A rule of thumb for people who are 55 and have another decade before reaching traditional retirement age is to have paid about eight times their salary into a retirement account. But the average 55-year-old’s current savings is just $50,000, far from enough to fund a secure old age, according to a new study.
In fact, only 1 in 5 55-year-olds have $447,000 or more saved for retirement, or eight times the median U.S. salary, found Prudential Financial’s 2024 Pulse of the American Retiree Survey. The report jibes with the others new study on Gen X’s retirement readiness, which found that half of those surveyed believe they will achieve a “miracle” in order to retire.
The new findings show that the oldest members of Generation X, or those born between 1965 and 1980, are now entering their pre-retirement years, giving them a short window of time to build up their savings before they retire from work. But many who have fallen behind on those savings milestones may not be ready — at least financially — for retirement, as it will be difficult, if not impossible, to build a nest egg that size in just a few years.
Even so, Plan B emerged with the group, with a quarter of 55-year-olds now telling Prudential they plan to rely on family for financial support in retirement, and twice as many 65- and 75-year-olds saying the same. About 1 in 5 Gen Xers, so-called “silver squatters,” also expect to need housing support in old age, Prudential said.
“If you know there’s a problem, you have to get money from somewhere,” David Blanchett, head of retirement research at Prudential, told CBS MoneyWatch. “It could be from their parents, if they’re still alive, but it could be their children.”
He added, “Parents may be making huge sacrifices to send their children to college,” and there may be a sense of financial obligation that comes back. But at the same time, those expectations could put more economic pressure on younger Americans like Gen Z, born between 1997 and 2012, who may struggle to buy a home or save for retirement.
The reality is that workers — and retirement planners — need to be realistic about what they can afford in the final decades of their careers, Blanchett said. For example, he notes that he often hears from retirement planners that clients need to work past 65 to save enough for retirement, but ignores the fact that most people retire years before they plan, he said.
“Hard Choices”
For example, an Urban Institute study that tracked workers from their 50s to at least age 65 found that only 19% retired voluntarily, with the majority having to stop working before retirement age due to layoffs, poor health or other problems. beyond control. The typical worker retires three years ahead of schedule, Blanchett said.
“Planners say, ‘Oh they’re behind, they can only til that 70 or 72,’ and like whoa, whoa, people retire before they plan to,” Blanchett said. “If you’re already behind, you’ll be further behind.”
In other words, 55-year-olds now have seven more years to work, not ten, which puts more pressure on them to figure out how to fund their retirement, he said.
“What can you do over the next seven years to get you into better shape? It will come down to hard choices,” said Blanchett.
While saving more can help, most workers don’t have a lot of extra cash to put into their retirement accounts, he said. But if the worker ends his career before he planned, he can get a part-time job or switch to another type of work at the end of his life, with the aim of earning enough to at least cover household expenses, which will help him. to avoid withdrawing retirement savings.
Second, older workers should plan to delay their Social Security claims as long as possible, as monthly benefits increase each year, delaying them until age 70. That means monthly benefits are about 75% higher at age 70, than if someone claimed at 62, the earliest age to start receiving benefits.
“The key is to save until you’re 63 or 64, but try not to claim or access benefits” for as long as possible, Blanchett said.
