7 months ago
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Many Americans believe they’ll need an average of $1.46 million in savings to secure a comfortable retirement, according to a 2024 Northwestern Mutual survey.
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But, as of 2022, the average savings balance in retirement accounts was only $609,000 among Americans aged 65 to 74, according to the latest data from the Federal Reserve.
In that same year, however, the median retirement account balance was actually only $200,000.
This tells us that the national average of $609,000 is likely being skewed higher by a small percentage of wealthy people.
Of course, account balances only represent one component of retirement wealth. Many seniors have additional means of income, such as 401(k)s and IRAs. There are also pensions, inheritances, homeownership, and Social Security benefits that all come into the mix.
But have you ever wondered how your level of retirement wealth stacks up? Here are four levels of wealth among older Americans — and how to get into one of the higher ones.
Lower level of retirement wealth
Retirees with a lower level of wealth typically have only modest savings to fall back on and largely live off their Social Security benefits.
People in this boat often have to function in survival mode. They may have just enough money to cover the absolute essentials, with limited flexibility for discretionary spending. In many cases, they may be living paycheck to paycheck.
Unexpected bills — for sudden home repairs or emergency medical procedures — can be stressful, and savings may be depleted after one or two of these unforeseen expenses.
The Social Security Administration (SSA) states that monthly benefits generally replace around 40% of retiree’s annual pre-retirement earnings — and notes that it shouldn’t be the only source of income.
A pay cut that large could lead to a bare bones retirement, and one that requires a significant cutback on spending.
If you fall into this category, you may have less than the median $200,000 savings balance among older Americans.
Middle level of retirement wealth
Those that fall under this category likely have some financial stress, but who doesn’t?
Retirees in this situation may have enough money to cover their basic needs and still have a modest amount left over for discretionary spending.
