Many Americans don’t save for their retirement until they have reached a time where they have to start. Unfortunately, this leads to many Americans not being able to retire when they should. So, let us look at the reality of retirement saving in the U.S. today!
A report released by the Economic Policy Institute (EP) stated that Americans save $95,776 between the age of 32 and 61 for their retirement. While this may seem like a reasonable amount, the number is only an average; this means that some people don’t save everything and others save a lot more than the average stated here.
Mean Vs. Median
To get a real idea about the retirement savings of the average American, we need to look at mean vs. median savings. Mean savings are based on the national average, while median savings are those at the 50th percentile of the national average, which usually provides a better overview of actual savings of the average American. The median for all working-age families in the U.S. is just $5,000.
The Age Variable
The retirement savings of the average American are variable by age.
Mean retirement savings of families between 32 and 37: $31,644
Median retirement savings of families between 32 and 37: $480
Mean retirement savings of families between 38 and 43: $67,270
Median retirement savings of families between 38 and 43: $4,200
Mean retirement savings of families between 44 and 49: $81,347
Median retirement savings of families between 44 and 49: $6,200
Mean retirement savings of families between 50 and 55: $124,831
Median retirement savings of families between 50 and 55: $8,000
Mean retirement savings of families between 56 and 61: $163,577
Median retirement savings of families between 56 and 61: $17,000
What You Should Be Saving
With so many different numbers floating around, it can be difficult to determine how much you should be saving. Ideally, you want to start saving for your retirement early; this means you will have to start investing in your 20s.
Before the age of 30, you should have an equivalent of your salary saved. So, if your salary amounts to $50,000, you should have a $50,000 in savings by the time you hit 30.
Once you hit thirty, you should focus on saving three times your current salary. Let’s stay with the same example we used before to make it nice and clear. So, before you hit the age of forty, you should have at least $150,000 saved up.
When you hit 50, you need at least six times your salary saved; this means if you make $50,000 a year, you should have at saved at least $300,000 saved. This amount increases by the age of 60, where you need at least eight times your salary, so this is $400,000. Then, when you reach the age of 67, you should have ten times your salary in the bank; this amounts to $500,000 in the bank.
The Earlier The Better
After looking what you need to save, it becomes clear that the earlier you start to save the better. So, instead of postponing your retirement saving until the age of 50, it is best to start when you are younger.
It is no surprise that it is harder to save when you are younger, because there are numerous expenses to take in account. However, when you save money according to the example above, you savings will match the income you have available. Of course, to get the right amount for your retirement, you will have to do the calculation according to the money you earn at the moment. Based on that, you can be ready for when you finally stop working!