Are You In The Top 3% of Retirees?

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.