Saving for retirement isn't easy, but it's critical to have a healthy nest egg if you want to enjoy your senior years as comfortably as possible. Social Security isn't as reliable as it once was, and even then, it was only designed to replace around 40% of your pre-retirement income. Unless you have access to a pension or other source of income, you'll likely be depending primarily on your personal savings in retirement.
As retirement becomes more expensive, you may need to save more than you think. The average worker expects to need around $1.7 million to retire comfortably, a 2022 survey from Charles Schwab found. If you're retiring early or live in an area with a very high cost of living, you may need even more.
While everyone's needs are different, it can sometimes be helpful to see how your savings stack up to the average. And if you're falling behind, there are some simple strategies to help you catch up.
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How much the average American has saved for retirement
Again, everyone's situation is different, so the national averages shouldn't necessarily be considered benchmarks. Even if you're ahead of the curve, you may still need to save more to meet your unique needs. And if you're behind the average, that doesn't necessarily mean you're off-track.
Every year, Vanguard releases its "How America Saves" report to give workers a glimpse into how their retirement planning progress stacks up to that of their peers. As of 2022, the average retirement account balance among U.S. workers was $112,572, according to the report.
However, the median balance can shed more light on how much workers are really saving, as the average can be heavily skewed by high-earning outliers. The median account balance in 2022, then, was just $27,376. Both of these figures are down from 2021, when they were $141,542 (average) and $35,345 (median).
This decrease may have to do with surging inflation over the past year, as many workers have had no choice but to tap their retirement savings just to make ends meet. But 2022 is the first year since 2018 that the average and median account balances have decreased year over year, according to Vanguard.
Simple ways to boost your savings
Saving more is tough, especially if you're on a tight budget. But even small amounts can go a long way over time. If you're having trouble saving, there are a few strategies that can help:
- Earn the full 401(k) match: If you have access to a 401(k) with matching contributions from your employer, that's a fantastic place to start. The company match is essentially free money and can instantly double your savings with next-to-no effort on your part. If at all possible, try your best to contribute enough to earn the full match.
- Set up automatic contributions: Automatic contributions can make it easier to build saving into your budget, rather than only investing the leftovers at the end of the month. With a 401(k), you may be able to set up automatic contributions straight from your paycheck to your retirement account. With an IRA, you can set up automatic transfers from your bank to your retirement fund on the schedule you choose.
- Start small: Finally, keep in mind that no amount is too small to save. Even if you only contribute, say, $10 per week, that can add up to more than $35,000 after 25 years, assuming you're earning a modest 8% average annual return. If you're putting off saving because you can't afford to invest much, you're missing out on more than you might think.
Regardless of how your savings stack up to the average worker's, it's wise to start planning now. By taking steps to boost your savings, you can accumulate more than you might think by retirement age.
