How do your retirement savings compare to savings by other people in your age group? Are you keeping up with the proverbial Joneses? Ahead of them? Or are you behind?
You might be surprised by your competition. Some are doing OK. Others, not so fine.
IRA plus 401(k) balances built by U.S. savers ranged from a paltry average of $9,500 for Generation Z as of June 30, up to $512,500 for members of the Silent Generation, who are older siblings and parents of Baby Boomers, according to Fidelity Investments.
Baby boomers logged in with an average of $462,800.
Retirement Savings: Millennials Average Just $66,200
Accounts owned by members of Generation X averaged $247,300.
Millennials averaged $66,200.
The Fidelity data are for accounts whose records are kept by the giant Boston-based mutual fund family and brokerage.
Retirement Savings By Age Groups Have Grown
Fidelity’s millennials were born 1981 through 1997. Their Gen Xers were born 1965 through 1980. Boomers were born 1946 through 1964. And members of the Silent Generation were born from 1928 through 1945.
Each of those age groups enjoyed big run-ups in average account balances over the prior 10-year upswing in markets.
Increases ranged from 96% for silent generation savers to 149% for baby boomers, 230% for Gen Xers and 264% for millennials.
Fidelity does not have 10-year-old data to compare the latest second-quarter 2021 average account balances to for Generation Z.
The overall account balance average rose 92%, up from $135,125.
Compare Yourself To Other Savers
As an IBD reader, chances are your retirement savings are in better shape than the average American’s.
Foremost, you’re far more likely to have retirement savings, whatever the size of your nest egg. Just under 51% of all Americans had retirement savings of any amount in 2019, according to the Federal Reserve. And that was down from 52% in 2016.
How many Americans close to retirement are up that savings creek without a paddle? A whopping 13% of Americans age 60 or older have nothing at all in retirement savings, according to professional consulting services giant PwC.
Aiming For The Top 10%
Whether you’re just starting to save or already have a nest egg under construction, the key issue is how to save most effectively.
In all likelihood, you want to be among the top 10% of retirement savers. Those folks average more than $1 million in retirement savings between ages 65 and 69, before they’ve spent down their peak balances, enjoying retirement and making charitable gifts.
So, here are five tips for ways to boost your retirement savings in 2020.
Retirement Savings Step #1: Plan Ahead
Your single most important step is to make a savings plan. This is your roadmap for deciding how to get where you want to go.
How much do you want your portfolio to grow in the coming years? If you haven’t already retired, how large do you want your retirement nest egg to grow by the time you stop working? When will you stop working? What is your risk tolerance? What investments will get you to your goal?
Write it all down. “A plan helps you understand your progress,” said Rita Assaf, Fidelity vice president for retirement and college leadership.
If your goals change because your circumstances change — suppose you get married, divorced, have a baby — bring your plan up to date.
Retirement Planning Step #2: Save Enough
How much savings is enough? “We recommend saving 15% of your income a year, including any company match,” Assaf said.
That level of saving should be specified in your plan.
Retirement Game Plan Step #3: Figure Out Where Your Money Goes
If you can’t afford to save 15% of your income, where will you get the extra money?
Start by figuring out where your income goes. Make a written, detailed budget. Once you’ve identified how you spend your money, prioritize your spending.
Label which expenditures are essential. Label spending that is merely discretionary. Discretionary spending is what you’ll have to cut. “Allocate money to spending on other things, especially discretionary spending, after setting aside money for retirement savings,” Assaf said.
Retirement Planning Step #4: Start Cutting
Don’t let habit get in the way of economizing. Be objective. Be hard-nosed. “Knowing how much you’re spending is the first step and you will likely trim down as a result,” Assaf said.
Here are some tricks for cutting spending:
- Use cash only. For one month, do not use your credit card. At the end of the month, odds are that your spending will have declined.
- Dine out less. Count how many times you’ve eaten at restaurants in the past six months. For the next six months, reduce your monthly average by one.
- Trim your subscriptions. Those include not only publications, but services like gym memberships and video and music streaming services. Once every six months, drop one.
Retirement Saving Step #5: Save More
Once you’ve trimmed your spending, what’s the best way to boost your savings?
Suppose you’re only saving 7% of your income. How do you boost that to 15%?
Don’t try to close the savings gap all at once in 2020. Instead, Assaf recommends boosting your rate of retirement saving by 1 percentage point a year. “Do that until you get to 15% or until you are contributing the maximum allowed by your plan,” she added. Contribute at least enough to get your company’s maximum matching contribution.
Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about personal finance and active mutual fund managers who outperform the market by picking top-performing growth stocks.
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