5 Surprising Retirement Planning Statistics You Need to Know
Retirement planning is a complex practice that involves understanding evolving financial landscapes and emerging trends, while also considering life expectancy, post-work lifestyle and goals, and health care, among other factors. While there’s no standard goal for savings, many financial advisors suggest investing at least 15 percent of your annual income each year until your nest egg is large enough to cover all expenses until the end of life. Similarly, many advisors promote the 4 percent rule, in which retirees withdraw no more than 4 percent of their savings each year, to ensure retirees don’t outlive their savings.
These are just guidelines, however. Retirement planning looks different for everyone due to a myriad of factors, including health, socioeconomic status, gender, inflation rates, geographic location, and lifestyle. If you feel as though you’re well behind on saving or haven’t started planning for retirement, it’s never too late and you’re not alone, as most Americans are in the same position.
Below is a closer look at the retirement savings shortfall issue in the U.S. as well as four other surprising statistics.
Most People Are Behind on Savings
While there have been several studies with different figures and estimates, most share the same conclusion that most Americans are well behind in retirement planning. In 2017, the Government Accountability Office reported that the median retirement savings for people between the ages of 55 and 64 was around $107,000 which, if invested in an inflation-protected annuity, would only equal $310 in post-retirement monthly payments. Unfortunately, the pandemic, coupled with year-over-year inflation reaching a 40-year high in 2022, has made the retirement landscape even more bleak for many Americans.
As of March 2023, only 56 percent of workers were contributing to a 401(k) or other employer-sponsored investment account and, according to the Federal Reserve, more than one-quarter of all non-retired Americans didn’t have any retirement savings. Because of this, many Americans expect to keep working in some capacity after reaching Social Security eligibility. Transamerica Institute, in a post-pandemic retirement study, found that 36 percent of workers expert to at least engage in part-time work while retired.
Taking Money out Early
With rising costs due to inflation, many Americans are withdrawing from their retirement plans to cover their increasing expenses. A recent TD Ameritrade survey found that 46 percent of workers between the ages of 40–49 had withdrawn funds from their accounts. More than half (53 percent) of Americans between the ages of 70–79 also dipped into their retirement funds early.
While it’s nice to have a back-up plan to cover rising or unexpected expenses, there are penalties for withdrawing early from most retirement accounts. Withdrawals from a 401(k) plan before you’re 59.5, for example, are subject to a 10 percent early distribution tax penalty. If possible, consider starting or contributing to an emergency savings account to cover future unexpected expenses.
Social Security isn’t Enough
Social Security should only be viewed as a complement to savings from retirement accounts. These monthly payments aren’t enough to cover the basic living needs of most retirees, let alone unexpected medical bills or other emergencies. Social Security is only guaranteed to be funded at its current rate until 2037, at which point it might decrease, in part due to an increase in older adults. There could be more than 78 million Americans 65 and older by 2035, compared to 56 million in 2023. Transamerica Institute’s study found that more than 70 percent of workers were concerned they might not be able to access Social Security when they retire.
“One of the big issues with Social Security is that it only provides a similar standard of living for those in the lowest quartile of income earners in the U.S,” notes Mark Hebner, author of Index Funds: The 12-Step Recovery Program for Active Investors, speaking to Investopedia. In other words, Social Security can only provide the same standard of living to households making less than $30,000 per year. If you earn more than this amount, you will need to supplement Social Security with your savings or other funds to maintain your lifestyle in retirement.
Medicare’s Long-Term Care Limitations
Medicare covers inpatient hospital care, home health care, and medical equipment, but it doesn’t pay the majority of long-term care costs. Roughly 70 percent of people who reach 65 years old will require some form of long-term care and, according to Genworth Financial, Inc., the median monthly cost of an assisted living facility was $4,500. That’s $54,000 per year.
Long-term care insurance is a good option for older Americans who are behind on their retirement savings. It covers most or all in-home care or assisted living facility expenses with an average annual premium of around $2,000 for a couple in their 50s.
Life Expectancy Increasing
Another important thing to consider for retirement, especially among young Americans, is that life expectancy is increasing. According to the Social Security Administration, a 65-year-old woman has a 50 percent chance of living until 86.8 years old. That means they should have enough savings to support at least 22 years of expenses post-retirement. There were an estimated 101,000 Americans over 100 years old in 2024, but that number is expected to increase to more than 420,000 within 30 years, according to U.S. Census Bureau projections.
