Here’s What the Average American Has in Retirement Savings: Is That Enough?

If the fear of running out of money during retirement keeps you up at night, don’t worry, you’re not alone. Saving enough for the future and stretching those savings over many years is a challenging task. Although you may not be where you would like to be financially, your savings may not be as far from those of the average American as you think. In addition, many still have time to make significant changes.

Many workers estimate that they will need around a million dollars, or even more, to retire comfortably. However, the average retirement accounts balance of American households in 2022 was just under $334,000, according to the latest Consumer Finance Survey.

Retirement Savings: A Realistic (Yet Optimistic?) Perspective

Before getting alarmed, it is important to remember that averages can be misleading, especially in financial matters. The averages include the extremely wealthy, who could have tens or even hundreds of millions of dollars saved. A more realistic view is obtained by looking at the average savings, which is the exact amount that the household has at the midpoint of the data set.

In 2022, the average savings was only $87,000. Here it is essential to highlight a few points: first of all, these are household savings, not individual ones. If you are married, compare your combined savings with your spouse’s against this average, not just your personal ones.

Secondly, this figure includes all workers and families, from young single adults who are just starting out in the world of work to those about to retire. So, while it may be reassuring to know that you may not be as below average as you thought, the $87,000 doesn’t necessarily reflect your specific situation or how much you really need for retirement.

Focus on Your Needs as a Soon-To-Be Retiree

Instead of worrying about how your savings compare to others, calculate how much you need for your own retirement and draw up a plan to achieve it.

First, take note of how much you have in all of your retirement accounts, including any accounts you’ve accumulated with previous employers. Then, calculate how much you need to save monthly to reach your goal. A retirement calculator can be very useful in this process. If you expect to receive matching contributions from your employer’s 401(k) plan, subtract that from your monthly savings goal to determine how much you need to contribute on your own.

Once you have this number clear, the way forward is simpler: keep working and saving every month. Things get complicated if you can’t save as much as you’d like right now, but having a plan and adjusting it as needed can help keep you on track for a secure retirement.

Retirement savings in the United States are divided into several types of accounts, each with its own characteristics and advantages. Below are some recent statistics about savings in retirement accounts such as 401(k), Roth IRA, and Traditional IRA plans.

401(k) Retirement Plans: How Much Does Americans Have?

Retirement savings in the United States are divided into several types of accounts, each with its own characteristics and advantages. Below are some recent statistics about saving in retirement accounts such as 401(k) plans, Roth IRAs, and Traditional IRAs.

Planes 401(k)

1. Average balance: The average 401(k) account balance was approximately $103,900.
2. Annual contributions: The maximum contribution allowed in 2024 for a 401(k) plan is $23,000 for individuals under age 50, and $30,000 for individuals age 50 or older (including the $7,500 bonus contribution).
3. Stake: Approximately 60% of employees with access to a 401(k) plan participate in it.

Roth IRA

1. Average balance: The average balance in a Roth IRA was around $39,500. 
2. Annual contributions: For 2023, the maximum contribution allowed in a Roth IRA is $7.000 for people under age 50 and $7,500 for people age 50 or older (including the $1,000 bonus contribution).
3. Distribution: Contributions to a Roth IRA are not tax-deductible, but qualified distributions are tax free. About 26% of American families have a Roth IRA.

Traditional IRA

1. Average balance: The average Traditional IRA account balance was approximately $107,200.
2. Annual contributions: The maximum contribution allowed in 2023 for a Traditional IRA is $6,500 for individuals under age 50 and $7,500 for individuals age 50 or older (including the $1,000 bonus contribution).
3. Deductions: Contributions to a Traditional IRA may be tax-deductible, depending on the taxpayer’s income and participation in other retirement plans.

Generalities and Trends

1. Account Distribution: According to the Investment Company Institute, 37% of American households have some type of IRA account.
2. Contributions: Most taxpayers who contribute to IRAs or 401(k)s do not maximize their annual contributions.
3. Withdrawal of funds: About 20% of 401(k) workers take out loans against their accounts, and about 10% make early withdrawals, often incurring tax penalties.