The average retirement age has generally been dictated by when certain government programs become available to retirees. 62 is the earliest you can take Social Security benefits while 65 is the earliest you can enroll in Medicare.
Even with the availability of assistance programs, lackluster retirement savings are pushing more and more retirees to put off retirement. And according to the annual Transamerica Retirement Survey, more than half of workers, 57%, plan to work in retirement, either on a full-time (17%) or part-time (40%) basis.
The average retirement age across all states and demographics in the U.S. is 64. But when you account for gender, state of residency, employment status, education, household income, and more, that average can change drastically.
What Is The Average Retirement Age For Men Vs. Women?
The average retirement age in the U.S. is currently 65 for men and 63 for women. That number has been slowly rising since the mid 1990s, up from 62 for men and 60 for women.
Given that the average life expectancy in the U.S. is almost 79, retirees should be planning a minimum of 15 years in retirement. Women should be planning a longer retirement as their average life expectancy is 81 while the average life expectancy for men is 76.
Given that fact, looking at the total household savings between men and women makes the retirement savings gap devastating. The median retirement savings for women across all ages is $28,000 compared with men who have saved $69,000.
And a staggering 31% of women have saved $10,000 or less in retirement accounts compared to 20% of men. Some of this comes down to data that shows women make only $0.82 for every dollar a man makes. And since Covid, women in the labor force participation is at a 33-year low as they’re forced to take on caretaking and homeschooling roles.
This data shows a large need for more access to investing education for women.
What Are Average Retirement Savings by Age?
After comparing the 2020 and 2019 Transamerica Retirement Surveys, it’s apparent that younger generations are learning from the previous generations’ mistakes of not saving enough for retirement. But not by much. And while access to retirement plans, investing, and education has gone up, retirement savings have gone down for every generation except millennials, where it’s stayed the same.
Baby Boomers, predictably, have the highest total household retirement savings with $144,000, down from $152,000 in the previous survey. They still have twice as much saved by Generation X at $64,000, down slightly from $66,000 the previous year.
Millennials have a median savings of $23,000 in both surveys. Additionally, one in 10 workers across all generations report having no retirement savings, including 12% of Millennials, 9% of Generation X, and 7% of Baby Boomers.
It’s important to not just look at the average savings but also how often workers are pulling from their retirement savings before retirement. 22% of Baby Boomers are likely to have taken out a loan or withdrawal from an employer retirement plan or IRA. That number increases significantly for younger workers at 32% of Generation X and 30% of Millennials .
How Much Money Will I Need For Retirement?
The amount you’ll need for retirement will vary based on your lifestyle, social security benefits, and your health. Standard recommendations for saving are:
- Americans in their 30s should have 1–2 times their annual salary saved for retirement.
- Americans in their 40s should have 3–4 times their annual salary saved for retirement.
- Americans in their 50s should have 6–7 times their annual salary saved for retirement.
- Americans in their 60s should have 8–10 times their annual salary saved for retirement.
Many financial experts suggest starting in your twenties saving 10–15% of your gross income but that percentage will fluctuate based on when you start saving. And that’s in addition to money saved for short-term goals such as a house, car or emergencies.
You can use an investment calculator to see how much you’ll need to save to get to your target retirement savings goal. You’ll find that the earlier you start, the less you have to save overall.
You’ll also want to take Social Security benefits into consideration when calculating how much you’ll need in retirement. Benefits are based on the 35 calendar years in which you earned the most money.
The estimated average Social Security retirement benefit in 2021 is $1,543 a month and the maximum someone filing at full retirement age, 66 or 67, is $3,148 a month. The longer you wait to start taking benefits the more you’re eligible to get each month up to age 70 where the max is $3,895 a month.
What is a Reasonable Amount of Money to Retire With?
How do you know what your retirement savings goal should be? Experts recommend the "80% rule,” which states that you should plan to live on 80% of your pre-retirement income.
When asked, most workers estimate they’ll need to have saved around $500,000 by the time they retire in order to feel financially secure, 34% estimated they’ll need $1 million or more. With the median retirement savings for all generations well under $300,000 there’s a gap that’s surely a source of stress for many workers.
Another way to determine what you need to save is by using the 25x and 4% rules. The 4% rule, based on a widely trusted retirement planning study, states that you can withdraw 4% of your retirement nest egg every year without risking running out of money for at least 30 years.
The 25x rule is a way to estimate how much money you need to save for that nest egg. Simply take what you predict your annual expenses will be in retirement and multiply it by 25. The resulting amount will get you a goal number in which that annual expense amount is 4% of your total savings.
When Social Security Benefits Aren't Enough
Most workers plan on retiring at 65 but the average retirement age is 64. This difference could mean workers are being forced into early retirement due to declining health, physical limitation or injury, caretaking of parents or grandchildren, or a number of other reasons.
So for someone planning to wait to take Social Security until 66 or 70, an early retirement could mean that savings and Social Security aren’t enough.
This is especially true for low-income households. Workers without a college degree have total household retirement savings of only $23,000, nearly seven times less than the $160,000 of those with a college degree. And because their incomes are low, their Social Security benefits will hover at or below the $1,543 monthly average.
There are several solutions to the problem. The first is you can relocate to a less expensive area, permanently or for a period of time. If you pay rent or still have a mortgage, downsizing or moving to a lower cost area could make your benefits work more favorably for you.
You could also get a part-time job to fill in the gap. Be aware that there are limitations to how much you can earn while on Social Security benefits. If you are under the full retirement age of 66 or 67 you’ll have $1 deducted from your benefit payments for every $2 you earn above the annual limit. For 2021, that limit is $18,960. In the year you reach full retirement age, you’ll have $1 in benefits deducted for every $3 you earn above a different limit which, in 2021, is $50,520.
If you find you’re able to alter your income and/ or expenses enough to not need Social Security you may be able to rescind your benefits claim. Anytime within 12 months of filing for benefits, you have one chance to withdraw it and wipe the slate clean. The only catch is that you will have to pay back any benefits you received but you won’t be subject to any penalties when you file again.
The Retirement Gap
The retirement gap is the difference between the income you'll need during retirement and the income you'll receive from your savings, pensions, Social Security, and other income sources in retirement. Identifying your gap and having a plan in place to close it are part of building financial security.
The retirement gap is obviously much more extreme in lower income households than it is in households earning six-figures or more. Workers with household incomes of $100K+ have $222,000 in median retirement savings and 49% have more than $250,000 saved.
Workers with household incomes of $50K to $99K have almost one-fifth of that at $47,000 median savings and those earning less than $50K have only $3,000 in retirement savings. More than one in four workers with a household income of less than $50K have no retirement savings at all.
Gender also plays a role in the gap. Among workers offered a 401(k) or similar employee funded retirement plan, 81% of men participate while only 73% of women are currently participating. One solution to the retirement gap is automatic enrollment in employer sponsored plans. Though there’s still a long way to go. 70% of employers offer a retirement plan and of those only 34% auto-enroll employees at a deferral of 5% or higher.
What Can You do?
The majority of workers plan to work past age 65 and 14% don’t plan to ever retire. If you want to retire at some point the most important thing you can do is start saving now. Take advantage of tax-sheltered retirement accounts for your investments and make lifestyle changes that allow you to invest more.
You may also want to incorporate some kind of passive income strategy to your retirement planning. There are plenty of ways to create recurring income businesses that take little to no time to maintain. The downside is that it can take several years before these businesses become profitable so you want to start one, or several, as early as possible.
You should also have cash saved for emergencies. You should have three to six months of expenses saved for unexpected expenses while you’re working and before you retire you should boost that number to 12 months of expenses.
While both genders under-save, women especially need to focus on their emergency funds. Men have a median of $8,000 saved for emergencies while women have only $2,000 saved.
The Average Retirement Age May Not be Right For You
You can plan a pretty picnic but you can’t predict the weather. Remember that saving for retirement is necessary but no plan is foolproof. You should be flexible with your investments. retirement age, and plans in retirement to ensure you get the most out of your savings and your golden years.