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Average Retirement Savings Revealed: Are You Normal?

Many Americans worry they’re not saving enough for retirement, and rightfully so.

A 2020 Northwestern Mutual study found that 71% of U.S. adults admit their financial planning needs improvement. However, only 29% of Americans work with a financial advisor.¹

The value of working with a financial advisor varies by person and advisors are legally prohibited from promising returns, but research suggests people who work with a financial advisor feel more at ease about their finances and could end up with about 15% more money to spend in retirement.²

^{A recent Vanguard study found that, on average, a hypothetical $500K investment would grow to over $3.4 million under the care of an advisor over 25 years, whereas the expected value from self-management would be $1.69 million, or 50% less. In other words, an advisor-managed portfolio would average 8% annualized growth over a 25-year period, compared to 5% from a self-managed portfolio.3}

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Shocking Savings Statistics

The National Institute on Retirement Security reports that almost 40 million households have no retirement savings⁴, while the Employee Benefit Research Institute estimates Americans have a retirement savings deficit at $3.68 trillion.⁵

But it’s not all doom and gloom, and many Americans are saving for retirement.

In fact, Fidelity reported in May 2022 that the total 401(k) savings rate for the first quarter of 2022 reached a record 14%, while the total number of Fidelity IRA accounts increased 11% over the first quarter of 2021. The average 401(k) balance for those who've been saving for over 10 years averaged over $380,000.⁶

General Guidelines for Retirement Savings

You should have saved the equivalent of one year’s salary by the time you hit 30, according to Fidelity research, but saving more certainly won’t hurt. By their estimates, you should aim to 3x by 40, 6x by 50, and 8x by 60 with the hopes of having 10x saved when it's time to retire.⁷ 

These recommendations are based on a person saving 15% of their income beginning at age 25, investing at least 50% in stocks and a target retirement age of 67. Of course, saving for retirement is different for everyone. If you feel like you're behind in savings, want to make sure you're on track, or want to find investment vehicles to help you save more, talking to an advisor can help you set and execute a retirement plan.

IN THE PRESS:

American's Average Retirement Savings by Age

An October 2020 study by the Center for Retirement Research calculated median retirement account (401(k)/IRA) balances by age from Federal Reserve survey data.⁸ Here are the numbers:

• 35 to 44: $51,000
  
  
• 45 to 54: $90,000
  
  
• 55 to 64: $120,000

Speak to an Advisor to Work On Boosting Your Retirement Savings 

Regardless of where your retirement savings stand right now, one way that you can help get a retirement plan in place is by working with a financial advisor.

As previously mentioned, research suggests people who work with a financial advisor feel more at ease about their finances and could end up with about 15% more money to spend in retirement.

Chances are, there are several highly qualified financial advisors in your town. However, it can seem daunting to choose one. 

Our no-cost tool makes it easy to find a qualified financial advisor. You can get matched with up to three fiduciary investment advisors that have been vetted and subject to our due diligence criteria. You even earn a free consultation with each of your matches, so you can compare them and be fully prepared to pick a financial advisor.  The entire matching process takes just a few minutes. 

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Assuming 5% annualized growth of $500k portfolio vs 8% annualized growth of advisor managed portfolio over 25 years. 

The hypothetical study discussed above assumes a 5% net return and a 3% net annual value add for professional financial advice to performance based on the Vanguard Whitepaper “Putting a Value on your Value, Quantifying Vanguard Advisor’s Alpha”.  Please carefully review the methodologies employed in the Vanguard Whitepaper  The value of professional investment advice is only an illustrative estimate and varies with each unique client’s individual circumstances and portfolio composition. Carefully consider your investment objectives, risk factors, and perform your own due diligence before choosing an investment adviser.

This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.

SmartAsset Advisors, LLC (“SmartAsset”), a wholly owned subsidiary of Financial Insight Technology, is registered with the U.S. Securities and Exchange Commission as an investment adviser. SmartAsset’s services are limited to referring users to third party registered investment advisers and/or investment adviser representatives (“RIA/IARs”) that have elected to participate in our matching platform based on information gathered from users through our online questionnaire. SmartAsset does not review the ongoing performance of any RIA/IAR, participate in the management of any user’s account by an RIA/IAR or provide advice regarding specific investments.

We do not manage client funds or hold custody of assets, we help users connect with relevant financial advisors.

SmartAsset.com is not intended to provide legal advice, tax advice or financial advice (Other than referrals to Investment Advisers or Investment Adviser Representatives). SmartAsset is not a financial planner, broker or tax adviser. The Service is intended only to assist you in your understanding of financial organization and decision-making and is broad in scope. Your personal financial situation is unique, and any information and investing strategies obtained through SmartAsset.com may not be appropriate for your situation. Accordingly, before making any final decisions or implementing any financial strategy, you should consider obtaining additional information and advice from your accountant or other financial advisers who is fully aware of your individual circumstances. 

Other than application and licensing fees, SmartAsset did not provide compensation for the aforementioned awards.

Sources:
1. “Planning and Progress”, Northwestern Mutual (April 2020) 
2.Journal of Retirement Study Winter (2020) . The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results. Please follow the link to see the methodologies employed in the Journal of Retirement study.
3. Vanguard (Feb. 2019), Putting a Value on Your Value The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of your future results.  Please follow the link to see the methodologies employed in the Vanguard whitepaper. 
4. "The Continuing Retirement Savings Crisis". NIRS (March 2015)
5. "Impact of the COVID-19 Pandemic on Retirement Income Adequacy: Evidence From EBRI’s Retirement Security Projection Model®". EBRI (April 2020)
6. "Building Financial Futures". Fidelity (May 2022).
7.."How Much Do I Need to Retire?" Fidelity (Aug. 2021).  
8. "401(K)/IRA HOLDINGS IN 2019: AN UPDATE FROM THE SCF". CRR. (Oct. 2020)

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