In this video I'm going to show you three things, what the average retirement savings is
for a 60-year-old if you're comparing that 60-year-old against a population of savers,
I'm going to show you that same number if you add in the-non savers in this country,
and I'm also going to show you what you should have at 60 years old to retire
in the same lifestyle that you're living right now. Coming up next on Holy Schmidt.
Holy Schmidt.
So you're 60 years old, five to seven years out from retirement, maybe a little bit more
because of the pandemic that we're all in right now and you want to know where you should be.
Well, that's a very good question. And it's a very complicated question because the pool of
60-year-olds spans the gamut from those that have saved virtually every penny they've made up until
this point in their life to those that have had massive financial obligations, are deep in debt,
and don't have a dime and everything in between. So let's talk about each one of these categories.
First, let's talk about the average retirement savings for a 60-year-old when you're comparing
that 60-year-old amongst a group of savers. This number comes directly from the Fidelity
401(k) balances and it's quite accurate, it's a good representation of where folks are.
Now, I want to point out two things. First, the difference between average and median. Let's say
you have five different 60-year-olds and in their 401(k) one had $700,000,
one had $100,000, the next one had $61,450, number four had $45,000 and number five had $17,550.
This totals $924,000 amongst those five 401(k) participants. And that gives an average balance
of $195,500. Now, even though I'm showing you five balances here I could have easily
have shown you 55,000 or 5 million and it would have looked very similar to this.
The average balance for a 60-year-old in their 401(k)
is 195,500 and the median balance is 61,450. So let's write these down. Average, 195.5K, median,
61,450. There are many, many problems with this information. If you went to fidelity.com and you
got this information, and that's where it came from, most people watching this video
would just call it a day. They'd say, "There's no chance I'm going to live well in retirement."
That's because retirement funds like Fidelity, Vanguard, et cetera, have a very strong interest
in you depositing more into your account, which is of course good for you, but it's also good
for them. So let's take this information, I'm just going to tell you what it actually means.
The average balance of $195,500 is comprised of a few, very, very large balances at the top. The
flip side is this right here, 81% of Americans have less than $5,000 in savings. The problem is
this number right here, the $700,000, we'll call those the trust fund and super saver 60-year olds.
Some didn't have the same bills that you might've had. Others lived very spartan and saved more than
most. , Maybe they lived at home until they were 50, who knows? But they were able to sock away a
lot of money but they don't represent the masses, but they do skew the number of the average way up.
This number, the median is the number that's more important here because this is the more accurate
representation of where you probably should be if your average is $61,450 in your 401(k).
Now, what happens if you overlay this population right here? 81% of Americans have less than $5,000
in their 401(k), 81%. So that brings these numbers way down, in fact, the actual numbers
when you factor in the non-savers are an average of $39,191 and a median of
$15,725. 81% of the population has almost nothing. When you add that in 39,191 is the average and the
median is 15,725. The question is, what should you have? Well, they'll tell you it's 8X,
8X your current salary. So if you make $50,000 a year you should have $400,000.
And before you shut the video off and pretend like you didn't turn it on, let's talk about this. This
assumes two things. One, it assumes that you get a rate of return of six and half percent
while you're working and 5% after, but more importantly it assumes that you have the same
exact expenses when you retire and therefore need the same exact income that you're making today.
The fact of the matter is when you retire you won't have an endless mortgage that you need
to pay off, you won't have college education for your kids. You may have already paid for
your child's wedding. You might have already taken the funds that you needed to set aside
to care for an elderly parent or a relative in need and put those aside and dealt with that.
So at 65 years old a lot of your expenses that you are paying for right now may or may not exist.
Certainly by the time you get to 70, 75, 80, those expenses are going to drop way down.
So, while they say you should have 8X for your savings in order to achieve the same income
that you have now in retirement at six and a half percent, I actually think for many people the
numbers are about half that, as little as 4X. So don't worry if you don't have
8X, you can't change the past. Don't even worry if you don't have 4X, if you don't have 195 thousand,
or even 15 thousand because there are things you can do now and even in retirement
to help your income go up or expenses go down. We'll talk about those in an upcoming video.
If you like this video, please give it a thumbs up so that other people can find it as well. Also
don't forget to click subscribe and notifications down below and that will alert you the next
time I post a video, I try to post them twice a week. This is Jeff Schmidt, thanks for watching.