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November 10, 2022
According to reporting from the Transamerica Center for Retirement Studies, retirees have a wide variety of savings and investments. Here are the average cash, savings, and home equity balances in the U.S. How do your financials stack up?
Keep reading to see how your accounts and investment types compare to that of most retirees. Use the NewRetirement Planner to see your totals now and projections for further growth. And, make adjustments and try different scenarios to maximize your wealth.
NOTE on Average versus median: The average numbers you will review below are usually higher than the median because very wealthy individuals can inflate the average. The median is just the middle number in a set of numbers.
You want money in cash accounts that you will need for shorter term living expenses and emergencies.
Living Expenses: You want cash available to cover your spending needs that are not met by existing income. Ideally you have cash available for the next 6 months to 2 years of spending. Use the NewRetirement Planner to see the delta between your income and expenses.
Emergency Cash: Most experts recommend that you have enough emergency cash to cover 3-6 months of living expenses. In a pinch? Explore the best and worst sources of emergency money.
There are three common types of cash accounts: checking accounts, savings accounts and… cold hard currency.
The FDIC reports that 95.5 percent of U.S. households were “banked” in 2021, meaning that at least one member of the house-hold had a checking or savings account at a bank. This is the highest percentage since the survey began in 2009. They attribute the change to better socioeconomic conditions.
The most recent Survey of Consumer Finances announced that the average household checking balance in 2019 was $41,600, while the median household checking account balance was $5,300.
Balances are only slightly higher for older Americans at:
According to the most recent data from the Federal Reserve, the median savings balance — not including retirement funds — of Americans under 35 is just $3,240, while it’s $6,400 for those ages 55-64.
The balances listed below reflect the averages across savings accounts, money market accounts, call deposit accounts and prepaid cards.
Since the good old days of the Y2K panic (and before), it has been a common practice for people to keep some amount of cash on hand at home. Whether it is stashed in the mattress or a coffee can in the freezer, cash can be useful in a natural disaster when the grid might be down.
Some experts do recommend that you have about three days worth of cash to get through a tough spot. Think through what you might absolutely need to buy in a disaster and have that amount on hand.
However, also remember that keeping cash at home means that the money is not earning returns and is also vulnerable to theft and fire.
However, younger people are returning to a cash economy. Many are embracing a practice called cash-stuffing. They take their income in cash and store it in envelopes or jars, one container for each category of spending. When a container is depleted, that is it for the month. Recurring bills are paid through a checking account and credit cards are paid off, but from the cash container for credit cards.
Proponents say it is a way to control spending and one online survey suggests that as many as 61% of adults aged 18-41 use cash-stuffing to some extent.
Home equity can account for a significant portion of household wealth — growing significantly as people age.
According to the most recent data (2020) from the Census Bureau, households aged:
Home equity can be a critical component of a retirement plan. This money can be tapped by retirees in a wide variety of effective ways, most commonly through: downsizing or securing a reverse mortgages.
Model these strategies for using your home equity in your NewRetirement Plan and see the impact on your cash flow, ability to achieve your desired retirement lifestyle and net worth.
Retirement accounts are tax advantaged accounts that are typically not used until you are in retirement. In most cases, there are hefty tax penalties for withdrawals made before you are age 59 1/2.
The Census Bureau reports that the average account balance for all Americans is $75,000. The average balances by age are:
$16,450 for those under 35 $60,000 for those 35-44 $91,500 for those 45-54$140,000 for those 55-64 $150,000 for those over 65
The Investment Company Institute (ICI) reports that 36% of all Americans have an IRA — the vast majority of those accounts being traditional IRAs as opposed to Roth IRAs or SEP IRAs, SAR-SEP IRAs or Simple IRAs.
However, Roth IRAs are growing in popularity. In fact, it can be a savvy tax strategy to convert money to a Roth IRA. (Learn more about Roth Conversions…)
The Employee Benefit Research Institute (EBRI) reports that
According to the Pension Rights Center, 45% of all workers participate in a workplace retirement plan and 34% participate in a retirement savings plan.
According to Fidelity, the average 401(k) balances by age cohorts are:
Not all investments are equally valued by retirees. Ownership in the stock market is the most popular.
According to Gallop, 58% of all Americans, which is only slightly lower than the 59% of those over 65 who own stocks.
And the Pew Research Center, found that the the median holding for those over 65 is $100,000. Most of that investment is in 401(k) accounts, and some of it may be represented by pensions that invest in the stock market.
A Certificate of deposit is a deposit you make with a bank that includes the promise that you won’t withdraw the money for a set period of time. To make that deal attractive, the bank gives you a better interest rate than you get with a regular savings account.
After a long decline in use, CDs have been making a come back. But, many Americans find CDs confusing.
In 2019, Transamerica reported that 20% of retirees had CDs.
A bond is debt you can buy from a government or a corporation. You loan the bond issuer money for a set period of time, and they pay you a premium for that loan that’s known as the yield of the bond.
Overall, direct household participation had fallen greatly due to low interest rates. However, 2022 saw a big climb in rates and huge interest in bonds.
On Oct. 28, 2022, the Treasury received $710 million in I-bond purchase requests in just that one day. (It was the last day to take advantage of a particularly high interest rate.)
There are many different ways to invest in real estate beyond owning rental property.
Transamerica reports that 9% of retirees have real estate investments.
Cue the sad music. The reality is that many retirees don’t have investments at all. The good news? It is possible to live on Social Security alone!
While this percentage is low, more and more retirees are starting businesses after retirement and they are good at it.
According to the Global Entrepreneurship Monitor (GEM), the highest rate of entrepreneurship worldwide has shifted to the 55-64 age group. And, entrepreneurial activity among the over 50s has increased by more than 50% since 2008.
In America, 34 million seniors want to start a business.
Learn more about financial success later in life and explore 12 business ideas for over 50.
Transamerica reports that 18% of retirees are getting income from an annuity.
An annuity is a payment stream that you purchase with savings. You are paying a fixed sum of money for a predetermined revenue stream.
You can model an annuity purchase as part of your overall NewRetirement Plan. Annuities are a great way to guarantee income rather than relying on riskier investment options.
Odds are that because you are reading this article, you are doing better than the averages – far better. But, do you have what is actually perhaps the most valuable and underutilized asset? A plan? A written plan for your retirement finances?
However, according to Fidelity, only a mere 18% of Americans have a written retirement plan.
When you retire, you are no longer living month to month or year to year. When you stop working, you are dealing with a finite set of financial resources that need to be budgeted to fund the rest of your life. You really do need a plan.
It is easy to create, manage and track a retirement plan with the NewRetirement Planner. Best of all, the comprehensive system enables you to do better with your time, taxes, investments, healthcare and more for more wealth, security and happiness.
Do it yourself retirement planning: easy, comprehensive, reliable
Take financial wellness into your own hands and do it yourself retirement planning: easy,
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