Average Retirement Savings Revealed: Are You Normal?

IN THE PRESS:

May 2022

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

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.

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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.

Each advisor has a unique strategy. Some advisors may suggest aggressive investments, while others are more conservative. If you prefer to go all in on stocks, an advisor that prefers bonds and index funds is not a great match for your style.

Empowering people to make smart financial decisions.

Empowering people to make smart financial decisions.

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.

Click Your State to Get Matched With Financial Advisors Who Serve Your Area

After you choose your state and answer a few questions, you can compare up to three advisors that serve your area and decide which to work with.

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