The average retiree has $171K saved for retirement (less than 1/3 of what they need)

A new report paints a troubling picture for retirees and those considering retirement: retirees have less in savings, are more likely to face poverty, and are hard-hit by inflation.

The report, from online real estate brokerage Clever, suggests that workers in the U.S. don’t just fail to save enough for retirement, they have an inadequate understanding of what is needed for a comfortable life after leaving work. Clever conducted an online survey of 1,000 Americans for the survey, released last month.

“Since the start of 2020, Americans have faced punishing economic conditions, making it harder to build savings, climb out of debt, and afford basic necessities,” wrote Matt Brannon on the company’s blog. “The COVID-19 pandemic upended the housing and job markets, while the recovery period has been plagued by historic inflation and a limping stock market.”

Losing ground on preparing for retirement

Brannon noted in the report that a comfortable retirement is more out of reach in 2023 than it was a year ago.

“Faced with rising prices and stock market setbacks, the average retiree has $21,000 less in savings than they had at the start of 2022 — dropping from $191,659 to $170,726. What’s more, the share of retirees with nothing saved jumped from 30% to 37%,” he wrote. “The consequences are clear. The latest Census data puts the share of U.S. seniors living in poverty at a 20-year high, and the economic turmoil of 2022 threatens to raise the number even higher.”

The report found that the average retiree has just 31% of the recommended amount saved for retirement, based on numbers from Fidelity Investments. Only one in eight retirees (12%) say they have the $555,000 that Fidelity estimates is needed for retirement.

Retirees are pessimistic and want the government, employers to step up

The survey found that 57% of retirees said they were surprised by how much money they needed for retirement. Just over half (51%) said they did not adequately prepare for retirement. And nearly half, 48%, said they believe they will outlive their retirement savings.

Not surprisingly, retirees are unhappy with how the system has worked for them. A very large percentage, 87%, said the government should do more to help retired Americans.

And employers are also the target of blame: 60% of retirees say their employer didn’t help enough with retirement, while 53% say their income wasn’t high enough to afford retirement. Perhaps more troubling, many say their employer did not offer any retirement plan: 47% say their employer did not offer a pension or a plan such as a 401(k).

Retirees also blame themselves, with many expressing regret for not doing more to understand the system and to save for retirement. This is an area that the new movement toward financial wellness might be able to address. The survey found that 67% of respondents said they wish they had better understood retirement savings when they were working, 63% said they should’ve managed their money better, 58% said they didn’t know how much money they would need to retire, and 57% said they waited too long to start saving for retirement. Close to one-third, 29%, said they pulled savings from their retirement plans early.

Early retirement adds to the problem

The survey noted that 65% of retirees say they left their jobs earlier than planned, only 30% say they retired at the time they planned to. Health issues were by far the largest reason: 50% of those who retired early said it was because of their health; 16% said it was to take care of family members. This may be a reason driven by the recent pandemic, but the decision adds to economic insecurity. For example, 71% of retirees report have non-mortgage debt, including 39% who say they have credit card debt, and 18% who say they have medical debt.

“The high rate of credit card debt is also a problem because of high balances,” the report said. “A 2022 study on Americans’ credit card debt found that the average baby boomer in credit card debt owes $8,208 — about $2,000 more than the average millennial in credit card debt.”

That finding points again to the need for better financial education among American workers. This article from 2022 lists a number of steps that employers can take to help workers to better prepare for retirement, including: offering a 401(k) match, using an auto-enrollment feature, offering target-date funds, and providing financial wellness programs.