As we age, it seems like we are inundated with news articles and stories about our impending retirement. Unfortunately, a lot of the advice can be contradictory or overwhelming. We are told that we need X amount for a 20-year retirement, or that we should contribute X amount to our 401(k). The experts tell us to pay off all of our debt but make sure we have enough liquidity for emergencies. There’s plenty of helpful information available, but how do you apply it to your own unique situation?
Retirement is arguably the most significant financial milestone you’ll reach in life, so how do you know if you’re on track? When will you be financially ready?
How Do Your Savings Compare?
With Baby Boomers retiring every day, the Census Bureau predicts that the population aged 65 and over will grow 50% between 2015 and 2030. Because of this, the U.S. Government Accountability Office was tasked with finding out how well prepared American workers are for retirement. They published a comprehensive report in 2015 (1) that we can use to see how your retirement savings line up with others your age.
Whether you think you’re on top of things or way behind, you may be surprised by what statistics show about retirement savings. Let these numbers serve you as a pat on the back or a kick in the pants.
If You’re Between the Ages of 55 and 64
It may surprise you, but if you have at least $1 saved for retirement, you’re doing better than 41% of those surveyed, and if you have at least $25,000 saved, you’re in the top 59%. Though those numbers may make you feel good about yourself, they don’t guarantee you a comfortable retirement. You may not know how much you need for retirement, but you can be sure it’s more than $25,000.
Here is a table from the GAO’s report showing how resources are divided between households with and without retirement savings in this age group.
Clearly, those without retirement savings don’t have a lot to fall back on. Since they lack additional resources, they will be dependent upon pension plans and Social Security to carry them through their retirement years. Of the 59% that have saved, the median nest egg is only about $104,000. With increasing longevity and health care costs, most of us will need a much greater nest egg.
In Table 2, you can see how much savers have actually managed to put away. Which category are you in?
If You’re Between the Ages of 65 and 74
65 is a popular retirement age, though more and more people are extending this date so they can catch up with their retirement savings. Like the previous age group, this bracket doesn’t have much in savings. Here is a chart showing the exact same information as the previous age bracket.
In this age group, people are a little more prepared but with only a slightly larger nest egg. However, the median net worth has increased and homeownership rates are higher. Let’s look at their savings breakdown.
Surprisingly, the median amount saved is not significantly higher than that among households aged 55-64. It only increases from $104,000 to $148,000. The lower percentiles nearly double their savings. Where do you fall?
It doesn’t take a whole lot of savings to look good relative to your peers. But how are your savings relative to your current lifestyle? Will you have enough to live the life you want or do you need to double down and save more?
How Much Do You Need For Retirement?
No matter how you compare to your peers, you need to figure out how your savings compare to the cost of the retirement you desire. There are plenty of online retirement calculators available, but they are often generic and don’t take into account the various factors that will impact your personal situation.
The only way to have a clear idea of what you’ll need to retire comfortably is to have a financial advisor run a thorough analysis. A professional can utilize technology to show you different possible retirement outcomes and how to prepare for both the good and the bad.
How I Can Help
You may think that if you don’t have much saved you don’t have enough to work with an advisor. The truth is, you can’t afford not to work with an advisor. You need to build wealth, and partnering with an experienced professional is the best way to do that.
At Pilot Wealth Management, we want to make sure we help you make the right decisions during your accumulation years to ensure you have the proper amount of assets to reach your retirement goals. Our goal is to help you understand and maximize the benefits of various retirement savings vehicles. Contact us today at 734-330-7033 or firstname.lastname@example.org for a complete financial analysis of your current situation and your goals. Retirement is coming. Let me give you the confidence that comes from knowing where you stand and what you still need to do to achieve the retirement of your dreams.
Chris Rueger, AAMS® is the President and Founder of Pilot Wealth Management, a fee-based only financial advisory and investment management firm. With nearly two decades of experience, he serves as a financial planner who brings financial advice and investment guidance to families serious about their financial future. With all his clients, he strives to instill in them peace of mind that their life savings is being handled appropriately so they can maintain their desired lifestyle. Based in Ann Arbor, Michigan, he works with clients locally and across the country. To learn more, connect with him on LinkedIn.