Some of my readers might know that I turn 60 this year. So, this question is interesting to me just based on my age, but it’s also a common question for many of my friends and clients.
It’s very human, and VERY American, to feel the need to keep score. To compare ourselves to others to see how we are doing. But I want to caution everybody . . . as Mark Twain said, “Comparison is the death of joy.”
As a fiduciary financial planner, I focus my work on helping clients define their financial goals and helping them to reach those goals safely and predictably. For my clients, it’s not really about how much other people are saving. It’s more about the client’s progress against their financial goals.
But sometimes a look at the big picture can offer some perspective. So, below I offer data from Vanguard Institutional Investment Group. The data comes from 5 million defined contribution plan participants in Vanguards business retirement plans.
First Let’s Talk Statistics
To help put the table in perspective, let’s have a quick refresher in statistics. We are looking at the difference between AVERAGE and MEDIAN.
Average – In ordinary language, an average is a single number taken as representative of a list of numbers, usually the sum of the numbers divided by how many numbers are in the list (the arithmetic mean).
Median – In statistics and probability theory, the median is the value separating the higher half from the lower half of a data sample, a population, or a probability distribution. For a data set, it may be thought of as "the middle" value. The basic feature of the median in describing data compared to the mean (often simply described as the "average") is that it is not skewed by a small proportion of extremely large or small values, and therefore provides a better representation of a "typical" value.
So, the table below shows that the AVERAGE 60-year-old has about $250,000 in their retirement account. But the MEDIAN (the middle in the list of all 60-year-olds) value is only a little less than $90,000. So, there are some REALLY big retirement accounts and A LOT of smaller ones.
Source: How America Saves, Vanguard Institutional, page 47, figure 55.
So, if you and your spouse each have $100,000 or more in your 401(k) at work during the year you turn 60, you are a bit better off than most people. But, if it’s important to you to get retired by your 65th birthday, and you want to travel and enjoy a “pretty nice” lifestyle in retirement, over the next 30 years, then you likely are a bit behind on saving to meet your goals.
To get a feel for where you stand, consider a few interrelated factors:
- How much is saved now? At work, in Social Security and personal savings.
- How long before you want to STOP saving?
- What it will take to live the retirement life you choose, on retirement day and for the 30 years thereafter?
- What is your health and the health of your spouse? Are you or are they likely to live longer or shorter than the average?
Maybe Some Advice Would Help
Calculating the interactions of those factors can be a little tricky. If you would like to talk with me about your situation, I would be honored to help. I work with families to chart out their retirement glide path all the time. Follow this LINK to find a time for us to talk.
If you want to talk with more advisors, a great way to start looking for the right advisor is to talk with a couple of CERTIFIED FINANCIAL PLANNER™ professionals.
To find a CFP® professional near you, start your search here.
As you visit with financial planners, I suggest a couple of things to check:
- Is the advisor always the client’s advocate – a fiduciary advisor?
- Is the advisor paid by clients, not financial product manufacturer or distribution network? That would be a fee-only advisor.
These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems obvious to me that a professional would work this way, but it’s not automatic.
A fiduciary, fee-first, CFP® professional can help you make great retirement income choices and develop a comprehensive financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.
Yes, I am a CFP® professional. I’m always a fiduciary and I work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.
If this article has you thinking about your circumstances, contact my office at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.