According to a 2018 Fidelity Investments analysis, average retirement-account balances are $106,500 for 401(k)s, $111,000 for IRAs, and $85,500 for 403(b)s. That’s a far cry from what Fidelity recommends most Americans save: six times their salary by age 50, and seven times their salary by age 55.

Many American Retirees Have No Savings

These numbers are far below suggested minimums required for maintaining a comfortable lifestyle. About 29% of households with members aged 55 and over have neither retirement savings, such as 401(k) plans or individual retirement accounts (IRAs), nor a defined-benefit (DB) plan (a traditional pension). An additional 23% do have a DB plan, but no other retirement savings.

Households that do have retirement savings generally have other resources to draw on as well, such as nonretirement savings and DB plans. Social Security provides most of the income for about half of households including people 65 and older.

Start Saving as Soon as Possible

It is clear that being average when it comes to retirement savings is not a good thing. The key to having enough at retirement is to start saving as soon as possible. The difference between beginning a regular retirement savings plan in your 20s compared to your 30s can be hundreds of thousands of dollars by the time you reach retirement age.

Contributing to an IRA or an employer-sponsored 401(k) provides tax-deferred earnings and benefits from compound growth.

Advisor Insight

Rick Fingerman, CFP®, CDFA®, CFS®, CCPS®
Financial Planning Solutions, LLC, Newton, MA

A better question to ask would be: "How much will I need in retirement?" Everyone is different. Some might need $100,000 a year to live in retirement, others more or less depending on their lifestyle requirements. If a so-called expert says you need a nest egg of $1,000,000 or $2,000,000 and they know nothing about you, then this is inaccurate.

To calculate how much you need to save, first determine what you suspect you will spend in retirement. Then, add up your expected future income, such as from a pension plan or Social Security, and subtract that from your spending budget. The discrepancy is what you will need to make up. Be sure to factor inflation into this amount as well, as purchasing power will inevitably decrease, especially for services like health care.