We tend to be data junkies here at Tematica, particularly as they pertain to our 10 investing themes as well as the overall global macroeconomy. In collecting these data points, from time to time, we receive ones that while confirming for our themes do point to problems ahead. In this case, the latest analysis of retirement savings confirms that for the vast majority of Americans, their retirement may not be what they were expecting.
As the collision of our Aging of the Population and Middle-class Squeeze themes intensifies, it is a natural headwind for the domestic economy as retirees adjust their spending to their economic reality.
At Vanguard, the average 401(k) account value for an investor age 65 and older is $192,877 in 2018, but that number is inflated by a small group of long-time super-savers. The median balance among the age group, where half have more and half have less, is a measly $58,035.
Average that out over 20 years — most Americans should expect to live into their 80s — and that is not a lot to pull out on a yearly basis, perhaps a little more than $3,000.
The median private pension was only $9,376 a year, according to the Pension Rights Center (state, local and federal pensions were higher).
That leaves us with Social Security. In 2018, the average Social Security check was $1,422 a month or $17,064 a year.
So let’s add up what our yearly payments are:
- Personal savings $3,000
- Pension $9,376
- Social Security $17,064
It’s certainly possible to live on $29,000 a year, particularly if you own your home, have low expenses, and live in a relatively low-cost part of the country.
But it is hardly a robust retirement.