The total average savings balance is $34,730, while the average retirement balance is $287,736, according to a 2019 report by MagnifyMoney. As you age, however, some of your savings needs increase, such as ensuring you have enough stashed away to retire. On the other hand, some of your expenses may decrease, such as the amount you need to save for your children’s education or to pay for housing.
Since expenses and goals are in flux, it’s essential to understand the average savings by age to ensure you’re on track.
A breakdown of average savings by age
Savings should be broken into two categories: emergency savings and retirement savings. Consumers should have both types of accounts. Here’s how much the average American has in each type of account, depending on their age.
Average savings under age 35
Average retirement savings: $24,728
Average emergency savings: $8,362
Many people under the age of 35 are in the early stages of their careers, which can mean they’re on the lower end of the salary range. Median earnings for Americans ages 25 to 34 are $47,736 a year, according to the Bureau of Labor Statistics (BLS), and this can make it harder to save if your expenses are high.
During their late 20s and early 30s, many people may still be paying off student loans or completing their education. According to a 2018 survey from the National Association of Realtors (NAR), the average age of a first-time homebuyer is 32, and coming up with a down payment could lower the amount
available for emergency savings. This age group also may not have a lot of experience managing their personal finance, and many may not have started saving for retirement, which can seem far off.
Average savings ages 35 to 44
Average retirement savings: $68,935
Average emergency savings: $20,839
The average savings balances among 35- to 44-year-olds suggest that this age group is taking advantage of increasing earnings, with the median annual salary for this age group at $59,020, according to BLS data. The averages above indicate that this age group is putting away more money in their savings and retirement accounts than the previous age group.
However, while their savings are increasing, so are their needs. Households in this age group often have a growing family, and they may incur additional food, shelter, child care and education costs. They also may be setting aside funds for long-term savings goals, such as purchasing a new home or paying for a child’s education. Retirement is a decade closer at this point, and it’s evident this age group has begun to stash away funds for their golden years.
Average savings ages 45 to 54
Average retirement savings: $129,051
Average emergency savings: $30,441
The median salary for people between the ages of 45 and 54 is $59,488 per year, which is only slightly higher than the previous age group. By this age, people may have reached a plateau in their career with earnings holding steady. However, they may have children in college, and if they’re helping to pay for their education it can put a strain on savings’ efforts.
Average retirement savings for those in this age range suggest they have started gaining traction on their retirement savings, stashing away nearly twice as much as those who are a decade younger. This is likely due to the fact that retirement isn’t a faraway goal anymore, and they may be making up for lost time.
Average savings ages 55 to 64
Average retirement savings: $190,505
Average emergency savings: $45,133
Between the ages of 55 and 64, the median income starts to drop, while savings continues to increase. The median annual salary for those between the ages of 55 and 64 is $56,680, which is a slight decline from the previous age group.
Households in this age range may already begin to tap into their retirement savings, since the age to withdraw without penalty is 59 ½.
Average savings age 65+
Average retirement savings: $209,984
Average emergency savings: $54,089
By age 65, many people have left the workforce. According to a recent Gallup poll, the average age that people expect to retire is 66. However, several people continue to earn money through part-time jobs. The labor force participation rate for people 75 and older nearly doubled between 1996 and 2016, and it’s projected to continue to rise.
The amount added to retirement savings during this stage in life generally slows down considerably as a result, and balances soon start to decline as funds are being withdrawn for living expenses. However, expenses also drop considerably for those in this age group. Child-rearing is likely over by this time, and some may choose to downsize homes, which can reduce costs.
How much should you really have in savings?
How much you should have in your emergency fund
|Average Emergency Savings vs. Emergency Savings Goals|
|Average emergency savings||Emergency savings goal*|
|By age 35||$8,362||$14,114|
|By age 45||$20,839||$17,800|
|By age 55||$30,441||$18,847|
|By age 65||$45,133||$16,553|
|By age 65+||$54,089||$12,715|
|*This was calculated based on BLS Data by taking the average annual expenditures for each age group and dividing by four to come up with three months’ worth of expenses, the suggested emergency fund balance.|
As you can see, the average American under the age of 35 does not have a fully funded emergency fund. However, age groups that follow do. This may be due to having higher incomes, which can make it easier to save.
Ideally, your emergency fund should have enough money set aside for an unexpected financial emergency, such as a surprise medical cost or an expensive car repair. It’s also intended to provide liquid assets in case of a job loss.
In general, the rule of thumb for emergency funds is to have three to six months’ worth of expenses saved in an account that offers liquidity. And once you use your emergency fund, it’s essential to start saving again right away so that you’re prepared for the next emergency.
How much you should have saved for retirement
|Average Retirement Savings vs. Retirement Savings Goals|
|Average retirement savings||Retirement savings goal*|
|By age 35||$24,728||$95,472|
|By age 45||$68,935||$236,080|
|By age 55||$129,051||$416,416|
|By age 65||$190,505||$453,440|
|By age 65+||$209,984||$529,360|
|*This was calculated by taking the BLS median weekly salary by age, multiplying that number by 52 weeks in a year and multiplying that amount by the retirement savings rule of thumb outlined below.|
While Americans are doing fine with emergency fund savings, the same can’t be said about retirement. As you can see, Americans fall short of the ideal retirement savings balance across every age group – and by a large amount.
Fidelity’s rule of thumb for retirement savings, for instance, is to have two times your income saved in retirement by the time you turn 35, four times by the time you turn 45, seven times by age 55, eight times by age 60 and 10 times your income by age 67.
As people age, they tend to start taking retirement savings more seriously. However, the earlier you start investing in your 401(k) or IRA, the more you can take advantage of a good rate of return, which can help your retirement savings grow faster. It’s harder to catch up when you start saving late.
Where to keep your savings
Emergency and retirement savings are important, and it’s equally important to know where to keep them.Where to keep emergency funds
- Cash management accounts
- Savings accounts
- Money market accounts
- Certificates of deposit (CDs)
Emergency funds should be kept in accounts that are liquid, so you can access your money on a moment’s notice. Your emergency funds also need to be safe, so it’s best to consider deposit accounts insured by the Federal Deposit Insurance Corporation (FDIC) or the National Credit Union Administration (NCUA). You also should look for a savings account that pays a competitive interest rate. Good choices can be cash management accounts, savings accounts, money market accounts and certificates of deposit (CDs).Where to keep retirement savings
Retirement savings should be kept in retirement accounts, such as a 401(k) or IRA. This will allow your money to grow tax deferred, which can help you reach your retirement goals. Personal retirement accounts supplement the Social Security benefits the government provides, offering retirees a greater sense of financial wellbeing.
With some retirement savings accounts, such as a 401(k), you can invest your money in stocks or mutual funds. The types of investment vehicles you choose should be based on your age group. For example, if you’re under 35 and have decades left before you’ll need to draw on your retirement savings, you can consider accounts that are invested in the market, offering the potential of greater gains but at a greater risk if the stocks or mutual funds decrease in value. As you get closer to retirement, you may want to move your money into safer investment vehicles, such as CDs or money market funds.
5 tips to improve your savings habits
How much you can save will depend on several factors, including your age, household size and income. That being said, it’s possible to manage your money in a way in which you maximize your savings and bring your balance closer to the ideal amount for your age and lifestyle.
- Set a monthly savings goal: Whether it’s a percentage of your income or a flat amount, set a savings goal each month. It can be helpful to attach it to a purpose, such as saving for an emergency to reduce money stress, or having enough money for the retirement lifestyle you wish to have.
- Automate your savings: Take a “set it and forget it” approach to savings by signing up for automatic savings withdrawals. Having money directly transferred from your paycheck to an emergency or retirement savings account can help you grow your balance without having to think about it. Be sure to increase your savings periodically, every time you get a raise.
- Pay down debt: It’s hard to get traction on saving when you’re trying to keep up with your bills. Currently, Americans pay $121 billion in credit card interest each year. If you carry a balance, save interest and potential fees by paying it off.
- Review your bills: When’s the last time you checked how much you’re paying for your phone or cable service? How about your auto insurance? Even a modest increase can add up to a few hundred dollars over the course of the year. Be diligent about what you’re paying, and shop around for better deals.
- Cut the excess: Track your spending and look for expenses you can cut. You may be surprised at how much you spend on dining out or groceries. Find areas that are high, and implement cost-savings tricks, such as cooking at home more often or tracking sales before meal planning.