What is the difference between average and median?
Before diving into the numbers, it's crucial to understand the difference between 'average' (mean) and 'median' savings. While the average is a simple calculation of all savings divided by the number of households, it can be heavily skewed by a small number of extremely high-value accounts. The median, representing the exact middle value of all retirement accounts, is often a more representative figure for what a typical American household has saved.
For example, recent data indicates that while the overall mean (average) retirement savings is over $333,000, the median is significantly lower at $87,000. This disparity is driven by a small percentage of high-net-worth individuals, which can give a misleading impression of the typical retiree's financial security.
Retirement savings by age group
How much an American has saved for retirement varies drastically depending on their age. The data below is based on the latest available Survey of Consumer Finances from the Federal Reserve, as cited by reputable financial publications.
| Age Range | Median Retirement Savings | Average Retirement Savings |
|---|---|---|
| Under 35 | $18,880 | $49,130 |
| 35–44 | $45,000 | $141,520 |
| 45–54 | $115,000 | $313,220 |
| 55–64 | $185,000 | $537,560 |
| 65–74 | $200,000 | $609,230 |
| 75 and older | $130,000 | $462,410 |
These figures demonstrate a clear trend: savings accumulate over time, peaking for those approaching or recently entering retirement. However, even the median savings for those in their 60s and 70s falls far short of the amount many financial experts suggest is needed for a comfortable retirement.
Factors that influence retirement savings
Several key factors determine how much an individual can save for retirement, and many of these contribute to the wide disparities in savings levels across the population.
- Income: Higher income levels correlate directly with higher retirement savings. High earners can contribute more, while low-income households often prioritize immediate expenses, leaving less for long-term saving.
- Employer-sponsored plans: Access to and utilization of employer-sponsored plans like 401(k)s, especially with employer matching, significantly boosts retirement savings. A lack of such a plan can put individuals at a substantial disadvantage.
- Inflation: The silent threat of inflation steadily erodes the purchasing power of savings over time. What seems like enough today may not be sufficient to cover future expenses.
- Health care costs: A significant portion of retirement savings can be consumed by healthcare expenses, which often increase with age and can be unpredictable. Planning for these costs is critical.
- Market performance and investment strategy: The growth of retirement savings is heavily dependent on investment performance. Market fluctuations, investment risk, and asset allocation all play a major role in the final nest egg size.
- Retirement age: The age at which a person plans to retire directly affects their savings goals. Retiring later allows more time to save and grow assets, while retiring early requires a much larger corpus.
Are you on track for retirement?
To see if you are on track, consider these common financial planning milestones suggested by experts like Fidelity.
- By Age 30: Have at least 1x your annual salary saved.
- By Age 40: Aim to have 3x your annual salary saved.
- By Age 50: Strive to have 6x your annual salary saved.
- By Age 60: Target 8x your annual salary saved.
- By Age 67: Accumulate at least 10x your annual salary saved.
The importance of financial planning
Given the complexity and variability of retirement savings, professional financial planning is more important than ever. A personalized plan can help account for your specific circumstances, including your income, desired lifestyle, location, and potential healthcare needs. It moves beyond generalized averages to build a strategy tailored to your goals. For some individuals, the average numbers are not a good benchmark. For instance, the US Government Accountability Office has noted growing disparities in retirement savings based on factors like income, race, and education, illustrating why a one-size-fits-all approach is ineffective. You can learn more about these disparities by reviewing the GAO's analysis.
Conclusion: Your retirement is a personal number
While knowing how much does the average person retire with in the USA provides a useful benchmark, it's not the definitive answer for your personal financial health. The statistics show that many Americans are not on track to meet retirement goals, but they also underscore the power of disciplined saving and smart planning. By focusing on your own situation, utilizing employer matches, and understanding factors like inflation and healthcare costs, you can create a robust plan to secure your own comfortable retirement, regardless of where the average falls. Acknowledging that your needs are unique is the first step toward a financially secure future.
