Saving for retirement is a long game that rewards the early birds.
Here’s a look at six unfortunate retirement statistics and tips on how to avoid becoming one of them.
1. Social Security Benefits Provide Retired Workers With an Average of Just $22,044 Per Year
Retired workers in 2023 are receiving an average of $1,837 per month – or $22,044 per year – in Social Security benefits. While Social Security benefits can be a helpful part of a retirement plan, the income is often not enough on its own – especially amid record inflation rates in recent years.
2. More Than 1 in 4 Adults Who are Still Working Aren’t Saving for Retirement
About a quarter of American adults who are still working (28%) say they don’t have any retirement savings, according to the Economic Well-Being of U.S. Households in 2022 survey by the Federal Reserve.
“A lack of retirement savings puts you at a severe disadvantage no matter your age, but it makes middle-aged adults particularly vulnerable,” says Jake Hill, CEO of the website DebtHammer.
3. Half of Millennials and 92% of Gen Z Don’t Own Retirement Accounts
According to the United States Census Bureau, about half of millennials and 92% of Gen Z say they don’t own retirement accounts. Rising costs, market volatility, unexpected expenses and the need to support family members are obstacles, according to a recent survey by Charles Schwab.
While it can be difficult to save for retirement earlier in life, doing so enables you to take full advantage of the benefits of compounding interest.
“The most important thing is to begin preparing for retirement as soon as possible by saving and investing. The power of compounding can significantly boost your nest egg over time,” says Jeff Mains, a finance expert and CEO of Champion Leadership Group LLC in Dallas.
“Even if you can’t put aside a large sum of money each month, opening an IRA and making small contributions can start you on the road to building a retirement fund,” Hill says.
4. 38% of Americans Don’t Invest in the Stock Market
Investing in the stock market can help you grow your savings and hedge inflation. The S&P 500, for example, has an average annualized return rate of 11.5% over the last 95 years. Returns can, however, be volatile from one year to the next, so profitability often requires leaving funds in the market long term.
Despite the opportunities stocks present, nearly four in 10 Americans don’t invest in them, according to the 2023 Gallup Economy and Personal Finance survey. Married Americans with higher household income levels and higher levels of education are the most likely to invest.
5. 69% of Americans Aren’t On Track With Their Retirement Savings Plans
While the majority of nonretired Americans have at least one type of savings account, most don’t think that their retirement savings plans are on track, according to the Federal Reserve Economic Well-Being survey. Just 31% felt they were making satisfactory progress in 2022, down from 40% in 2021.
The older the survey respondents were, however, the more secure they felt. For example, only 24% of respondents between the ages of 18 and 29 felt they were on track, compared to 41% of those 60 and older.
The Federal Reserve says the year-over-year decline is likely due to declines in stock and bond prices in 2022. Still, the majority of Americans have felt off track since the survey began in 2017.
6. Many Retirees Without Private Income Report Struggling Financially
Many retirees are, unfortunately, struggling with their finances. The Federal Reserve found that just over half of retirees (53%) who had no labor or private income said they were not struggling financially.
Financial well-being ratings increase, however, as a retiree’s income sources increase. In fact, 96% of those with pensions and interest, dividends or rents report being financially OK.
How to Avoid Becoming a Retirement Statistic
Preparing for retirement can be complicated, but the earlier you start, the better – even if you can invest only small amounts. Another key is to not rely solely on Social Security benefits – or on any single income source.
Figure out the amount you’ll need to support yourself in retirement and create a diversified retirement plan to get there. If you need help, consider seeking a financial professional sooner rather than later.
