|
Average Retirement Savings by Age GroupIf you are curious as to the average retirement savings by age group, you’ll first want to understand the terminology and what is including in the savings. Retirement is defined as the point in time when an individual stops working.
Savings is defined as funds set aside and not used for day-to-day living expenses. The savings typically earn interest or dividends as opposed to cash in a safety deposit box or in a non-interest bearing checking account. Savings is any one or more of the following:
Retirement Savings is NotWhen you are studying the average retirement savings by age group, there are some savings vehicles you should not consider as a good retirement investment:
When averaging the savings in the table: 24 and Younger $ 1,475 25-34 $ 21,714 35-44 $ 61,266 45-54 $116,515 55-64 $183,028 65 and Older $170,008 The reason the 65 and older savings is less than the 55-64 is because the majority of senior citizens have retired at this point and their savings remains flat and slowly decreases as they use the funds. When calculating the average retirement savings by age group, there are several factors which move this number, both up and down:
Net WorthAs you looking at the average retirement savings by age group, also consider net worth. Net worth is your assets (savings, value of house, etc.) minus your liabilities (all of your debt, such as student loans and mortgage). Examples of Net Worth Debbie and Dale, both are 30 years old, are engaged to be married. Before they pool their money and debt into a joint account, each one had an opinion of their net worth and their partner’s net worth. See if you can determine whether Debbie or Dale have a higher net worth today and at age 55. Debbie’s Story: Debbie doesn’t have any debt; she has a good job with retirement benefits (401K with the employer matching the first four percent). She is currently earning $75,000 per year with the potential for an annual raise of five percent. She has a Money Market Account with a current balance of $50,000. The current balance in her 401K is $40,000. She plans to continue investing six percent in her 401K. Dale’s Story: Dale just completed medical school. His student loan debt is $200,000. The first year he will earn $80,000 and each year his income will increase by $20,000. He doesn’t have any savings, including retirement or liquid balances in a Money Market Account. Dale’s goal is to pay off his student load debt in five years. Once the loan is paid off, he will begin investing 8% towards his retirement, since he is self-employed, he will not have an employer matching 401K). Which one has a higher net worth today and at retirement? Debbie’s net worth today is $90,000 and Dale’s is zero. Debbie’s net worth at age 55 is estimated to be $511,686 and Dale’s will be $702,240 (see calculations below):
Debbie’s salary increased five percent per year and Dale’s increased by $20,000 per year. The average retirement savings by age group for Debbie when she turns 55 years old is based on her 401K six percent investment and her employer’s four percent matching with a 10% return each year. Dale does not have a 401K or employer providing a match. He is investing five percent per year and he has an annual return of 10%. Average Net Worth by AgeThe average retirement savings by age group should include your net worth. According to CNN Money, here is the average net worth today by age group:
Bottom LineWhen you are looking at the average retirement savings by age group, it isn’t what your salary is, it’s what you spend that will help you save for your retirement. You can’t save it if you’ve spent it. When considering the average retirement savings by age group, the average return rate isn’t always 10%, a flat rate or a positive rate. There may be losses. This example indicates with a positive 10 percent return, Dale will eventually have a higher net worth than Debbie. Even though Debbie’s income is a great deal less than Dale’s when they turn 55, given her salary, if she can live within her means and not go into debt, she could possibly save more for retirement and match Dale’s net worth. Are you on track from your retirement savings, if not evaluate one of the many investment options keeping safety and soundness in mind. Return from Average Retirement Savings by Age Group to The Best Places to Retire Home Page |
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
