Have you been wondering how does your retirement savings stack up to your peers? As you prepared your retirement plan initially and updated it over the years, you may have seen astonishing estimates. You need $X to retire comfortably. That X is often an unattainable figure for many working adults. If it’s attainable, it may require you to cut back on your spending with harsh effects on your lifestyle.
As a result, you can easily feel overwhelmed and discouraged. You may wonder how so many other people can afford to pull together seven or eight figures in savings for retirement. Talking openly about your wealth continues to be a social no-no, so you can’t really ask your co-workers and neighbors.
How Does Your Retirement Savings Stack Up?
The good news is that the Federal Reserve recently released its Survey of Consumer Finances for 2024. So, how do you stack up? The average amount of retirement account savings among people between the ages of 65 to 74 years old is $426,000.
The survey also looked at additional assets owned by these individuals. The average person at age 70 has $60,000 in their checking and savings accounts combined. He or she also has $43,000 accumulated in a whole life insurance policy and $144,000 in CDs and bonds.
This doesn’t quite hit the million-dollar-plus level that we’re often led to believe. In fact, some resources now say that you need at least $2 million to retire comfortably.
Is That Really Enough Money to Retire On?
The Federal Reserve’s survey doesn’t delve into how comfortably these folks are in retirement, so you should analyze these figures with a grain of salt. In addition, the actual amount of money you’ll need to retire comfortably depends on factors like:
- Your debts
- Your lifestyle
- The cost of living in your area
- Other sources of income beyond Social Security, such as real estate rental income or royalties
Even when you take these things into account, other factors affect your financial security in retirement. One of the biggest factors is inflation. Inflation directly eats away at the value of your money, making what you have worth less in the future.
If anything can be learned from the last several years, it’s this. Inflation is a yo-yo. You can make estimates when planning your retirement budget. You can make what you perceive to be a high estimate – you know, to be on the safe side. However, at the end of the days, this is an assumption in your planning.
Do You Have Enough Retirement Savings?
While you can compare your retirement savings to others to get a sense of comfort (or to get a much-needed prod to make crucial changes in your savings habits), one thing is clear. What works for your neighbors may not work for you. You need to make your own retirement budget, and you need to plan accordingly based on your expectations.
What if you don’t have enough money saved? There’s always the possibility of continuing to work until you’re 70 or older. Many people delay retirement for financial reasons as well as for the simple fact that they think retirement will be boring.
Roughly 20% of seniors today continue to work at least on a part-time basis in retirement. What are these options:
- Work at your current job
- Work in a low-stress side gig
- Make money from independent projects (such as by writing a book or selling your woodworking crafts)
In addition to working, there are ways to live on less money. For example, you could relocate to a more affordable location or downsize.
Depending on how far behind you are on retirement savings or where your comfort level is with finally cutting the cord on your income-generating years, you may adopt both money-making activities with options to live on less money.
While retirement is (hopefully) the easy life, preparing for retirement is anything but easy. Knowing a precise figure that you need to retire isn’t possible, so we all need to plan carefully and hope for the best.