The rule of thumb for people who are 55 and still have ten years of work left before they reach traditional retirement age is that they already have eight times their salary in their retirement account. But the average savings of today’s 55-year-olds is just $50,000, far from enough to finance a secure old age, according to a new study.
In fact, only 1 in 5 people age 55 have $447,000 or more saved for retirement, or eight times the average U.S. salary, according to Prudential Financial’s 2024 Pulse of the American Retiree Survey. The report is consistent with another report recent research about Generation
The new findings come as the oldest members of Generation work. But many who are already behind on these savings milestones may end up being unprepared – at least financially – for retirement, as it would likely be difficult, if not impossible, to build up a significant savings pot in just a few years.
Yet a Plan B is emerging within the group, with a quarter of current 55-year-olds telling Prudential they plan to rely on financial support from their family in retirement, and twice as many 65 and 75-year-olds year olds say the group is the same. About 1 in 5 Generation Xers, so-called “silver squatters,” expect to need housing assistance in their old age, according to Prudential.
“When you know you’re in trouble, you know you have to get money from somewhere,” David Blanchett, head of pension research at Prudential, told CBS MoneyWatch. “It could be their parents, if they are still alive, but it could also be their children.”
He added, “Perhaps parents have made a great sacrifice to send their children to college,” and there may be a sense of financial obligation that comes back. But at the same time, these expectations could put more economic pressure on younger Americans like Gen Z, born between 1997 and 2012, who themselves may struggle to buy homes or save for retirement.
The truth is that employees – and retirement planners – need to be realistic about what is possible to achieve in the final decade of one’s career, Blanchett said. For example, he noted that he often hears from retirement planners that their clients will have to work much longer than 65 years to save enough to retire, but that ignores the reality that most people retire years earlier than they had planned, he said.
“Difficult choices”
For example, an Urban Institute study that followed workers from their early 50s through at least age 65 found that only 19% retired voluntarily, with the majority having to stop working before reaching retirement age due to layoffs, ill health or other problems. beyond their control. The average worker retires three years earlier than they plan, Blanchett says.
“Planners say, ‘Oh, they’re behind, they’ll just work until they’re 70 or 72,’ and it’s like whoa, whoa, people are retiring before they plan to,” Blanchett said. “If you’re already behind, you’ll only be further behind.”
In other words, people who are now 55 years old may have only seven more years of work left, not 10, putting more pressure on them to figure out how to finance their retirement, he noted.
“What can you do over the next seven years to get in better shape? It comes down to hard choices,” Blanchett said.
While saving more can help, most workers don’t have a lot of extra money to put in their retirement accounts, he noted. But if a worker ends his career before he planned, he could get a part-time job or switch to a different type of job later in life, with the goal of earning enough to at least cover household expenses, which would leave him would help them avoid withdrawing their retirement savings.
Second, older workers should plan to delay claiming Social Security for as long as possible, as the monthly benefit increases each year it is deferred until one is 70 years old. That means the monthly benefit at age 70 is about 75% higher than if one claims at 62, the earliest age to receive the benefit.
“The key is to save until you’re 63 or 64, but try not to claim your benefits for as long as possible,” says Blanchett.
