How Much of the Average Net Worth at Retirement Is in Retirement Accounts?

Despite advisor recommendations that Americans should aim to have at least $1 million in their retirement accounts, the reality is that most people don’t have enough. Part of the problem is that most Americans live paycheck to paycheck, making it difficult to set aside the recommended 10 to 20 percent of their income for long-term savings.

But the more you develop the habit of “paying yourself first” and setting aside money for savings before paying your bills, the more likely you are to build a large nest egg over time. Here’s an overview of the average net worth of Americans ages 65 to 74, along with suggestions for improving your chances of a comfortable retirement.

What is the average net worth of retirees?

According to the most recent data from the Federal Reserve, the median net worth of Americans ages 65 to 74 was $409,900. For those over 75, it was $335,600. That’s not surprising, since older retirees typically spend more than they earn, and retirement nest eggs deplete as they get older.

When it comes to the average net worth of these age groups, the numbers are significantly higher. That’s because a handful of ultra-rich individuals skew the average much more. The average net worth for people ages 65 to 74 was $1,794,600, more than four times the median. The ratio was even higher for people ages 75 and older, whose average net worth was $1,624,100, nearly five times the median.

Is that enough? $409,900 may seem like a decent nest egg, if you live frugally and live in a low-income area, but for many Americans, it won’t provide the retirement income you dream of. For example, if you invested that $409,900 at a 5% interest rate (about what you get today on Treasury bonds or high-yield savings accounts), you’d only earn $20,495 a year.

Social Security helps, but it’s probably not enough. Most advisors estimate that you need at least 80% of your pre-retirement income to have a comfortable retirement. Based on the Fed’s report that the median American household income is $70,300, this means that the average American needs at least $56,240.

How to Increase Your Chances of a Comfortable Retirement

The first way to increase your chances of a comfortable retirement is to view Social Security as a supplement, not your main source of income in retirement. This is because Social Security is not enough to support a satisfying lifestyle for most Americans. As of May 2024, the average Social Security check for retirees was just $1,915.26 per month, or $22,983.12 per year. For most Americans, that’s just not enough.

This is why investing is so important, and the earlier you start, the better. For example, according to Dave Ramsey’s investment calculator, if you put aside just $190 a month starting at age 20, you can have over $1 million by age 65, with an average annual return of 8%.

It’s always better to try to increase your income, savings, and investments before retirement than to try to cut back on expenses after. That’s why it’s important to save as much as you can and take advantage of retirement accounts like 401(k) plans that offer tax benefits and the opportunity to earn “free money” in the form of employer contributions.

A helpful tip is to automate your savings. You no longer have to remember to contribute to your savings or investment plan every month, lifting this burden off your shoulders. Not only will you likely build a bigger nest egg than you ever imagined if you continue to invest consistently in this way, but you can also benefit from market declines because automatic deposits allow you to buy stocks when they are cheap.

Another way to increase your nest egg is to not be too conservative, especially if you are young. In your 20s, 30s, and 40s, you still have plenty of time until retirement to weather market declines, and contributing more to your account during this time can reap additional benefits in the long run. If you invest too conservatively, you may not see a net gain even after deducting the effects of inflation and taxes.

Take the First Step

It’s interesting to compare your retirement savings to national averages and medians, but at the end of the day, what really matters is what your personal financial situation is. Based on your lifestyle and expected life expectancy, $409,900 might be enough for you to retire, or it might fall far short of what you need.

Talking to a financial planner is a great first step in creating a plan that meets your long-term needs while meeting your risk tolerance. But whether you work with a professional or figure it all out on your own, automating your investments, taking advantage of retirement plans, and getting started as soon as possible are all helpful steps in your lifelong retirement journey.