- The Pandemic Has Resulted in Record Savings, but Only for Some
- U.S. Personal Saving Rates in 2020
- Who’s Saving During The Pandemic?
- U.S. Personal Saving Rates in Historical Perspective (2000-2020)
- How Long Can It Last?
- How To Grow Savings During The Pandemic
- Save Over Paying Down Debt
- Prioritize Your Essential Expenses
- Negotiate Your Bills
- Seek Government Relief
- Average Retirement Savings by Age and Why You Need More
- What is the average retirement savings?
- How much each age has saved for retirement
- Under 35
- Ages 35 to 44
- Ages 45 to 54
- Ages 55 to 64
- Ages 65 to 74
- What do these numbers tell you?
- Average Retirement Savings: Are You Normal?
- What Are Average Retirement Savings by Age?
- What Is the Median Household Net Worth?
- Why Social Security Benefits Alone Won’t Be Enough
- America’s Retirement Savings Gap
- Where You Stand
- Bottom Line
- Tips to Help You Save for Retirement
The Pandemic Has Resulted in Record Savings, but Only for Some
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As local economies shut down and the service industry flounders, Americans are saving a greater percentage of their money than ever before, according to new data.
But the high overall U.S. saving rate is hiding a deep inequality.
While many are cutting back on their spending and hoarding cash never before, poorer Americans are still spending nearly as much of their money as before the pandemic.
“The problem in America, in particular, is that there’s a very large portion of the population that was living paycheck to paycheck.
They couldn’t save enough to miss one payment or put $400 aside for an emergency,” says Sarah Nadav, a behavioral economist in the World Economic Forum’s expert network.
“So, if they were barely able to pay their bills before then they don’t have very much room to cut down and save now.”
The U.S. personal saving rate — the percentage of people’s income remaining each month after taxes and spending — skyrocketed to a record 32.2% in April, up from 12.7% in March, according to the U.S. Bureau of Economic Analysis. At the same time, consumer spending fell 12.6% as the economy slowed down and unemployment rose.
Data from the Federal Reserve Bank of St. Louis shows the previous record American saving rate was 17.3% in May 1975, at the tail end of a recession spurred by rocketing gas prices, government spending on the Vietnam War, and a Wall Street stock crash. Over the last 10 years, it has hovered in the 6-8% range.
The saving rate usually goes up when there’s a decline in general economic activity, but it can quickly fall back down when there are positive signs of growth, according to a 2018 Congressional Research Service report.
In June, the saving rate fell 4.2 percentage points from May to 19%, the Bureau of Economic Analysis said Friday. That’s a sign people started spending more when businesses partially reopened, though the rate could be affected in July by the increase in COVID-19 cases and the end to the extra $600 in federal unemployment benefits.
U.S. Personal Saving Rates in 2020
Note: Saving rates Federal Reserve data from 2020.
Who’s Saving During The Pandemic?
Americans have historically struggled to save money, for a number of reasons. According to a 2019 report by the Federal Reserve, four 10 Americans would be unable to pay an unexpected $400 bill their savings.
A typical middle-class lifestyle in the U.S. is 30% more expensive than it was 20 years ago, according to Alissa Quart, executive director of the Economic Hardship Reporting Project and author of “Squeezed: Why Our Families Can’t Afford America.”
And while the pandemic has presented Americans of all income levels with financial challenges, these hardships have been exacerbated for people who have lower incomes.
According to a recent study from a Harvard-based research group, coronavirus is disproportionately harming lower-income Americans. This group is still spending nearly as much as it did pre-pandemic, despite the personal saving rate hitting a record high in April.
The findings reveal that high-income Americans are responsible for most of the reduction in consumer spending, particularly in areas with high rates of COVID-19 infection and in sectors that require physical interaction.
Do some math; take a look at what you owe and what you can do to bring in cash now. Create an emergency version of your budget and stick closely to it to save up what you can during these uncertain times.
High-income households reduced their spending by 17%, whereas low-income households reduced their spending by only 4% as of June 10, according to the study. Almost 70% of low-wage earners working in the highest-rent ZIP codes lost their jobs during the initial shutdown.
Where people have cut their spending during the recession caused by the coronavirus is very different from prior recessions. In previous downturns, people stopped spending on costly items cars and homes, while still spending on common services. It’s the opposite this time around; spending fell most on services that require in-person interaction, such as restaurants and hair salons.
Yelena Maleyev, an associate economist at accounting and advisory firm Grant Thornton, says it’s important to note the correlation between wealthier households and older ones. Baby boomers have the most wealth compared to the other generations.
“The wealthier households were already spending more on services than goods. Fast forward to the pandemic, they’re not going to go out to any of these places because they’re closed. Furthermore, they’re more ly to be older, so they’re also more vulnerable to the virus,” Maleyev says.
So, while the personal saving rate has risen over the last few months, research and data show that not all Americans are saving more during the pandemic.
U.S. Personal Saving Rates in Historical Perspective (2000-2020)
Note: Saving rates Federal Reserve data from 2000-2020. NextAdvisor calculated the cumulative average saving rate for every year over the last 20 years. The cumulative average may vary more and percentages may not total 100 due to rounding.
How Long Can It Last?
Many experts expect that urge to save to stick around for the long haul, while others say it’s a temporary trend driven by uncertainty.
“Pre-pandemic, we were starting to see the rate slowly inch up from the historic lows in the early 2000s, which kind of coincided with the housing boom,” Maleyev says. “So we already saw this trend; it just got exacerbated by this pandemic and the fact that the recession is a service-driven recession. It’s very unique. We’ve never seen this before.”
Consumer spending accounts for almost 70% of the U.S. economy, so saving at the individual level instead of spending—while incredibly beneficial—could also pose a risk to the economy’s recovery in the long run, experts say.
“America, in general, is a consumer-based economy, and that’s not really going away without some serious long-term changes. Those are bigger questions that will in turn contribute to some changes in how we spend vs. save,” Maleyev says.
How To Grow Savings During The Pandemic
With a high percentage of Americans work and a tanking economy, you may be wondering how you can even think about saving money during a global health crisis.
“In the big picture, people are really afraid. They probably weren’t saving as much as they could’ve or should’ve,” Nadav says. “When people are afraid, they do start saving money and putting it aside, assuming correctly that they’ll need it.”
A lot of traditional financial advice doesn’t apply in these unprecedented times, but there are ways you can conserve the money that you do have—starting now—regardless of how much it is.
It may be challenging to save right now but it’s not impossible, and this could be the wake-up call you need to form saving habits that will last beyond the current crisis.
Save Over Paying Down Debt
Trying to pay off debt and build your savings at the same time can be frustrating. Pam Capalad, a certified financial planner and founder of Budget and Brunch, recommends prioritizing savings over paying down debt right now.
“It’s unconventional advice, but it’s the advice I give to clients regardless. Prioritizing savings over debt means you end up having savings and paying down your debt anyway,” Capalad says.
Without some money saved up during these uncertain times, you could simply wind up borrowing and adding more debt to your plate in order to pay your essential bills or any unexpected costs, she says.
“Especially now when it comes to prioritizing food, shelter, and sanity, if you have debt that you’ve been trying to pay down, don’t worry about it right now. Whether it’s student loan debt or credit card debt, the priority right now is putting money in the bank,” Capalad says.
You should be making minimum payments on your high-interest debt if you can, but there are numerous types of debt that Capalad says can ly be put off for now, or at least negotiated. That would include credit-card debt, back taxes, and even federal student loans, which are on pause until October 1.
A saving rate can be calculated for an economy as a whole or at the personal level. Knowing how much you bring home relative to what you spend can give you a clearer idea of your financial situation and help you start saving. Here’s how you can calculate your own saving rate in five easy steps:
1. Calculate your income for a specific period of time (i.e. one month)
2. Calculate your spending for the same period
3. Subtract your spending from your income
4. Divide the number calculated in step three by your income
5. Multiply by 100.
Keep in mind that your income should be after taxes, or you risk over-estimating your savings.
Prioritize Your Essential Expenses
Now is the time to budget, especially if you’re worried about losing your job. You’ll need to figure out where you can completely cut out costs or reduce spending if money gets tight, and start tracking all your expenses—that means every coffee, household item, and take-out meal.
In your “essentials-only” budget, prioritize your important expenses (food, housing, etc.) and look at your discretionary expenses to see where you can cut back. Your lifestyle and discretionary categories will ly offer the most potential relief, but you should also take a hard look at your fixed expenses, including your rent or mortgage.
If you can terminate your rental agreement, you could consider moving back home if you’re feeling too much financial pressure. In fact, millions of Americans have moved back in with their parents to save money during the pandemic, a recent Zillow report found. Additionally, make note of any subscription or annual fees you could pause or cut out.
Negotiate Your Bills
If you’re financially struggling, any bill is negotiable. Many credit-card companies, utility providers, and cell phone providers are offering assistance during the pandemic, so call them as soon as possible to see what your options are. Keep in mind most companies are not offering complete forgiveness — you will eventually have to pay any bills you skip.
Figure out which calls you need to make and roughly what kind of assistance you’d be looking for in dollar amounts. Try to focus on paying your essential expenses your rent or mortgage if you can.
Seek Government Relief
If you haven’t already, take advantage of government relief. The extra $600 weekly jobless benefit is about to end, but you can still apply for unemployment insurance through your state’s individual system.
Every state has different requirements and benefits, so use this resource to learn more about your state’s program.
Even if you’re just getting the bare minimum of unemployment insurance, anything is better than nothing.
Congress is currently negotiating another aid package that could extend the extra unemployment support, though ly at less than $600. There also may be another coronavirus stimulus check on the way.
You could also work with a credit counselor who can advise you on your money and debts. Many non-profit credit counselors often offer initial budgeting sessions at no cost. To find a credit counselor, you can try the Financial Counseling Association of America or the National Foundation for Credit Counseling.
If you think you might fall behind on your mortgage payments because of coronavirus, forbearance under the CARES Act may be an option to consider. The U.S.
Department of Housing and Urban Development also funds housing counseling agencies throughout the country that provide free advice on renting, defaults, foreclosures, and credit issues.
If you’re not sure where to start or want to learn more about your options, take a look at this comprehensive list of financial resources.
Average Retirement Savings by Age and Why You Need More
If you’ve ever wondered how your retirement savings stacks up against your peers, you’re in good company.
The desire to know where you land in the sea of retirement savers is natural, and it can help either kick-start more progress or give you a feeling of satisfaction.
But no matter how the numbers make you feel, they may not be the best measure of whether you personally are on track for retirement.
What is the average retirement savings?
The 2019 Survey of Consumer Finances shows that the average retirement savings for all families is $255,130. The median retirement savings for all families is $65,000.
Taken on their own, those numbers aren’t incredibly helpful. There are a variety of decent retirement savings benchmarks out there, but how much money other people have isn’t one of them.
Even breaking the numbers down by age won’t give you a great picture of where your own finances should be.
After all, age is just one factor in how much you should save for retirement — and not everyone who is the same age will retire at the same time.
But retirement savings balances do tend to increase with age, as they should — the closer you are to retirement, the more you should have stashed away. (If you've been struggling to fund retirement accounts, our guide on how to save money will help.)
How much each age has saved for retirement
A little fine print upfront: Because averages can be heavily skewed by outliers — in other words, the savings over- and underachievers in each group — we’ve also included median balances.
The median can often provide a more representative number than the average, and you’ll notice that the median numbers are quite a bit lower than the averages.
(All data is from the 2019 Survey of Consumer Finances, unless otherwise noted.)
It’s also worth noting that both figures include only those who have retirement holdings — there are many people of all ages who do not. In 2019, only about half of families owned any kind of retirement account.
Average household retirement savings: $30,170
Median household retirement savings: $13,000
Let’s start with millennials; they’re used to being under the microscope. In 2019, 45% of families headed by someone under age 35 had retirement accounts — meant here to include IRAs, Keoghs and certain employer-sponsored accounts such as 401(k)s, 403(b)s and thrift savings accounts.
Of the families in this age group who have retirement holdings, the average value of those holdings is $30,170, and the median value is $13,000. In other words, 3,352 and 1,444 pieces of $9 avocado toast, respectively.
Ages 35 to 44
Average household retirement savings: $131,950
Median household retirement savings: $60,000
This age range encompasses the oldest millennials and the youngest of Generation X. More than half (56%) of households headed by someone of this age have retirement accounts, according to the data.
The average and median values of this group’s retirement holdings are significantly higher than those of the under-35 set. These are strong earning years alongside peak spending years.
Particularly for those who have kids, dollars may be stretched around paying for child care, saving for college and saving for retirement.
If you’re looking to increase those retirement savings, an IRA can be a great way to do it.
Ages 45 to 54
Average household retirement savings: $254,720
Median household retirement savings: $100,000
This group is still part of Generation X, with the oldest members about a decade from what’s considered the standard retirement age. About 58% of households headed by someone this age have retirement holdings, according to the SCF.
These can be peak earning years, especially for men, who see earnings growth until age 55, according to compensation research firm PayScale. The company’s research shows women top out over a decade earlier, at 44.
Ages 55 to 64
Average household retirement savings: $408,420
Median household retirement savings: $134,000
These are baby boomers, and the oldest among them are knocking on retirement’s door — just a couple of short years from Social Security’s definition of full retirement age. About 54.5% of households headed by a baby boomer have retirement holdings.
Ages 65 to 74
Average household retirement savings: $426,070
Median household retirement savings: $164,000
The bulk of these households include someone who is in retirement, or at least of retirement age. As a result, many are at the stage when they are probably spending, rather than accumulating, savings. According to the SCF, 48% of this age group have retirement accounts.
After this point, average and median retirement account values begin to fall, as does the percentage of people who have retirement accounts. For households headed by someone age 75 or older, the median value of retirement holdings is $83,000, with an average holding of $357,920.
What do these numbers tell you?
The headline here: Most people aren’t saving enough for retirement and are entering retirement with very little stashed away.
“If you use these numbers as your guiding star, you’ll ly be in the same state as most of the country: unprepared for retirement.”
That’s just one reason why the average retirement savings for someone your age isn’t a benchmark. If you use these numbers as your guiding star, you’ll ly be in the same state as most of the country: unprepared for retirement.
How much you should have saved, and how much you should be saving, have nothing to do with where others your age stand. It has everything to do with your income, planned retirement spending, expected retirement age and life expectancy.
If you want to find out how much you personally will need to retire, a retirement calculator can help. And if that calculator tells you you’re behind? An IRA is a good place to start catching up.
Average Retirement Savings: Are You Normal?
If you’re wondering what’s a normal amount of retirement savings, you’re probably one of the 63% of Americans who either don’t think their savings are on track or aren’t sure, according to the Federal Reserve’s “Report on the Economic Well-Being of U.S. Households in 2019.” Among all adults, median retirement savings is $60,000, the Federal Reserve’s most recent data shows. The Fed estimates that by retirement, this number will grow to a median $228,900.
Of course, these figures reflect the situation of people who have retirement accounts. About a quarter of us don’t. Of those of us who do, 55% have employer-sponsored accounts and 47% having savings in non-retirement accounts. A small percentage – 22% – have pensions.
As we get closer to retirement, we tend to save more. So knowing how your retirement savings compare to your peers – and to older Americans – can be helpful. It can put your mind at ease to know that you’re ahead of curve – or let you know that you need to pick up the pace.
What Are Average Retirement Savings by Age?
First, it can’t be stressed enough that too many of us aren’t even saving for retirement. According to the National Institute on Retirement Security, almost 40 million households have no retirement savings at all.
Taking them and people who aren’t saving enough into account, the Employee Benefit Research Institute estimates that Americans have a retirement savings deficit at $4.3 trillion. That means all U.S. households (with a head of household between the ages of 25 and 64) have a total $4.
3 trillion less in savings than they should have for retirement.
Research by the Federal Reserve found that the median retirement account balance in the U.S.
– looking only at those who have retirement accounts – was just $60,000 in 2016 (the survey is conducted every three years and data for 2019 will be released at the end of 2020). The conditional mean balance was $228,900.
Those numbers might not sound bad, but consider that the medical costs alone for a couple over the course of retirement is estimated to be about $200,000.
An October 2017 study by the Center for Retirement Research calculated median retirement account balances by age from Federal Reserve survey data. Here are the numbers:
|Median Retirement Account Balance by Age|
What Is the Median Household Net Worth?
It isn’t just retirement accounts that Americans lack. Looking at overall net worth tells a similar story, although these figures have been consistently rising since the Great Recession.
In the same Federal Reserve report, the median household net worth for a head of household age 35-44 years old is $59,800. For a head of household age 45 to 54 years old, that figure is $124,200. In the 55-64 age range, average net worth is $187,300.
Including all age groups median net worth rose 16 percent from the 2013 survey.
Why Social Security Benefits Alone Won’t Be Enough
For many Americans, Social Security benefits are the only source of income during their retirement. Social Security was never meant to be the sole source of retirement income, though.
Retired workers average a monthly Social Security benefit of $1,503 as of December 2019 – roughly the equivalent of a minimum-wage job.
Add the rising debt levels among older Americans and you have a situation that’s a far cry from most people’s’ retirement dream of travel and leisure.
America’s Retirement Savings Gap
America has a retirement savings gap to match our income gap. People with higher incomes are more ly to have retirement savings and their average retirement savings are higher, too. Meanwhile people with the lowest incomes have no savings and plenty of debt. That shouldn’t come as a huge surprise, but it’s one of the most notable features of the U.S. retirement savings landscape.
It may be counter-intuitive but those near the top can still have big retirement savings gaps. Think of a high-earning family with an expensive mortgage and kids in private school. They may not save much for retirement, and their high standard of living means there would be a big gap between the income they’re used to and the retirement income they’ve saved.
Think lower-income folks can simply work longer and retire later to make up for their lack of savings? Not so fast.
Americans with lower incomes may be the ones least able to work into their late 60’s and 70’s, either because their work is too physically demanding or their employers won’t want to keep them on.
It’s a good idea even for white-collar workers not to count on working later as a substitute for retirement planning.
Where You Stand
Experts generally think of retirement savings as an end goal with a series of mileposts along the way. Some say that you should have saved the equivalent of one year’s salary by the time you hit 30, but saving more certainly won’t hurt.
By the time you retire, it can be a good idea to have between nine and 11 times your salary in retirement savings. These aren’t hard-and-fast rules, and experts disagree about how much to save by 30, 35, 40, 45, 50, 55, 60, 65 and beyond.
Conventional wisdom has been that saving between 10 and 15 percent of your salary each year will get you on your way to a comfortable retirement so long as you choose a low-fee investment vehicle that consistently earns inflation-beating returns. Talking to an expert can help you set and execute a retirement plan.
So why don’t Americans’ average retirement savings match up to what experts say we should have? There are two very good reasons.
One is that our brains have a hard time giving up present reward for future reward, especially when that future is decades away. Saving is tough.
We can’t picture ourselves choosing between food and prescription drugs in our old age but we can picture what we’d do with our paychecks in the here and now.
The other reason for the retirement savings shortfall: many of us don’t earn enough to be able to save for retirement. Juggling necessary expenses, student loan payments, childcare and all the rest can leave us with nothing left for an IRA.
When it comes to average retirement savings statistics in America, the picture is fairly grim. That means that keeping up with the Joneses in this respect just isn’t enough. Even above-average savings and a healthy Social Security benefit might not be enough to let you maintain your lifestyle in retirement.
Many Americans say they expect to work longer and retire later to get around the retirement savings gap. That’s one strategy but it isn’t a sure thing that you’ll be able to keep working into your 70s. The safer bet is to save as much as you can, as early as you can – and throughout your career.
Tips to Help You Save for Retirement
- Social Security benefits alone won’t be able to support your current lifestyle. However, they can certainly help with your living expenses in retirement. Try our Social Security calculator to see how much of a benefit you can expect.
- While you’re at it, check out our retirement calculator to see if your savings are on pace; and try our cost of living calculator to get a better idea of your income needs.
- According to the Federal Reserve, 60% of us with self-directed retirement accounts are not confident about our investment decisions. If you’re one of them, why not hire a financial advisor? SmartAsset’s matching tool will connect you with a fiduciary advisor in your area.
The service is free and there’s no obligation.
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