How Does My Pension Savings Compare?
“How am I doing for my age?”
This is a question I often get asked. One way we tend to look for answers is by comparing what we have to what our neighbours, friends, and family, have. Even though we know deep down that “the grass is not always greener on the other side,” it can be hard to look away when our phones, computers, and TVs are practically forcing us to make these comparisons.
I came across this comparison recently and it may be American but it probably reflects the Irish position.
I do understand the worry that you might not be keeping pace with your peers. But if you’re wondering about where your pension savings “should be,” it’s important that you look at these numbers with the proper context.
According to Nerdwallet, here’s how average American pension savings break down by age:
Average household retirement savings: $32,500
Median household retirement savings: $12,300
Ages 35 to 44
Average household retirement savings: $100,100
Median household retirement savings: $37,000
Ages 45 to 54
Average household retirement savings: $215,800
Median household retirement savings: $82,600
Ages 55 to 64
Average household retirement savings: $374,000
Median household retirement savings: $120,000
Ages 65 to 74
Average household retirement savings: $358,400
Median household retirement savings: $126,000
As you might have guessed, pension savings tend to ramp up as we get older. In part, this is because the older we get, the more real retirement becomes, and more prepared we want to be.
But as financially responsible people age, their debt level tends to drop as well. No more children to support. No more Credit Union or Bank loan payments. Cars and mortgages get paid off. Credit cards get used less and paid down. There’s only so much you can keep in a low-interest savings account before you want to put more of your money to work.
The numbers behind the numbers
If these figures seem a bit low to you, you’re not wrong. Most financial experts believe that, generally, Americans are not saving nearly enough for retirement. We are no different in Ireland.
Yes, having a couple hundred thousand in savings and investment accounts may sound like a lot of money. But people are also living longer and more active lives than ever before. That means our pension savings are going to have to last longer than your parents’ and grandparents’ did.
And as pensions continue to dry up, the responsibility for preparing for retirement has shifted more and more to individuals. That’s going to be a challenge for anyone who’s significantly below these savings levels. And it’s going to be a BIG problem for the 43% of households headed by someone 35-44 who don’t have any retirement savings at all.
Is an “average” retirement good enough?
Let’s say you’re the average 65-year-old with just over €300,000 in your pension pot. How long is that €300,000 going to last? Is that nest egg going to provide the retirement you’ve been dreaming about and working for most of your life?
There’s no one-size-fits-all answer to those questions. We all have different passions, goals, healthcare needs, and lifestyle expectations. Some retirees might live quite happily at or even a little below the average level.
But what happens if your spouse has an accident and needs to see a specialist? What if your roof needs repairing? Will an emergency stretch your “average” retirement fund too thin?
What happens if, five years into a twenty-year retirement, you start to feel bored and restless? Maybe you decide you need to see more of the world? What if you can’t let go of that passion project you’ve always wanted to develop into your own business? Will your nest egg provide for changes that will make your retirement more fulfilling?
How your money measures up.
Successful retirement planning balances the things that we can anticipate with the things we can’t. That’s why, as we work together, l never hold up a graph comparing where your money is to where your peers are. I am not interested in outside standards of “measuring up.” I am interested in how your money measures up to what YOU want out of life, and what you’ll need to stay comfortable on rainy days.
Contact me to review your saving plan and spending levels. I can help you adjust as necessary to make sure that both are on track to hit the standard that matters most: YOURS.