How Much Does the Average Middle Class Person Have in Their Retirement Fund

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Retiring can feel pointless, and often be postponed when an individual is faced with low retirement savings. Not practicing frugality, overspending, gambling and other vices, living in a place with high cost of living, and many other factors contribute to a person hitting this retirement wall. But the biggest reason an individual can be faced with financial hardships in retirement is never having or never prioritizing a retirement fund. With the upper class tending to not have to worry too much on their retirement fund due to their higher net worth, and lower class individuals constantly being reminded to worry about their retirement fund, its easy for the middle class to let this necessity slip altogether. But does this generalization actually ring true for the average middle class American? Is the middle class actually falling behind in retirement? Are they ahead? Or somewhere in the middle?

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With a middle-class income ranging from $50,000 to $150,000 annually, the amount allocated towards a nest egg can vary widely from person to person. To find this answer GOBankingRates looked at various sources including, Federal Reserve’s Survey of Consumer Finances, NerdWallet, EdwardJones, and used help from ChatGPT to create an accurate answer.

Understanding Retirement Savings

According to the Federal Reserve’s 2022 Survey of Consumer Finances, the average retirement savings for all families is $333,940. However, this figure can be misleading due to the presence of outliers. A more telling statistic is the median retirement savings, which stands at $87,000. The median offers a clearer picture of what a typical family has saved, excluding the extremes that can skew the average.

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Average and Median Retirement Savings by Age

Under 35

• Average Savings: $49,130
• Median Savings: $18,880

Young adults are often balancing the challenges of student debt, early career earnings, and establishing financial independence. As a result, their retirement savings are typically lower, with nearly half of families in this age group having some form of retirement account.

Ages 35-44

• Average Savings: $141,520
• Median Savings: $45,000

This age group sees a significant increase in retirement savings as individuals move into higher-paying positions and become more focused on their financial futures. About 60% of households in this bracket have retirement accounts.

Ages 45-54

• Average Savings: $313,220
• Median Savings: $115,000

With peak earning years typically occurring in this age range, retirement savings generally see growth. A majority, around 62%, of households have retirement holdings.

Ages 55-64

• Average Savings: $537,560
• Median Savings: $185,000

As individuals near retirement age, their savings reach the highest levels. About 57% of households headed by someone in this age group have retirement accounts, preparing for the transition into retirement.

Ages 65-74

• Average Savings: $609,230
• Median Savings: $200,000

Many in this age group are already retired or about to retire, with savings peaking before beginning to draw down during retirement years. Approximately 51% of households have retirement accounts.

Ages 75 and Older

• Average Savings: $462,410
• Median Savings: $130,000

Savings typically start to decrease as retirees begin to withdraw from their accounts. The percentage of people with retirement accounts also declines in this age group.

Factors Affecting Retirement Savings

Several factors influence the retirement savings of middle-class individuals, including:

1. Income Levels: Higher earnings over the years generally lead to more significant retirement savings.
2. Savings Rate: Consistently saving a percentage of income, typically 10-15%, can significantly impact the total savings accumulated by retirement.
3. Investment Returns: The performance of investments over time can substantially affect the growth of retirement accounts.
4. Employment Benefits: Access to employer-sponsored retirement plans like 401(k)s with matching contributions can boost savings.
5. Financial Literacy: Understanding financial planning and investing can lead to better decision-making and higher savings.

The Reality for Middle-Class Retirees

Many middle-class retirees find themselves with a mix of savings, investments, and retirement accounts. For instance, a typical retiree might have a combination of 401(k) accounts, Roth IRAs, and taxable investment accounts. A 62-year-old retiree with a middle-class income of around $72,000 per year might have accumulated approximately $500,000 across various retirement accounts by living frugally and consistently saving and investing.

Building a Robust Retirement Fund

To ensure a comfortable retirement, financial experts recommend the following strategies:

1. Start Early: The earlier you begin saving, the more you can benefit from compound interest.
2. Maximize Employer Contributions: Take full advantage of employer matching contributions to your retirement accounts.
3. Diversify Investments: Spread your investments across various asset classes to reduce risk and improve returns.
4. Automate Savings: Set up automatic transfers to retirement accounts to ensure consistent contributions.
5. Live Below Your Means: Adopting a frugal lifestyle can free up more money for savings and investments.
6. Seek Professional Advice: Working with a financial advisor can help you develop a personalized retirement plan and stay on track.

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This article originally appeared on GOBankingRates.com: How Much Does the Average Middle Class Person Have in Their Retirement Fund