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What is the Size of the Average Retirement Nest Egg?
What is the Size of the Average Retirement Nest Egg?
See how you compare—and whether you have enough saved for retirement.
-Think depend where you live... If in Santa Barbara orange county or NYC you may need 10 mills but in other rural areas where home are extremely affordable like x maybe 1 mills. or if you like fancy lifestyles, fine and dine/shopping w wifey may need lots of travel maybe much more, and if your mortgage is paid or not [unless take a reverse mortgage]
If they are only looking at 'retirement' accounts (ie, tax-deferred ones) that could be skewed reporting ... I wonder what that looks dismal outlook would be if you include people with taxable investment accounts as well. To wit: much of my future 'retirement' assets are nicely growing in taxable accounts, which are significantly larger than my Roth IRA or 403/457s.
To only consider 'tax deferred' accounts as 'retirement' accounts is bad analysis. imho.
The median account size is a lot more important than the average in this case for economic analysis because the largest accounts skew the numbers higher for the average. There is also the fact that a significant portion of the population has essentially no nest egg or retirement accounts.
Howdy @rforno Knowing you are well aware, too; of the difficulty with this type of report with data, I offer this. I'm not criticizing the report in general or the data provided, but not unlike you; initial thoughts about such an article pop into our heads. These views of course are related to what we know and how each of us tend to see and think about this type of write based upon our experiences. One of my initial thoughts was: how old is the data base info? Apologizes if a data link is available, as I'm short on time today. Other initial thoughts related more so to the baby boomers (born 1946-1964) and their effect on the numbers. If indeed the reported numbers are accurate, 10,000 boomers per day retire. Ten thousand each day !!! I'm sure many have read this number before, too. An interesting number to consider in the scope of American life. So, whatever percentage of these folks had 401k's, etc. and are no longer contributing as well as some who have also started required distributions; how is this calculated into the data? In theory, this group could have been the largest dollar value contributors based upon their being at their highest wage years and/or also playing catch-up with contributions. What if 50% of the retired boomers rolled over their 401k/403b accounts to an IRA within a 6 month period? Would this alter the outcome of the data enough to make the numbers look worse? So many items could alter what the numbers mean to me in the write. Thanks for your thoughts with viewing this write. Regards, Catch
If they are only looking at 'retirement' accounts (ie, tax-deferred ones) that could be skewed reporting ... I wonder what that looks dismal outlook would be if you include people with taxable investment accounts as well. To wit: much of my future 'retirement' assets are nicely growing in taxable accounts, which are significantly larger than my Roth IRA or 403/457s.
To only consider 'tax deferred' accounts as 'retirement' accounts is bad analysis. imho.
Looking only at deferred accounts is not the perfect analysis (nothing is), but it is beneficial. My question for you is... Why do you not have more in the deferred accounts? If your answer is simply that you can't because you maxed out contributions, then your nest egg is more than enough and people with the financial flexibility to do that really should be excluded from most of these types of analyses anyways....
My question for you is... Why do you not have more in the deferred accounts?
Not @rforno, But others have made the argument that with some types of investments (especially those with favorable long-term capital gains treatment) it’s preferable to have them outside a tax shelter. At some point (Roths excluded) those assets in your sheltered plan (including 100% of the “gains”) are subject to normal income tax rates. Those rates can be substantially higher than the rates on long term capital gains. I’m not a mathematician - but respect those who are and have made that case from time to time. (In the end, the current system is slanted in favor of the wealthy. Call it what it is.)
Than there’s also the issue of municipal bond investments where the tax issue is essentially mute.
The last year of boomers turns 67 in 2031 giving them more than 10 year to accumulate savings. I don't know about you but, even with the 2000 and 2008 downturns I doubled my savings between 2000 and my retirement in 2010. I have a passion for numbers but lose interest when those numbers are like these demographic, non-granular, averages.
Here is the article authors bio. He's not a clunker, IMHO; a been there done that person. But, as Anna has noted, too; this type of article has a lot of moving parts that are difficult to nail in place for any length of time.
@JoJo: I've invested in taxable accts since I was 18. Moreover I (thankfully) did rather well in choosing employers during the Dot Com era, and while I'd have loved to throw the whole bunch into a tax-deferred account, IRS rules don't allow that. Ergo those assets had to be in taxable accounts and I invest them with the (perhaps overly cynical) expectation that I will *not* get much if any social security or pension funds in retirement. Taken together my personal taxable accts are far larger than my tax-deferred ones, which admittedly I opened later in life. (All of this, btw, is a 'good problem' that I'm thankful for, I admit)
My comment on the article was about those who might have taxable accounts and invest them with the primary goal of planning for retirement purposes. In other words, even if they're not a 'retirement account' (which generally is interpreted to be tax-deferred) the PURPOSE of the account is more important in determining a person's total retirement 'nest egg' than just the $$ in a tax-deferred account.
Off the top of my head ... But out of all working age or retired U.S. residents, I’d be surprised if 50% had any nest egg at all. Define nest egg as: all savings (including retirement accounts) not needed to cover next month’s living expenses minus student loan, auto and consumer debt (but excluding home mortgage).
I agree. I suspect the majority have little or nothing saved up. I always see those reports about how X percent of America couldn't cover a $500 emergency expense w/o incurring credit card debt or such. It's definitely a bad situation!
But out of all working age or retired U.S. residents, I’d be surprised if 50% had any nest egg t all. Define nest egg as: savings (including retirement accounts) not needed to cover the next month’s living expenses minus consumer debt, and excluding home mortgage.
Amplifying the comments of rforno and hank, from the referenced article itself:
"So if you're wondering how your retirement nest egg stacks up against the "average" one, you first need to decide to whom you want to compare yourself (and your egg)—the U.S. population in general or people more like you in terms of age, income, education, and so forth."
Or, to put that another way, a title like "What is the Size of the Average Retirement Nest Egg" is essentially meaningless.
@JoJo: I've invested in taxable accts since I was 18. Moreover I (thankfully) did rather well in choosing employers during the Dot Com era, and while I'd have loved to throw the whole bunch into a tax-deferred account, IRS rules don't allow that. Ergo those assets had to be in taxable accounts and I invest them with the (perhaps overly cynical) expectation that I will *not* get much if any social security or pension funds in retirement. Taken together my personal taxable accts are far larger than my tax-deferred ones, which admittedly I opened later in life. (All of this, btw, is a 'good problem' that I'm thankful for, I admit)
My comment on the article was about those who might have taxable accounts and invest them with the primary goal of planning for retirement purposes. In other words, even if they're not a 'retirement account' (which generally is interpreted to be tax-deferred) the PURPOSE of the account is more important in determining a person's total retirement 'nest egg' than just the $$ in a tax-deferred account.
The point I'm making is that combining the accounts in most instances wouldn't be material. People already have little savings in let's call it the most traditional retirement accounts... These same people certainly don't have other accounts earmarked for retirement that may come in the taxable variety. You are an outlier, and congrats on that success, however, my whole point from the beginning was to ignore those situations... "If your answer is simply that you can't because you maxed out contributions, then your nest egg is more than enough and people with the financial flexibility to do that really should be excluded from most of these types of analyses"
What a great point! We exclude folks like rforno and me (and most likely the great majority of MFO participants) because we're "outliers" with too much saving to be considered, and then of course to be consistent we also need to eliminate everyone who has too little or even no savings which could be used for retirement, so then we take the "average" of whoever is left, and that tells us exactly what?
The entire concept of "What is the Size of the Average Retirement Nest Egg" is essentially meaningless, as noted in the article itself.
The point I've been attempting to drill through your brains this whole time is that adding in taxable accounts isn't going to change the overall picture... Those with limited "retirement" savings in tax-deferred accounts surely don't have (material) assets in taxable accounts (for the purpose of retirement use). Do you not fundamentally agree with this?
I did. If you arbitrarily exclude one group of what you consider to be "outliers", then it's only reasonable to also exclude other obvious "outliers". In other words, the point I've been attempting to drill through your brain is that this entire subject as it's been structured here is complete nonsense.
Since you evidently missed it, the article itself states: "So if you're wondering how your retirement nest egg stacks up against the "average" one, you first need to decide to whom you want to compare yourself (and your egg)—the U.S. population in general or people more like you in terms of age, income, education, and so forth."
I did. If you arbitrarily exclude one group of what you consider to be "outliers", then it's only reasonable to also exclude other obvious "outliers". In other words, the point I've been attempting to drill through your brain is that this entire subject as it's been structured here is complete nonsense.
Since you evidently missed it, the article itself states: "So if you're wondering how your retirement nest egg stacks up against the "average" one, you first need to decide to whom you want to compare yourself (and your egg)—the U.S. population in general or people more like you in terms of age, income, education, and so forth."
Of course the report is skewed, and it discarded as outliers people with too little in savings.
It's skewed in part because it relies on figures that Fidelity provided from retirement plans it manages. AFAIK, Fidelity's plans skew toward large companies. Regardless, as reported, the data from Fidelity is per account not per person (it fails to sum multiple retirement accounts owned by an individual).
The Transamerica data was based on what it called a "nationally representative sample" of 6,732 workers. The sample itself wasn't nationally representative. For example, it oversampled workers at small companies (3428/6732, while according to the Census Bureau, "just" 46.8% of private sector workers in 2016 were employed by small companies). The survey did adjust the weighting to correct for the oversampling; still this illustrates that you can't assume that the figures are as described by the plain English. https://www.transamericacenter.org/retirement-research/retirement-survey
As @rforno speculated and @LewisBraham asserted, "An analysis of U.S. Census Bureau data reveals that the median retirement account balance among all working individuals is $0.00." That is, analyzing retirement accounts discards as "outliers" over 50% of workers, let alone all people, employed or not.
That quoted statement illustrates a general problem in relying upon retirement accounts and home brewed restricted sample sets. IMHO the better way to study how well prepared the population is for retirement is to look at data that covers the whole population, i.e. US Census Bureau data and its SIPP figures. The quote above came from such a study. https://www.nirsonline.org/reports/retirement-in-america-out-of-reach-for-most-americans/
Again as rforno suggested, that study also looks beyond nominal retirement savings, to net worth, which it acknowledges is "a generous measurement of retirement savings". This study addresses @johnN 's concern about varied costs of living by comparing people's savings/worth against their annual salaries. (How many people have saved N times their annual savings? At what ages?)
@catch22 asked about how old the data is. One difficulty in looking at savings figures or any other data-based issue is that the richer the data set, the older it tends to be. So while the study I cited (which is dated Sept. 2018) is based on the most recent SIPP data, that's only 2014.
The Transamerica report referenced by the originally cited page is from Transamerica's 18th annual survey. That summarized the results of a 25 minute Harris online survey conducted in English (another source of skewing) between August 9 and October 28, 2017. It says that it adjusted " for attitudinal and behavioral differences between those who are online versus those who are not, those who join online panels versus those who do not, and those who responded to this survey versus those who did not."
Though one has to wonder why the original page, updated May 2, 2019, did not use Transamerica's 19th annual retirement survey. That one was based on an online survey done between October 26 and December 11, 2018. Unlike the earlier survey, it included at least a smattering of workers older than "baby boomers" (its terminology, not mine).
I wouldn't go so far as to say that the references used or the original page are financial porn, but ISTM that virtually every doubt raised by posters here is legitimate, and that there are better sources of data and analyses.
Comments
To only consider 'tax deferred' accounts as 'retirement' accounts is bad analysis. imho.
Knowing you are well aware, too; of the difficulty with this type of report with data, I offer this.
I'm not criticizing the report in general or the data provided, but not unlike you; initial thoughts about such an article pop into our heads. These views of course are related to what we know and how each of us tend to see and think about this type of write based upon our experiences.
One of my initial thoughts was: how old is the data base info? Apologizes if a data link is available, as I'm short on time today.
Other initial thoughts related more so to the baby boomers (born 1946-1964) and their effect on the numbers. If indeed the reported numbers are accurate, 10,000 boomers per day retire. Ten thousand each day !!! I'm sure many have read this number before, too.
An interesting number to consider in the scope of American life.
So, whatever percentage of these folks had 401k's, etc. and are no longer contributing as well as some who have also started required distributions; how is this calculated into the data? In theory, this group could have been the largest dollar value contributors based upon their being at their highest wage years and/or also playing catch-up with contributions.
What if 50% of the retired boomers rolled over their 401k/403b accounts to an IRA within a 6 month period? Would this alter the outcome of the data enough to make the numbers look worse?
So many items could alter what the numbers mean to me in the write.
Thanks for your thoughts with viewing this write.
Regards,
Catch
Than there’s also the issue of municipal bond investments where the tax issue is essentially mute.
Here is the article authors bio. He's not a clunker, IMHO; a been there done that person.
But, as Anna has noted, too; this type of article has a lot of moving parts that are difficult to nail in place for any length of time.
@JoJo: I've invested in taxable accts since I was 18. Moreover I (thankfully) did rather well in choosing employers during the Dot Com era, and while I'd have loved to throw the whole bunch into a tax-deferred account, IRS rules don't allow that. Ergo those assets had to be in taxable accounts and I invest them with the (perhaps overly cynical) expectation that I will *not* get much if any social security or pension funds in retirement. Taken together my personal taxable accts are far larger than my tax-deferred ones, which admittedly I opened later in life. (All of this, btw, is a 'good problem' that I'm thankful for, I admit)
My comment on the article was about those who might have taxable accounts and invest them with the primary goal of planning for retirement purposes. In other words, even if they're not a 'retirement account' (which generally is interpreted to be tax-deferred) the PURPOSE of the account is more important in determining a person's total retirement 'nest egg' than just the $$ in a tax-deferred account.
Given that, it is difficult to understand why we would limit our consideration to only the sheltered component of such a "nest egg".
1 in 3 Americans has 0 retirement savings.
http://money.com/money/4258451/retirement-savings-survey/
Some great (err ... troubling) debt figures.
https://www.fool.com/investing/general/2015/01/18/the-average-american-has-this-much-debt-how-do-you.aspx
I agree. I suspect the majority have little or nothing saved up. I always see those reports about how X percent of America couldn't cover a $500 emergency expense w/o incurring credit card debt or such. It's definitely a bad situation!
"So if you're wondering how your retirement nest egg stacks up against the "average" one, you first need to decide to whom you want to compare yourself (and your egg)—the U.S. population in general or people more like you in terms of age, income, education, and so forth."
Or, to put that another way, a title like "What is the Size of the Average Retirement Nest Egg" is essentially meaningless.
The entire concept of "What is the Size of the Average Retirement Nest Egg" is essentially meaningless, as noted in the article itself.
Since you evidently missed it, the article itself states: "So if you're wondering how your retirement nest egg stacks up against the "average" one, you first need to decide to whom you want to compare yourself (and your egg)—the U.S. population in general or people more like you in terms of age, income, education, and so forth."
It's skewed in part because it relies on figures that Fidelity provided from retirement plans it manages. AFAIK, Fidelity's plans skew toward large companies. Regardless, as reported, the data from Fidelity is per account not per person (it fails to sum multiple retirement accounts owned by an individual).
The Transamerica data was based on what it called a "nationally representative sample" of 6,732 workers. The sample itself wasn't nationally representative. For example, it oversampled workers at small companies (3428/6732, while according to the Census Bureau, "just" 46.8% of private sector workers in 2016 were employed by small companies). The survey did adjust the weighting to correct for the oversampling; still this illustrates that you can't assume that the figures are as described by the plain English.
https://www.transamericacenter.org/retirement-research/retirement-survey
As @rforno speculated and @LewisBraham asserted, "An analysis of U.S. Census Bureau data reveals that the median retirement account balance among all working individuals is $0.00." That is, analyzing retirement accounts discards as "outliers" over 50% of workers, let alone all people, employed or not.
That quoted statement illustrates a general problem in relying upon retirement accounts and home brewed restricted sample sets. IMHO the better way to study how well prepared the population is for retirement is to look at data that covers the whole population, i.e. US Census Bureau data and its SIPP figures. The quote above came from such a study.
https://www.nirsonline.org/reports/retirement-in-america-out-of-reach-for-most-americans/
Again as rforno suggested, that study also looks beyond nominal retirement savings, to net worth, which it acknowledges is "a generous measurement of retirement savings". This study addresses @johnN 's concern about varied costs of living by comparing people's savings/worth against their annual salaries. (How many people have saved N times their annual savings? At what ages?)
@catch22 asked about how old the data is. One difficulty in looking at savings figures or any other data-based issue is that the richer the data set, the older it tends to be. So while the study I cited (which is dated Sept. 2018) is based on the most recent SIPP data, that's only 2014.
The Transamerica report referenced by the originally cited page is from Transamerica's 18th annual survey. That summarized the results of a 25 minute Harris online survey conducted in English (another source of skewing) between August 9 and October 28, 2017. It says that it adjusted " for attitudinal and behavioral differences between those who are online versus those who are not, those who join online panels versus those who do not, and those who responded to this survey versus those who did not."
Though one has to wonder why the original page, updated May 2, 2019, did not use Transamerica's 19th annual retirement survey. That one was based on an online survey done between October 26 and December 11, 2018. Unlike the earlier survey, it included at least a smattering of workers older than "baby boomers" (its terminology, not mine).
I wouldn't go so far as to say that the references used or the original page are financial porn, but ISTM that virtually every doubt raised by posters here is legitimate, and that there are better sources of data and analyses.
Median and average net worth by age:
Under 35: Median net worth: $11,100 (average net worth: $76,200).
35-44: $59,800 ($288,700).
45-54: $124,200 ($727,500).
55-64: $187,300 ($1,167,400).
65-74: $224,100 ($1,066,000).
75+: $264,800 ($1,067,000).