The median family of retirement age has $12,000 in savings

MB 360–Given the discussion of 401ks and IRAs you would think that most Americans have a nice nest egg ready to support them into their margarita drinking days on the beach.  Yet like most dreams, the reality is very different.  Most Americans are broke.  The Economist put out some data highlighting that the median family of retirement age has $12,000 in savings.  In other words, one minor injury and you are bankrupt.  It is a troubling contrast to the image that is portrayed on television and throughout the media of the fully financially prepared family.  Life just doesn’t work out that way for most.  Unsuspected illnesses, job losses, stagnant wages, inflation, family changes, and student debt all throw a wrench into the plans of most.  What is also startling is that this drought in retirement savings is happening at a time when the stock market is near an all time high.  So what gives?

The crisis in retirement

The total stock market cap of the U.S. market is $27.35 trillion.  You would think with that amount, there would be plenty of prepared individuals.  The challenge is that most of this money is aggregated at the top 5 to 10 percent of the population.

Take a look at market caps around the world:


You need to reconcile this with the reality that the median family of retirement age has $12,000.  The typical 35 year old has a net worth of zero and is too broke to even afford a home.  Even basic retirement planning will tell you that people need to start early to build up that nest egg.  This is what was preached when pensions started to go extinct in the early 1980s and people were pushed into 401k style retirement plans.  Here we are nearly 40 years later and the results are not that promising.


This is where the data gets massaged.  The average amount saved by families of retirement age is $100,000 but this is skewed by those at the higher end (i.e., millionaires and billionaires).  So this doesn’t necessarily show how the typical family is doing.  The median is a much better measure of how the typical family is doing.  And in that situation, they are not doing all that well.  Those 55 to 64 have $12,000 to their name in most cases.

So what are the implications of this?

“(The Economist) They continue to ignore the savings crisis that should worry them: Many Americans do not have enough savings ever to be able to retire. Traditional macroeconomics cares only about aggregate levels of capital stock. There is plenty of that. But it is shared among too few people. The median family of retirement age has $12,000 in savings. That is a terrifying figure for a country where Social Security, the state pension, pays out a maximum of roughly $2,500 a month, and pensions for both public and private employees are underfunded.”

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Social Security.  Social Security has already become the de facto retirement plan for most older Americans.  Half of elderly Americans would be out on the streets begging for food if it weren’t for Social Security.  And given how badly people have saved for retirement, there will be a heavier reliance on this system that is already having a tough time.