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The State of Retirement in the U.S. in 2016

It’s sad.

<End of post.>

Alright, alright. I’ll get into details if I must. First, the good news:

According to the 2016 Retirement Confidence Survey published by the Employee Benefit Research Institute, people are starting to move out of their recession fears. The percentage of workers “very confident” in having enough to retire, went up from 13% in 2013 to 22% in 2015. This year it went down slightly to 21%, but overall, people are feeling a bit more confident in these insane market days.

The question is: Should they feel this confident?

26% of the surveyed workers that provided actual investment numbers reported they had less than $1000! Now, I’m assuming/hoping those 26% had NO OVERLAP with the 21% feeling “Very confident,” but I don’t actually know.

Let’s look at a different source. The Economic Policy Institute has put together a chartbook on the State of American Retirement. In their findings, 47% families between the ages of 32-61Β are contributing to NO PLAN AT ALL!

Now if you’re like me, you like to compare your numbers. Here is a chart of the averages of each of the different age groups. As you’ll see, the savings amounts do increase as people age, but not nearly as much as they should be! 56-61 year olds with less than $200,000! I can happily say we are currently higher than the average 44-49-year-olds, but I hope to surpass even the averages of the 56-61 year olds soon!

This calculates to a total overall average of $95,766. But the story gets WORSE. This is the AVERAGE! What happens when you average two people with $1,000 of total savings and one guy with $1,000,000? You get an average of about $334,000. See how that one guy skews everything? Another indicator is called median which orders everyone from lowest to highest and looks at what the guy in the middle is saving. They found that (because 47% have no savings at all) the median was just $5,000! What about the 90th percentile family? They were only up to $274,000! What about the median of families WITH retirement plans? $60,000! All of this shows there is HUGE INEQUALITY. It turns out white, married, educated people are WAY more likely to have retirement plans and ones with higher balances. ugh. And the gap between the upper crust and the lower crust has INCREASED since the recession.

The 1% had $1,080,000 or more. This does not bode well for the general public. But guess what? It does bode well for YOU! You know how easy it is to make $1,000,000 over a long period of time! And you know it’s possible to do it in less! That means YOU, regardless of race, gender, marital status, or education level can become a 1 percenter!

Also, stop reading your retirement newsletter. THE PEOPLE NEED TO KNOW THEY CAN DO BETTER!

Disclaimer: This post may contain affiliate links which, at no cost to you, helps support Northern Expenditure and keeps our heat on in the winter. Thanks!

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22 Comments

  1. LOL – it is very bad, isn’t it? I don’t even think these numbers really tell the whole story. What about debt? Most Americans also have significant credit card debt, are paying off student loans, and have a mortgage. The problem of low retirement savings is compounded (in a bad way) by debt. The picture that you chose is perfect for the present status.

    • MaggieBanks

      SO true. Debt is taking up the rest of those savings! THE PEOPLE NEED TO KNOW! πŸ™‚

  2. The other note recently in the news is that 46 percent of the population couldn’t cover a surprise 400 dollar bill. The simple reality is the average American lives paycheck to paycheck regardless of pay rate. They don’t invest in the stock market and their only source of funding is their labor. Scary indeed.

  3. Matt @ Optimize Your Life

    The 90th percentile only has $274,000? That’s nuts. All of those numbers are upsetting, but that was the most surprising to me. That seems so low considering you are talking about the 10% of the country who are the best savers. Wow.

    Thanks for the interesting research.

    • MaggieBanks

      I know! Selfishly, I thought, “My next goal is $274,000! Then I can say I’m in the top 10% of savers!” And no one at my next party will know that means such a low amount. I’ll just throw that out as a statement and people will assume I’m super rich! πŸ™‚

  4. Aside from staggering and downright scary, it gets me thinking.

    Do those who did the analyses say how large the sample sizes were? That can badly skew things. However I have a horrible feeling they were well executed studies with large sampling and this is nothing but reality.

    I need to go for a walk to digest lunch and this mind-boggling data.

    • MaggieBanks

      I know sample sizes can skew. But these were pretty large studies… unfortunately! πŸ™‚

  5. Can I copy and paste this post and include it as the next installment of our #retirementlie series? πŸ˜‰ I know — all of this stuff makes me SO SAD. Especially because most of these people really could be saving a lot and setting themselves up for a much less stressful retirement. πŸ™

  6. The Green Swan

    Love the conclusion, Maggie, we all can do it if we put our minds to it. It’s not overly difficult, just start saving early and often! Nice post!

  7. I have run into this first hand at both companies I have worked for. This is working with educated, financially competent people – I mean we do risk analysis and financial metrics for any project – and they are generally at a 6 figure income level, and still act clueless about retirement savings. I get more crazy looks when I start talking about Vanguard, index funds, and saving above and beyond your 401k. The reality is that this is the first generation or close to it where their retirement is entirely in their hands. As scary as it is most people don’t want to take accountability for their retirement and would rather pay “an expert” to think about it for them, if they’re even thinking about it at all.

    Twice now, I’ve sent out an email to various people and the rest of my team with numerous links to PF intro forums, and links on how to set up a Vanguard account, build a couch potato portfolio, or similar no thought, low risk portfolio and you’d be surprised how much time I have to spend explaining even the most basic concepts. It’s been fun, and easier because we all have whiteboards in our offices I can draw on to better explain things, but man, I am amazed how this can seem so difficult for people who have no problem analyzing and recommending to move forward with multi million dollar projects.

    My take away is like yours – these are simple concepts and you don’t have to be a frugal miser to implement them, but you have to be intentional and actually implement something.

    • MaggieBanks

      You NEED to put a copy of that email on your blog as a post. I would love to see that aggregated list of posts to send!

  8. I’m still walking my eyebrows down from my hairline. That IS scary. I knew it was likely bad out there but that’s worse than I suspected, especially if the sample sizes are large enough to be representative.

    I’m both glad that we’re at the top with our retirement savings (only 401Ks and IRAs) but worried for everyone who isn’t on track to have a decent retirement savings to fall back on when age and health catch up to them.

  9. God that is depressing. I am already vested in one defined benefit plan (US Government FERS) and in 8 year will be vested in another (US Military Guard Retirement), but I retirement assets that are an order of magnitude higher than any of the ones listed below. Mind you, I live in a high COLA area, but I am moving very steadily from not worrying about retirement.

    • MaggieBanks

      Well done… and pensions are awesome if you can get them in my opinion. πŸ™‚

  10. I encounter this at the university I teach at. I have colleagues with Ph.Ds who can’t/won’t take the time to sit down and figure out there 401ks. Some just opt for the pension plan blindly so they don’t have to think about things. We need a seminar for this. The good thing is, even though I am not a finance professor, I am starting to get involved with our financial literacy project. Many of my colleagues need it. BAD!!!

    • MaggieBanks

      Yay for helping your community! I agree with you. Most people I talk to assume their companies are just taking care of that… with their best interests in mind! Not a chance!

  11. TJ

    I don’t know if I should feel good about where I’m at or feel awful at the reality for so many others.

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