Are You In The Top 3% of Retirees? (2024)

Are You In The Top 3% of Retirees? (1)

Financial Planning Retirement Retirement Red Zone

The average American has less than $260,000 for retirement. But this number might not tell the story you think it does.

Published by Motley Fool Wealth Management Originally posted on Wed, Oct 25, 2023 Last updated on January 10, 2024

Are You In The Top 3% of Retirees? (2) 7 min read

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We won’t keep you in suspense. If you have more than $1 million saved in retirement accounts, you are in the top 3% of retirees. According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.1

However, there’s a surprising amount of information to unpack. It’s impossible to properly convey the state of American retirement savings with just one number, so here’s the big picture of how much U.S. households are saving for retirement, and how to figure out where you stand.

How much does the average American have saved for retirement?

Here’s the short answer. According to the most recent (2019) Federal Reserve Survey of Consumer Finances, the average retirement account balance in the United States was $255,130.2

There are a couple of caveats to mention here. For one thing, this average retirement account balance number only refers to money saved in tax-advantaged retirement plans like IRAs, 401(k)s, and similar accounts.3 If a retiree has a lot of money saved in a regular savings account or standard brokerage account, it wouldn’t be considered “retirement savings” for the purposes of these statistics. And the same can be said if a retiree has a portfolio of investment properties, or equity in their own home.

Now, according to many financial planners, a little over $255,000 in retirement accounts isn’t likely to sustain anyone through a multi-decade retirement unless there are large pensions or annuities involved. However, just because a household doesn’t have a massive retirement account does not necessarily mean they are poorly prepared. In fact, according to the same survey, the Federal Reserve found that the average household had a net worth of $746,820 at the same time as the retirement data.4

We believe net worth can be an even more telling metric because things like non-retirement stock investments can certainly be used to fund expenses in retirement. Retirees can choose to sell their large homes and buy small condos, putting hundreds of thousands of dollars of equity in the bank in the process.

In addition, these are the averages among all American households. It includes households where the primary earners are approaching retirement age and have been saving for decades, and it also includes households formed by 23-year-olds who just got their first job after college. So, we think it’s fair to say that the average person who is close to retirement age has more than the overall average.

The average retirement savings and net worth by age

If we look at a breakdown of the average retirement savings by age, that’s exactly what we find. We mentioned earlier that the average American had $255,130 saved in their retirement accounts. However, the average among the 55-64 age group was $408,420, and the average 65-to-74 retirement saver had $426,070 saved.5

As far as net worth is concerned, we mentioned the average ($746,820) net worth of American households, but this rises to $1.18 million for the typical household whose head is in the 55-64 age group, and $1.22 million for a household led by a 65-to-74-year-old.6

The median data tells another story

However, it’s also worth noting that these are average, or mean, numbers for the data. If we look at the median, it paints a much different picture.

For starters, the median retirement savings of a U.S. household is $65,000, far lower than the average of $255,130 we mentioned earlier. And the median net worth is $121,760 —roughly one-sixth of the average.7

We’ll spare you a deep statistics lesson, but here are two key points to know. The median is the midpoint of a set of numbers, meaning that half of households have saved less for retirement and half have saved more. Second, when the average of a set of numbers is much larger than the median, it implies that the numbers are being skewed by a relatively small number of large values. In this case, this means that households that have lots of retirement savings and high net worth are making the averages look much higher than reality for the typical American household.

Top retirement savers have a lot in common

It’s also worth noting that while none of these are universally true, we think there are some clear predictors of whether a household has a high level of retirement savings or not:

  • High income — This is perhaps the most obvious, but it is worth mentioning. The average person in the top 10% of household incomes has $769,000 saved for retirement, and a $4.8 million net worth. For comparison, someone in the middle quintile of household income has retirement savings and net worth of $79,500 and $223,000, respectively.8
  • Homeownership — The average homeowner has more than $303,000 saved for retirement, which is 267% higher than the average renter. The gap is even wider when it comes to net worth, which isn’t surprising since home equity is included in that calculation. The average homeowner has a net worth of about $1.1 million while the average renter has a net worth of about $96,000.9
  • Education — While there are certainly a lot of successful people who never went to college, the average college graduate has more than three times the retirement savings of the average person with a high school diploma. And the average college graduate has a $1.52 million net worth, compared with about $305,000 for someone with a high school diploma.10

Are you in the top 3% of retirees?

As mentioned, $1 million in tax-advantaged retirement accounts will put you in the top 3% of retirement savers. As far as net worth is concerned, estimates that use the same data from the Federal Reserve survey have found that a net worth of $4.64 million would put you in the top 3% of American households.11

Of course, there are a lot of moving parts here. A $5 million retirement nest egg would mean one thing to a retired couple living in San Francisco and spending $400,000 per year on living expenses, but would mean something else entirely to someone living in a low-cost area and spending $100,000 per year. One may feel like they are in the top 3% of retirees, and one may not. And there are other factors like Social Security and pension income to consider.

The bottom line is that it can be helpful to see where you stand when it comes to saving for retirement and building wealth, but the question of how much is enough for you is far more complicated.

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    Are You In The Top 3% of Retirees? (2024)

    FAQs

    Are You In The Top 3% of Retirees? ›

    If you have more than $1 million saved in retirement accounts, you are in the top 3% of retirees.

    What is the 3% rule in retirement? ›

    The 3% rule in retirement says you can withdraw 3% of your retirement savings a year and avoid running out of money. Historically, retirement planners recommended withdrawing 4% per year (the 4% rule). However, 3% is now considered a better target due to inflation, lower portfolio yields, and longer lifespans.

    What is considered a wealthy retiree? ›

    Home equity and moderate nest eggs facilitate occasional luxuries and social engagements. With a net worth of $1.9 million, retirees in this percentile are deemed well-off, enjoying a lifestyle enriched by extensive savings and investments. This includes bucket-list travels, charitable endeavors and legacy planning.

    What percentage of retirees have a net worth over 1 million? ›

    Putting that much aside could make it easier to live your preferred lifestyle when you retire, without having to worry about running short of money. However, not a huge percentage of retirees end up having that much money. In fact, statistically, around 10% of retirees have $1 million or more in savings.

    What is the average income for most retirees? ›

    The median income for Americans 65 and older is $50,290. The mean (average) is $75,020. Average annual expenditures for Americans 65 and older are $57,818. The average Social Security retirement benefit check is $1,907 as of January 2024.

    What percentage of retirees have $3 million dollars? ›

    According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.

    What is the average 401k balance for a 65 year old? ›

    $232,710

    How many people have $3,000,000 in savings in usa? ›

    1,821,745 Households in the United States Have Investment Portfolios Worth $3,000,000 or More.

    What is the average net worth of a 65 year old? ›

    The average American net worth is $1,063,700, as of 2022. Net worth averages increase with age from $183,500 for those 35 and under to $1,794,600 for those 65 to 74. Net worth, however, tends to drop for those 75 and older.

    What is considered upper middle class in retirement? ›

    Upper middle class might mean earning 15-50% above the median with a comfortable financial cushion, while the upper class generally refers to the top 1-3% earners with substantial wealth and investment-derived income,” said Jeff Rose, CFP and founder of Good Financial Cents.

    What is the net worth of the top 5%? ›

    Top 2% wealth: The top 2% of Americans have a net worth of about $2.472 million, aligning closely with the surveyed perception of wealth. Top 5% wealth: The next tier, the top 5%, has a net worth of around $1.03 million. Top 10% wealth: The top 10% of the population has a net worth of approximately $854,900.

    What net worth puts you in the top 1%? ›

    Profit and prosper with the best of expert advice - straight to your e-mail.
    • People with the top 1% of net worth in the U.S. in 2022 had $10,815,000 in net worth.
    • The top 2% had a net worth of $2,472,000.
    • The top 5% had $1,030,000.
    • The top 10% had $854,900.
    • The top 50% had $522,210.

    Does net worth include home? ›

    Your net worth is what you own minus what you owe. It's the total value of all your assets—including your house, cars, investments and cash—minus your liabilities (things like credit card debt, student loans, and what you still owe on your mortgage).

    What is the average Social Security check? ›

    Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.

    How much do most retirees live on per month? ›

    Average Retirement Spending

    According to the Bureau of Labor Statistics (BLS), the average income of someone 65 and older in 2021 was $55,335, and the average expenses were $52,141, or $4,345 per month.

    What is the average Social Security check at 62? ›

    According to recently released data from the SSA's Office of the Actuary, just over 590,000 retired-worker beneficiaries were receiving $1,298.26 per month at age 62, as of December 2023. That compares to about 2.11 million aged 66 retired-worker beneficiaries who were taking home $1,739.92 per month.

    What is the 4 rule for retirees? ›

    The 4% rule limits annual withdrawals from your retirement accounts to 4% of the total balance in your first year of retirement. That means if you retire with $1 million saved, you'd take out $40,000. According to the rule, this amount is safe enough that you won't risk running out of money during a 30-year retirement.

    At what age is 401k withdrawal tax free? ›

    Once you reach 59½, you can take distributions from your 401(k) plan without being subject to the 10% penalty. However, that doesn't mean there are no consequences. All withdrawals from your 401(k), even those taken after age 59½, are subject to ordinary income taxes.

    How much can you withdraw in retirement and not run out of money? ›

    For most people, managing retirement savings is a balancing act. If they withdraw too much too fast, they'll risk running out of money. Not withdrawing enough money can deny them the full benefit of their hard-earned savings. For those who want a rule of thumb to follow, the 4% Rule is an easy-to-use choice.

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