What is the size of the average retirement nest egg?

The Golden (Nest) Egg

What is the size of the average retirement nest egg? It depends on what you mean by “average”.

A 2019 analysis of more than 30 million retirement accounts by Fidelity Investments found that the average balance in company-sponsored 401(k) plans at the start of 2019 was $103,700. For traditional, Roth and rollover IRAs, the amount was $107,100. And for 403(b)s and other defined contribution retirement plans in the nonprofit sector, it was $85,800. These numbers were almost unchanged from the same quarter last year, mainly due to the downturn in the stock markets at the end of 2018.

Basic Takeaways

  • American workers had an average of $95,600 in their 401(k) plans at the end of 2018, according to a major study.
  • However, 401(k) and other retirement account balances vary widely depending on the age of the worker.
  • Other important factors that affect retirement savings include family income and education.

Generational divisions

Of course, overall averages like these tell us so much. As you might expect, young workers tend to save less for retirement than older workers, in part because their wages are typically lower and they haven’t had as many years to contribute to retirement accounts.

The gap, as it turns out, is quite wide. A June 2018 report from the Transamerica Center for Retirement Studies looked at a nationally representative sample of 6,372 workers, age 18 and older, and analyzed their retirement savings by generation. It found that child-raised households had estimated retirement savings of $164,000 on average as of 2017, while Generation Xers had $72,000 and millennials had $37,000.,,

Even these numbers tend to mask how much (or little) many people have saved. For example, the Transamerica study found that 14% of Millennials surveyed had $0 to $4,999 saved for retirement, while 42% of baby boomers had $250,000 or more.,,

Even if your retirement nest egg is larger than average, that doesn’t mean it will be big enough.

The importance of a good education

In addition to age, other factors that play a role are income and education. Perhaps not surprisingly, people with higher incomes tend to put more money into their retirement accounts. The Transamerica study reported that households with annual incomes below $50,000 had an estimated average retirement savings of $11,000, households with incomes between $50,000 and $99,999 had average savings of $61,000, and those with incomes of $100,000 or more had $0.,,

Advisor Insight

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

A better question to ask instead of “What is the size of the average retirement nest egg?” would be: “How much will I need in retirement?”

Everyone is different. Some may need $100,000 a year to live on in retirement, but others may need more or less depending on their lifestyle demands. If a so-called expert says you need a $1,000,000 or $2,000,000 nest egg and knows nothing about you, then that is inaccurate.

To figure out how much you need to save, first determine what you suspect you’ll 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 deviation is what you will need to fix.

Be sure to factor inflation into this amount, as purchasing power will inevitably decline, especially for services such as health care.

The higher their level of education, the more money people are likely to have set aside for retirement. For those with a high school education or less, the estimated median was $36,000. For those with some college or trade school, it was $51,000. For college graduates, it was $154,000. People with graduate degrees or at least a bachelor’s degree had saved even more, for an average of $225,000.,,

So if you’re wondering how your retirement nest eggs compare to the “average,” you first need to decide who you want to compare yourself (and your nest egg) to—the US population at large, or people who are most like you. age, income, education and so on.

And keep in mind that even if your nest egg is above average, that doesn’t necessarily mean it will be enough to support you when retirement finally comes.

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