when you are ready to leave the workforce and enjoy your retirement.

What this means for you

For a realistic assessment of your prospects, the amount of money saved must be compared to the amount of money future retirees in your demographic group will need. There are, however, a lot of unknowns: how long you will live, whether you will need long-term care, what resources will be available from Social Security and Medicaid, and investment returns and inflation rates.

The short answer for whether retirees will have enough money to retire is: Most people need to save more than they have now. The long answer is more complicated.

Americans are at risk of falling short in retirement

The Center for Retirement Research at Boston College calculates the National Retirement Risk Index. It’s updated every three years, relying, in part on the same Federal Reserve data that EPI uses. According to those numbers, 50% of households were at risk of not being able to maintain their pre-retirement income through retirement. That’s a marked increase from the 30% that the Boston College analysts calculated for 1989.5

People in retirement rely on a number of sources of income: earned income (29% of people over age 65 work at least part time), Social Security, pensions, investment income, and retirement savings. Many of them also receive other sources of income including disability benefits, veterans’ benefits, and support from relatives.

Do you have a retirement plan?

When you’re examining your own retirement prospects, the obvious first question should be: Is your family participating in a retirement plan? In 2016, the EPI found that 54% of all families were, mostly through a defined contribution plan such as an IRA or 401(k).

Of folks age 32 to 37, 53% had retirement savings, as did 62% of those age 56 to 61. If you don’t have a retirement account, it’s time to join the majority and set up a retirement plan.1

Figuring out your retirement savings target

If you want a target, use a retirement savings calculator. It looks at your retirement contributions and annual income and compares your retirement savings progress to your peers.

Saving for retirement may seem daunting because of the huge number of variables involved. The most important part is to start. Over time, the rest of the numbers will come into focus and become more achievable with the help of strong early habits. A financial professional can help you take the next steps.

[1] “The State of American Retirement Savings,” https://www.epi.org/publication/the-state-of-american-retirement-savings (Dec. 10, 2019).

[2] “Savings by Age: How Much to Save in Your 20s, 30s, 40s, and Beyond,” https://www.ally.com/do-it-right/money/savings-by-age-how-much-to-save-in-your-20s-30s-40s-and-beyond/ (Aug. 17, 2020).

[3] “Saving for retirement when you’re in your 40s,” https://www.bankrate.com/retirement/retirement-saving-tips-for-40s/ (Nov. 9, 2020).

[4] “No Retirement Savings at 50? Here's How to Get on the Fast Track.” https://www.schwab.com/resource-center/insights/content/need-to-put-retirement-savings-on-the-fast-track (Aug. 08, 2018).

[5] “How Would More Saving Affect the National Retirement Risk Index?” https://crr.bc.edu/wp-content/uploads/2019/10/IB_19-16.pdf (Oct. 2019)

Neither Nationwide nor its representatives give legal or tax advice.  Please consult with your attorney or tax advisor for answers to your specific tax questions.

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