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American Retirement Savings Statistics

In order to determine the right path forward, one must know what the different paths look like. For retirement planning, it’s useful, maybe even necessary, to have as much information about the different retirement plans as possible.

In this piece, I’ve gathered all the relevant information on how much Americans are saving for retirement, which accounts they’re using for retirement, and what disbursements might look like.

Table of Contents
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Social Security

No discussion about retirement can really begin until we tackle one of the biggest factors in anyone’s retirement planning: Social Security. Here are some quick facts from 2021, per the Social Security Administration.

  • Roughly 65 million Americans receive some form of Social Security.

  • 46.7 million of those people are retired.

  • Those Americans received $72.7 Billion in benefits.

  • $1,555 average per month, or $18,660 per year.

  • Retirees on Social Security had 2.9 million dependents, for another $2.34 Billion in payments.

Compare these numbers to the average Cost of Living for people over 65 in America:

  • $48,885 dollars spent, on average.

  • That’s over $30,000 a year more than received from Social Security.

  • Or, over $2,500 a month.

  • Over $22,000 a month on just food and housing.

  • On average, if a 65 year old person tried to live on Social Security alone, they would be almost $4,000 short just for food and housing.

  • Another $14,000 are spent on transportation and medical bills.(1)

These numbers make it clear that for most retired Americans, Social Security benefits alone are not enough to live on.

Here are some demographic statistics about retirees and Social Security.

  • 9 out of 10 people 65 and older receive Social Security.

  • Social Security benefits represent about 30% of the income of the elderly.

  • 37% of men count Social Security as 50% or more of their income.

  • 42% of women said the same.

  • 12% of men count Social Security as 90% or more of their income.

  • Compared to 15% of women who say the same.

These numbers will all be compounded by the projection that the number of Americans 65 and older will increase from 57 million to 76 million by 2035.

Social Security Versus Other Retirement Accounts

As pointed out earlier, the existing Social Security framework is not covering living expenses, and that gap in coverage will only increase as it stands, a substantial number of retired people are already relying on other income.

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  • 68% of people 65+ have a pension (59% of all retired persons).

  • 50% have income from investments (46% of all retired people).

  • 25% of people 65+ still need to work for income, and that number jumps to 32% for all retired people. (2)

Individual Retirement Accounts

Among one of the most common ways to plan for retirement outside of Social Security, an IRA allows a person to pay into a retirement account and receive a tax benefit. In a traditional IRA, the income you invest is tax deductible, but your withdrawals at retirement are taxed. In a Roth IRA, this is reversed: taxes are paid before the income goes into investment, but withdrawals are tax-free.

As of 2019:

  • ~14.9 Million Americans paid into an IRA.

  • $75.5 Billion in total contributions.

  • Or, just over $5,000 a year in contributions.

  • 4.6 Million Americans paid into a Traditional IRA, at:

  • $20 Billion total, or an average of $4,393 per person.

  • 7.9 Million Americans used a Roth IRA, at:

  • $27.6 Billion total, or a $3,477 average. (3)

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There are interesting breakdowns of contribution by age and income, as well. It makes sense that the older Americans get, the more they pay toward their retirement, and it also bears out that the more a person makes, the more they contribute.

  • All contributions over $6,000/year to Traditional IRAs were made by Americans 50+ years old.

  • Only 2 Million Americans age 20-49 contributed to an IRA.

  • Contributions totaled $7.8 Billion.

  • Over 2.5 Million Americans aged 50-70½ paid into an IRA.

  • Contributions totaled $12.2 Billion.

  • ~4.9 Million Americans made $75k or less and contributed to an IRA.

  • These Americans had $14.5 Billion in Contributions.

  • On the other hand, ~7.6 Million Americans made more than $75K and contributed.

  • These Americans had $33.2 Billion in Contributions. (4)

These data are set against the average income in that same year being just over $72K; (5) this means that the average American is contributing less often, and in far smaller amounts, to their retirement.

Again, this follows logically from how much leftover income lower income brackets have; but it also underscores how much more important it is for the average American to contribute to some form of retirement.

Total Worth of IRAs

Beyond what people are contributing, and how much they are paying in, it is also worth noting just how much Americans have invested, total, into their IRAs.

  • 62.7 Million taxpayers hold some form of IRA.

  • 49 Million of these accounts are traditional.

  • 21.9 Million are Roth.

  • Compare with previously stated data, that more Americans contributed to Roth IRAs, indicates that there is a shift to Roth IRAs among consumers.

  • In 2019 alone, 16.9 Million Traditional IRAs were converted to Roth.

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  • $10.9 Trillion in assets are held in IRAs.

  • $9.3 Trillion in traditional, $1.01 Trillion in Roth.

  • 5 Million Americans completed a Rollover.

  • Totalling $554 Billion in assets.

401(k) Statistics

Another popular retirement planning option for many Americans is the 401(k) model. This model relies on an employer-employee agreement that a certain amount will be withheld from wages, which amount will be matched to some degree by the employer, and the total dollar amount invested in a retirement account.

A leader in 401(k) and other investment plans, Vanguard International released an industry study in 2021, and here are some of their findings.

  • Plans with automatic enrollment had a 92% participation rate.

  • Only 62% of people elected to enroll in voluntary plans.

  • 74% of Vanguard enrollees elected for a Roth-style plan.

  • The average Vanguard account balance was $129k. (7)

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We can compare those data with a third-party industry publication from the Investment Company Institute.

  • 401(k) plans constitute a total of $7.3 Trillion in assets.

  • This accounts for roughly one fifth of the entire retirement market.

  • This is up from one-seventh of the market ten years earlier.

  • There are around 600,000 active 401(k) plans, with:

  • 60 Million active individuals, compared to:

  • The previously mentioned 65 Million Social Security participants and 14 million IRA participants.

  • Only participants 40+ years old, with 20+ years with their company had assets over $100,000. (8)

Conclusion

While the numbers in these data can seem quite large (into the trillions), it is important to remember that they are divisible into the millions (population), resulting in denominations that breakdown into thousands of dollars per year, per person.

For example, if the total amount of 401(k) assets were added to the total amount of IRA assets, divided by each population, we would see:

  • ($7.3T/60M) +( $10.9T/62M) = $121,666 in total 401(k) per person.

  • And $175,800 in total IRA per person.

If we take those numbers, assuming each of the 60 million Americans has both, and will receive the average Social Security Benefit, starting at 65 and continuing on until the life expectancy age of 77 (9), we see the following:

  • 401(k) at 121,666 + IRA at 175,800 =297,466

  • Divided by 12 years = $24,789/year.

Even if we combined that with the above-mentioned $18,660 from Social Security, we find the total income for a project retiree who benefits from all three Retirement Plans to be $43,450 per year. This still falls nearly $5,000 short of the average expenditures per year of retired persons.

Given factors such as inflation, increasing life expectancy, and the likelihood that an American has a robust IRA and 401(k), it becomes clear that further investments for the average American are needed.

Related: Can I borrow from my IRA?, How to execute a 401k to gold IRA rollover?, What is gold IRA?, Best Gold IRA Companies

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The post American Retirement Savings Statistics appeared first on Income Based Repayments.

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By: Greg Lorenzo
Title: American Retirement Savings Statistics
Sourced From: www.ibrinfo.org/american-retirement-savings-statistics/
Published Date: Wed, 14 Sep 2022 00:41:19 +0000

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