The most recent U.S. Survey of Consumer Finances seems to indicate the younger Americans are, the less they have in savings. We analyzed the federal data to discover the average savings by age.
The analysis reveals the youngest members of the workforce don’t have much to back them in an emergency, as under-35 households in America average less than $5,000 in their savings accounts. As they age and incomes rise, so do the amounts Americans put away in savings and for retirement, but not so much in certificates of deposit, or CDs. Generally, CDs are passed over as Americans elect to keep midterm savings in savings accounts and seek greater returns on long-term savings in retirement accounts.
Types of Savings Accounts
Savings Accounts. About 50 percent of households have a savings account — that is, an interest-earning account at a bank or credit union. Most savings accounts are readily accessible, although federal regulations restrict the number of withdrawals that account holders can make in any given month.
CDs. Only about 7% of households save via CDs, in no small part due to the historically low rates CDs have offered since the 2008-09 recession.
Retirement Accounts. Retirement accounts such as 401(k) plans and individual retirement accounts, also known as IRAs, now comprise the lion’s share of American household assets that are considered savings. But unlike savings accounts and CDs, the rates of returns of these accounts are variable, as many of these account values are tied to retirement plans that offer investment options that may gain or lose value.
The average amount of savings in the savings accounts of under-35 households is $4,659, according to data from the triennial Federal Reserve Survey of Consumer Finances. Under-35 households hold an average of $437 in CDs, and have $13,707 in retirement savings.
Households in this age range have less than half the amount those a decade older have in savings accounts and about a quarter of the amount the older group has in CDs and retirement accounts. The low savings balances may be because of the earning potential of the younger heads of households. Members of the under-35 group — the youngest age range in the survey — are likely to be just starting out in their careers and may not yet have realized much of their earning potential. They may also generally lack financial management experience and many may not have started saving for a “faraway” retirement.
The members of this age group may still be heavily burdened with student loan debt as they may be more recent graduates or still completing their education. Their entry-level salaries may not be large enough for them to save a substantial amount of money, afford a basic lifestyle and combat a heavy student loan debt burden.
Age 35-44 Households
The average savings of households between ages 35 and 44 is $11,568. These households also hold an average of $1,273 in CDs and have an average of $56,790 in retirement accounts, according to the Survey of Consumer Finances.
Households in this age range seem to be taking advantage of increasing earnings and putting away significantly larger balances in savings, CDs and retirement accounts than the previous age group.
These households may require more in emergency savings as their families grow and they incur additional food, shelter, child care and education costs. They may be setting aside funds in CDs for long-term savings goals such as purchasing a home, having children or paying for a child’s education. Retirement is a decade closer and it’s evident this age group has begun to stash away funds for their golden years, although they still have only about half the amount saved for retirement as those a decade older.
Age 45-54 Households
The average savings of households between ages 45 and 54 is $16,471. These households also hold an average of $2,498 in CDs and have an average of $128,927 in retirement accounts, according to the Survey of Consumer Finances.
Households in this age range have more than twice the amount in retirement savings than those a decade younger. But when it comes to savings accounts, there’s only a modest increase, suggesting that there’s only so much money families will store in a traditional savings account before finding more rewarding opportunities for their money.
Age 55-64 Households
The average savings of households between ages 55 and 64 is $21,141. These households also hold an average of $6,669 in CDs and have an average of $221,042 in retirement accounts, according to the Survey of Consumer Finances.
Households in this age range may already begin to draw down their retirement savings. Interestingly, they also seem to be the age where average balances in CDs jump the most, suggesting that some of these saving households may be trying to squeeze as much interest as possible out of at least some of their savings.
As the analysis shows, Americans seem to be putting significantly more money away in savings and retirement accounts as they age, but many are passing over CDs. The low interest rates CDs have offered since the 2008 recession may not have been worth it for a consumer to trade the temporary limited access to their savings. But that sentiment may soon change. The Fed recently raised the benchmark interest rate for the third time in 2018, which translates into higher, more attractive earnings on low-risk CDs in the near future.