The Scary Reality of Americans’ Retirement Savings

Anna Williams

retirement fund It’s not exactly news that Americans’ overall retirement savings are greatly amiss. But the actual magnitude of that disconnect between what we know we’re supposed to save and how much we’re actually putting away is shocking.

A new study by the National Institute on Retirement Security spells out this shortfall in scary-low numbers, and finds that with the median retirement account at a mere $3,000, the average American working family has virtually zero retirement savings.

Those nearing retirement are no better off. When the study focused on just the demographic approaching that benchmark (people age 55 to 64), they found that less than 5% had savings that were on track to meet standard targets. All in all, the report calculates that the national savings gap could tally up to $14 trillion.

What Does This Mean for the Future?

The study pinpoints the savings shortage on more than just the recent economic crisis, also noting that only half of private employees today are offered retirement benefits through their employer—that’s the lowest it’s been since 1979, and is likely compounding the problem.

Without some improvement, the study suggests that the country is setting itself up for heavy dependence on public assistance, younger generations and social service organizations to help with the future retirement burden. “The ‘American Dream’ of retiring after a lifetime of work will be long delayed, if not impossible, for many,” according to the report. Perhaps this could be a wake-up call to save more for retirement.

RELATED: The Secret of Retirement Savings: You Can’t Make Up for Lost Time

  • CrankyFranky

    ‘the average American working family has virtually zero retirement savings.’ – yes but this may be a bit of a beat-up – as my understanding is average families do not really start to save for retirement until the kids have left and the mortgage is paid off, when they can start to focus on ramping up savings for retirement.

    Figures I have seen for people over 55yo are much more reassuring – but hey I’m in Oz where people may be more relaxed and comfortable about getting a government pension as needed.

    • ana

      “Those nearing retirement are no better off. When the study focused on just the demographic approaching that benchmark (people age 55 to 64), they found that less than 5% had savings that were on track to meet standard targets.”

  • macattack

    I’m with crankyfranky, the kids are out of school, house is paid, lets put some serious money into ira

    • ana

      It doesn’t have as much time to grow and compound when you start that late. Not saying it can’t be done but there will never be the perfect time to start saving and the earlier you start the better off you will be.

  • Guest

    I think there are several issues with waiting until ‘the kids are out of college’ to start saving for retirement: compound interest means a little saved early has a bigger impact than a lot saved later; more and more people are getting married and having kids later (if you have your children in your mid-late thirties, you are ~57-60 when they graduate from college–that’s not a lot of time to fully fund your retirement); most people don’t have ANY savings to speak of, so this trend seem less the result of people who are strategically managing their money and more the result of people who are consistently lacking extra funds to devote to savings of any kind (whether due to the recession, disinterest, lack of knowledge, etc.).

    The only people I know from my parent’s generation (mid-late 50s) who are in decent shape to retire on schedule are those who will be getting a pension. I think this trend is very concerning and should be a wake-up call to anyone hoping to retire at some point.

  • rubymer

    I’m 25. Have 0 saved. I calculate my income versus spending and including food and gas and I only have about 200 left…. This is trying to include 400 of savings a month, but does not include oil changes, medical co-pays (I have asthma) and deductibles, and all that. I have been depleting my savings all year since I moved out on my own and have no idea when I will be able to save for retirement.

    • CrankyFranky

      agree that until you have surplus income you cannot save for the future – I’m happy I live in Oz where young people get $20+ an hour for basic jobs – and shake my head at US workers accepting $5ph or less just so they can get health insurance – that looks real unfair to me – but hey it’s your democracy and I can’t vote for you – good luck.

      • rubymer

        What is Oz? And I actually do make a livable wage… if I didn’t live in Southern California.

        • CrankyFranky

          sorry – Oz = Australia – often pronounced Oztraylia …

          yep – a living wage – enough for another place – but if it’s not enough where you are … ?

          as mara – most young people I see are all about going out and having fun which includes unconscious consumption/spending – I liked this morning ‘you know you’re an adult when you buy your own toilet paper’ – when those bills start rolling in, and there’s only you having to pay them, then some serious contemplation of spending, budgets and planning may be appropriate – before that if mom and dad pay the bills, who cares … ?

    • mara

      rubymer…I was in the same boat as you at 25 but add (or substract) 7K in debt to 0 in savings. I decided to do something about it last year when I was 27…I started budgeting for real, find extra ways to get a few extra hundreds a month (tutoring or helping people move) and finding ways I could cut some costs here and there. Reading about finances also motivated me big time and now for the first time EVER I have a few thousands in savings and no debt…just this year a also started to put something towards retirement (the portion that my company matches). I tell you this because I wished I would have made the sacrifices a bit earlier because it is just at first that it is hard then you don’t even think about it. Try your best to find ways to find that extra to go to is worth it! sometimes the side things you can you will help you in unexpected ways to raise your overall income. Work in your defense (cutting expenses) and your offense (income) but remember that you can only cut so much but there is no limit to how much income you can make. I still have feel like I am climbing a big mountain but before I was just looking up wondering when I would be able to are there don’t wait til you feel “ready” to get started just go..little by little even if it is 50 bucks at a time :)
      good luck!

      • rubymer

        I am 40,000 in debt :-) Car Loan (8,000), Student Loans (24,000) and money owed to a family friend (8,000). I should take on a second job perhaps…………………. I have 2,500 in savings. But just had to use 300 to fix my car window as it was broken for theft and my roommate moved out leaving me with paying twice my rent for July and I haven’t been able to find anyone else to replace her, another 700$. Not to mention I support my disabled boyfriend (just food costs mostly). Wow I am missing college!

        • mara

          Rubymer…even with the 40k in debt try your best to get to your goals even if it is a bit at a time..sometimes that may be staying still and not moving backwards (getting more debt)..but then pick up where you left off and focus on realistic financial goals. Tiny steps will make a HUGE different at the end. I have seen it with some of my friends that inspired me to quit saying “one day I will…” and actually put that “one day” in the calendar. :D

          • Carol F

            Agreed – I started my 401(k) at 20 just putting away 2% of my paycheck (I’m now up to 9%), and I’ve been saving for 10 years. I’ve just hit 40k. It isn’t as much as I should be saving, but I’m on the right track. Hopefully when the kids are out of the house, I can up the ante, but until then I’m trying to use the compounding interest factor in my favor.

          • rubymer

            It’s hard because I don’t have access to a 401 through my employer and it will take forever to save the minimum of 1,000 to start a roth IRA with Vanguard… I guess I should just put the 2% or so into a savings account…

        • LJ

          I would recommend getting a second (or third) job. I got a part time job waiting tables in addition to my “career” job so that I could pay off school and my car quickly. While it can be difficult to manage the extra work, it’s worth it to not have the debt hanging over your head!

  • A.J Evans

    I agree with Ana, thats why i started looking for advisers, i found, they where really helpful