In the realm of retirement savings, only a select few in the United States achieve the milestone of a $5 million nest egg.
Data from the Employee Benefit Research Institute, based on the Federal Reserve’s Survey of Consumer Finances, reveals that a mere 0.1% of retirees manage to accumulate over $5 million in their retirement accounts, whereas only 3.2% amass over $1 million.
A look at those with around $5 million in savings, as reported by the Wall Street Journal, shows that such retirees often did not anticipate reaching such financial heights. They were consistent in their savings efforts from early in their careers, yet their lifestyles remained modest. Many continue to work part-time, forego frequent new clothing purchases, and, while they do splurge on global travel, they share the same concerns about health and family as other older Americans.
Meanwhile, Northwestern Mutual’s research indicates that Americans believe they need around $1.46 million to retire comfortably. Yet, the median retirement savings account balance paints a grimmer picture, standing at only $87,000, according to the latest figures from the Federal Reserve’s Survey of Consumer Finances. Here’s how these figures breakdown by age group:
—Under 35: $18,880
—35-44: $45,000
—45-54: $115,000
—55-64: $185,000
—65-74: $200,000
—75 or older: $130,000
While the average balance across all families is higher at $333,940, this number is skewed upward by the wealthiest households. Besides retirement accounts, many retirees also have substantial amounts held in regular savings, brokerage accounts, and investment properties.
The equity in a retiree’s home also significantly contributes to their financial security. In 2021, home equity accounted for a median of 45% of the total net worth of U.S. homeowners, indicating a significant portion of an average person’s wealth comes from their primary residence.
The picture of American retirees’ financial health is thus more nuanced than it appears. Financial planners advise considering all assets and net worth to fully assess retirement readiness, rather than focusing solely on retirement account balances.
Although a $5 million nest egg is rare, achieving a comfortable retirement is still within reach. By consulting with a financial advisor, you can develop a tailored plan to meet your retirement goals based on your financial situation and lifestyle aspirations. A financial advisor can provide valuable insights and strategies to help you maximize your savings and ensure financial security for your retirement years.
