The Economic Policy Institute recently published some charts focusing on the state of retirement savings among working families in the United States today. I’m not sure what they determine exactly constitutes a ‘working family’ – since most Americans live in 1 or 2 member households – but assuming the definition is reasonably broad, the data was interesting. It showed the amount of retirement savings that had been amassed in American households in 2016:
- Top 1% of Savers: $1.08M in retirement accounts
- Top 10%: $274K
- Top 20%: $116K
- Top 30%: $50K
- Top 40%: $20K
- Median (50%): $5K
- Few families below the median had any retirement savings
While many may read this as a story of the “haves” and “have nots” – but it can also be read as the path many take to FIRE. We’ve been in all of these groups at different times of our married life & careers.
Fresh out of college, we had zero net worth and practically no retirement savings for the first couple years we were married. While we each did start a 401k account when we started working at our first MegaCorps, we undoubtedly had a negative net worth due to significant student loans and some credit card debt.
After being married about three years, we were out of debt and bought our first house. With the help of my parents, we had a 20% down payment to get a mortgage and had paid off all of our other debt. Certainly by that point we had reached the “working family median” retirement savings of $5K, and our nest egg grew steadily after that.
Our retirement savings reached $100K when we were in our early thirties – it was all in our 401k accounts. I remember a good friend of mine from high school mentioning that his 401k had also reached $100K and we were amazed at how quickly the accounts had grown. I would have been surprised to see that having a little more than that ($116K) puts a household in the top 20% of American’s today.
Our retirement savings (and overall net worth) grew pretty quickly after that point. It is quite a ‘hockey stick’ of exponential growth that builds your retirement savings – if you focus on banking your raises and investing your bonuses to increase your savings rate each year.
Reaching millionaire status is certainly a big deal, but I was a bit surprised to see that having a little more than $1 million in retirement savings puts you in the top 1% of retirement savers. Yes, $1 million dollars is an awesome amount of money, but still it just buys $40K a year in spending at a 4% withdrawal rate over a 30 year retirement. A nice chunk of money (that could reach $65K with an average couple’s Social Security checks), but not the windfall I might have expected for someone in the ‘Top 1%’.
How does your experience line up with these benchmarks?
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