What Does the Average Person Have Saved for Their Retirement?

A well-funded IRA likely means a financially sound retirement.

Known as the "golden years," retirement is a time to relax and enjoy the fruits of your labor. If you've saved enough money, you will coast through retirement. If not, you may struggle to pay your bills. Unfortunately, according to 2009 and 2010 data, Americans, on average, are not saving enough money for their retirements.

Current Trends

According to a 2010 study by the Employee Benefit Research Institute, or EBRI, American workers over age 36 in the process of saving for retirement average a shortfall of more than $47,000 of what they will need in retirement to cover basic living expenses. Another study by the same research group examined employee participation in employer-sponsored retirement plans, noting that approximately 40 percent of Americans contribute to these retirement accounts. Retirement savings rates have fallen in previous years; this trend could mean a future population of deeply underfunded retirees.

Ages

In 2009, the EBRI published a report that listed the average retirement savings for Americans by household. Of those surveyed, Americans ages 55 to 64 had the most money saved for retirement, averaging just over $69,000 per person. Not surprisingly, Americans under age 35 had the least money saved for retirement, with just $6,306 on average per person.

Expert Opinion

Economic experts suggest you will need 70 percent of your preretirement income available annually during your retirement years. However, the amount of money you need to stash away for retirement varies with your financial situation. You must compare your desired retirement age with the amount of money you will need during retirement, as well as the number of years you expect to live in retirement. According to the U.S. Department of Labor, the average American spends approximately 20 years in retirement.

Considerations

Although many Americans have low retirement savings, some may receive future inheritances from wealthy or well-insured parents and family members. Others may expect significant pensions from their employers or high social security income during retirement. The federal government gives low to middle-income taxpayers an incentive to save for retirement. Funds contributed to IRAs and 401(k)s are tax-deductible, and some taxpayers who meet income eligibility guidelines may receive a tax credit of up to $1,000 per year for contributing to an IRA savings account.

References

• STL Today.com; Average American's Retirement Savings Falls Short by $47,700; David Nicklaus; October 19, 2010
• EBRI.org; Individual Account Retirement Plans; Craig Copeland; June 2009
• U.S. Department of Labor: Top 10 Ways to Prepare for Retirement
• IRS.gov; Get Credit for Your Retirement Savings; February 2011