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It is a question that I actively try to dodge when sitting down to dinner with my father: “Are you contributing to your retirement account?” I usually try to defer by saying something snarky like, “Well, if you’re paying for dinner I can free up some cash to throw in an IRA.” I’m only half kidding.
But, it’s not just my future that’s fucked. The average working household has virtually no retirement savings.
According to the National Institute On Retirement Security,
When all households are included— not just households with retirement accounts—the median retirement account balance is $3,000 for all working-age households and $12,000 for near-retirement households.
Based on 401(k)–type account and IRA balances alone, some 92 percent of working households do not meet conservative retirement savings targets for their age and income. Even when counting their entire net worth, 65 percent still fall short.
Two-thirds of working households age 55-64 with at least one earner have retirement savings less than one times their annual income, which is far below what they will need to maintain their standard of living in retirement.
What’s more is that 38 million working-age households (45 percent) do not even own any retirement account assets, whether in an employer-sponsored 401(k) type plan or an IRA. NIRS reported that even those who do, the vast majority of households fall well sort of conservative retirement savings targets for their age and income based on working until age 67–a staggering 92 percent of working households do not meet targets.
As The Economist points out, this is a terrifying problem “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.” Not to mention, a previous study claimed that six in 10 Americans don’t have enough savings to cover a $500 or $1,000 unplanned expense.
Hey dad, can I borrow five bucks?
[h/t The Economist]