Most Americans don’t have enough saved for retirement.

Do you?

Average Retirement Savings By Age 60. How much should you have saved? (2023 edition)

Resources:

• Click here to watch our video: When Can You Retire? 3 Question Checklist 
• Click here for a Free Download Guide: 5 Retirement Mistakes to Avoid 

Full transcript:

SPEAKERS

Alex Okugawa & Anthony Saffer

Alex Okugawa 0:00
Most Americans don’t have enough saved up for retirement. But do you?

Today, we’re going to show you how you may stack up against the average American in saving for retirement. Stay tuned.

Hey there, it’s Alex and Anthony, from One Degree Advisors, and we help you gain confidence in your retirement. If you’re like most people you want to know, are you going to have enough in retirement? You know, am I saving enough? Am I on track? Am I going to run out of money? Right? These are really big questions that most people want to know before they make that plunge into retirement,

Anthony Saffer 0:34
The average American spends about $67,000 a year that’s $5,600 a month according to the Bureau of Labor Statistics. I mean, that’s it’s a good amount. And then we’re gonna put up on the screen here. Vanguard did a study where the average person right around 60 years old, has about $256,000 saved now this is by account. So it’s very possible that more than somebody’s 401k, they have other savings. But I guess the question is, Does that seem low to you?

Alex Okugawa 1:05
Well, in the Federal Reserve did a report back in 2019, that had the average retirement savings account for the age group of 60, just above $400,000. So you know, we’re kind of in that range. And like you said, Anthony, I think we want to get feedback from other folks. Does that seem right? Does that seem high or low? I mean, it’s probably going to depend upon where you live in the country, right? That amount of money in Southern California doesn’t go as far as maybe when you live in middle America, where expenses might be just a little bit lower. Now, 60 year olds today are the last of the baby boomer generation with the older side of Gen X, just approaching 60.

Anthony Saffer 1:43
Yeah, the Gen X is just coming up and approaching at 60. And so they’re very much in the prime of preparing now for retirement, Yahoo Finance just had an interesting article posted, and they looked in Gen X is just really not prepared over half of Gen X doesn’t even have $10,000 saved for retirement. And now they’re in this push of like having to catch up. And that’s pretty normal I would say as far as having to catch up when you’re in your 50s to 60s, in fact, even contributing to a retirement plan, they have something called a catch-up contribution, where you can put more in. And that’s what they’re basically doing, when they look at that study of Gen X, people are starting to put more away simply because they have to,

Alex Okugawa 2:28
Nonetheless, even if people do are able to put more money away, it’s still a problem because we’ve all seen those pictures in those graphs, and how the math works out where even if you start saving a little bit early on, how the effect of compounding over time really can impact your ending account balance. So even though, you know, maybe folks are able to save a lot later on in life, it just doesn’t have the time in the market that you need. Right. And there’s that that famous saying, it’s not about timing the market, it’s about time in the market. So the more people can get into the market earlier on, the better they should be over the long term.

Anthony Saffer 3:03
Yeah, so absolutely saving, and are you on track? Now you may or may not compare well to the average American, you know, hopefully, you’ve been able to save a good amount. But first is looking and saying, Okay, from my investments, how much income can I possibly get out of that, and then looking at other income sources. So we’re gonna put this chart up here. And just using a very simple rule of thumb, which is the 4% withdrawal rate, someone that has $200,000 Saved can realistically think about getting $8,000 per year of income, and you go down further down the line to where if you have a million dollars, then that can equate to about $40,000

Alex Okugawa 3:41
And real quick before you keep going. I want to touch on this whole 4% rule. It’s just a rule of thumb, right? It is not the Bible, it is not the rule. It’s just a guideline. And so if you have people saying, well, I should be able to take more or less than you might be able to but it’s just a good guidepost to say here’s some general guidelines for you,

Anthony Saffer 3:59
Right. And even sticking with those guidelines, then what you want to do is look and say, Okay, well, how much do I actually need to live on? Let’s just say that it’s $8,000, a month that you need, then you’d want to look at other income sources, perhaps it’s Social Security. In this example, like the average American gets $1,800 per month from Social Security. So we’ll just say, you know, you’re a married couple, you double that, then you maybe have some other rental income, perhaps you have a rental property, or maybe it’s even a pension or something else, well, then that leaves that you need $2,400 from your investments. And then if you back into it, again, using that simplistic 4% withdrawal rate, that means you need just over $700,000 in your investment portfolio.

Alex Okugawa 4:45
Yeah, and I mean, the thing is, these are just the initial steps, right? I mean, this is a really basic illustration. And I don’t think people appreciate that. You really need to be considering taxes into this equation because you could have a $700,000 IRA. But when you start creating income off of that IRA, that is taxable money and so the after-tax money you need to be thinking about how much money do I need to be landing in my bank account each month. So you need to be considering taxes, inflation, and ways that you can prepare for retirement so that you can retire even if there’s a bad market and still continue to send yourself income. This is the kind of stuff that financial planning can really help you with and the stuff that we help you with. We recently posted a video, can you retire? a three-question checklist. Folks can watch that below.

Once again, this is Alex Okugawa with One Degree Advisors and if you enjoyed today’s video, please like and subscribe for more it helps us reach more retirees like us so that they can retire with confidence. We also created a free guide called Five retirement mistakes to avoid you can download that for free in the description below.

Transcribed by https://otter.ai

The One Degree Blog

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