Here in the US, we hear a lot about retirement savings. About how much you should have saved, about all the new applications and industries setting up to “help you reach your goal savings”, but there’s also a lot on how scary the idea of retirement savings is actually becoming to the average US citizen.
It’s a rule of thumb that you should have around $555,000 saved before you retire – with many discovering they’ll actually need to have close to double that amount to support the current cost of living.
But most retirees have far far less than that. In fact, a recent survey from Clever discovered that the current state of retirement savings in the United States is a daunting reality.
We’ve dug into all things retirement savings to form this complex expose on the state of retirement savings in the United States today.
What Clever discovered on retirement savings that you don’t want to know (but need to!)
Information based on the 2023 study posted in Clever discovered some pretty harrowing truths. And, while we know it’s much easier to cover your eyes and pretend it doesn’t exist, information truly is power and it’s super important to be aware of the current situation at hand so you can make the most out of it.
Here are just some of the shocking details:
48% of retirees believe they’ll outlive their savings entirely – which is not too surprising given how little many have saved for retirement
57% of retirees said they were surprised by how much money it takes to retire – the minimum recommended amount is roughly $555,000 or 10x the U.S. median income
Nearly half of retirees (47%) said that their company didn’t actually offer 401(k) plans or pensions
The most common source of retirement income among retirees is Social Security, with 79% of those surveyed citing it as a source of income. However, the average monthly Social Security payment is just $1,692, which is not enough for most retirees to cover all their expenses
In 2023, the average retiree has $170,726 in savings – a 10% decline from last year and just 31% of the $556,400 experts recommended. In fact, only 12% of survey respondents had at least the recommended $555,000 amount
And that’s really just a small percentage of what was found in this survey. We recommend jumping over to it to fact-check all the fine details (we recommend coming back here once you’re done to peek at our strategies to improve our retirement savings [below] and save yourself an existential crisis!)
How many retirees have no savings?
It’s a pretty common question we see circling around in a number of spaces – so we thought we’d nip this question right in the bud.
In this 2023 survey, it was found that 37% of retirees say they have no retirement savings, up from 30% in 2022. It’s a pretty shocking statistic to see, but the fact is, we’re not as surprised as we should be.
It’s an all too familiar story in the US: individuals working hard, taking care of everyone around them and doing honest, proud work. But, while they have to miss out on the important moments and work themselves toward burnout, they still can’t afford to invest in their own retirement. Leaving them vulnerable in their later years and wondering “what was all that hard work for?”
It’s a big part of why many younger generations are turning toward high-return, flexible careers like influencing. While many of us will laugh at the kids for “thinking they can get famous posting food pics everyday” the fact is, wouldn’t you? If you grew up watching everyone in society hustle and bustle, only to be let down in their later years, wouldn’t you adapt your priorities so you can make big bank, doing exactly what you love (and for minimal effort and stress!)?
The consequences of having no retirement savings
While the number of retirees with no retirement savings is jumping, the consequences of having no retirement savings remain the same.
But it’s more than just the obvious, there’s a number of consequences of having no retirement savings (it makes it a wonder the government isn’t taking the issue more seriously)…
Here’s all the consequences of having no retirement savings:
- Dependency on social security, which may not even be enough to cover all their expenses
- Reduced standard of living
- Limited opportunities for travel and leisure
- Unable to support the family, meaning if a grandchild needs support of any kind, the available solutions end with parents. This can be detrimental to the ability of the economy: if parents are limited by costs and grandparents can’t afford anything, how are we expected to thrive?
- Increase financial stress and risk of poverty
- Delayed retirement, meaning less job opportunities for non-retirement aged individuals
- Impact on healthcare and quality of life in retirement – which is only worsened by the fact that financial stress (or stress of any kind) can actually worsen health conditions
Strategies for improving retirement savings
It’s pretty disconcerting hearing all the data. And we’ll level with you – we’re getting pretty hopeless ourselves.
But, we won’t leave you without the very best ways to improve your retirement savings. Though we can’t promise they’ll fix your every issue, it can help to put you in a much better position than you already are.
- Start thinking about retirement – early!
One of the best ways to secure retirement savings for your future is to start saving early. This doesn’t just mean scraping every drop out of the peanut butter tin or watering down your shampoo to make it last longer (though, we will admit, every dollar will count!).
It can be as simple as making monthly contributions to a retirement account or another high-interest account that will grow overtime to a sizable nest egg. Remember: the more time you have, the more your money will grow.
Having contributions to your 401(k) or other retirement accounts automatically withdrawn each month or from every other paycheck. It may be worth it too: some companies offer contribution matching, meaning for every dollar you invest (up to a certain amount) they’ll contribute that amount too!
- Pay off debt (hint: credit card debt is the most common form of debt across retirees!)
Alongside saving early, it’s a good idea to work to pay off debt in your lifetime. While it may seem redundant to be asked to focus your efforts toward putting money anywhere other than in your retirement savings, those rates rack up.
In the 2023 article from Clever, it was reported that the most common forms of debt among retirees were credit card debt (49%), mortgage debt (24%), car payments (20%), medical debt (18%) and personal loans (14%).
While that may seem scary, we think it’s worth encouraging our readers to pay off credit card debt early. Many put it to the side and focus on mortgages and other debts instead, but looking at the data we think it’s a smart idea to manage your credit card debt early – especially if you’re in your early 20’s at the moment and have no other major debts to face.
- Get a side gig or side hustle either in or right before retirement
A good way to secure financial stability through retirement is to establish a side gig or hustle that enables you to make money on your own terms. It could be as simple as getting a second job or a part-time job through retirement (even if you’re working as little as 10 hours a week), doing freelance work or selling the scarves you spend all week knitting for extra cash.
There are a number of different side hustles you can pick up to help boost your income and ensure that, when retirement does come, you have something that can bring return, with minimal effort necessary on your part.
- Downsize/relocate for retirement
The final strategy we have to improve your retirement savings is to downsize or relocate for retirement. Living abroad or moving to a state with a lower cost of living can help you dramatically, and downsizing from your 6 bedroom home to a smaller home or even unit, can really alter the overhead costs you’re looking at.
But we also recommend considering “downsizing” as a state of mind, not just a verb. You may have to analyze your current living costs and consider narrowing down on your expenses and re-evaluating the standard of living you have today. Subtle adjustments can make a big difference in the long run.
The state of retirement savings in the US today is pretty daunting to think about. Looking toward the future may feel hopeless, but there are ways you can improve your retirement savings.
If you’re young: you’re at an advantage that you have the time to be able to plan for your retirement and start saving early. But even if you’re already in retirement and are looking at your savings account with fear, there are a number of ways for you to earn money in retirement and improve your financial situation.
It’s about having all the facts at your disposal, so you can play to your strengths and be aware of the risks associated with the state of retirement savings in the United States today.
