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Many Americans Save Plenty for Retirement

Common wisdom has it that Americans are woefully under-prepared for retirement. But some recent data from Fidelity Investments offers hope that things may not be so bad after all.

When discussing retirement readiness, many point to data that show American workers haven’t saved enough in their 401(k)s to do more than buy a luxury car. But Fidelity took a look at the combined amounts investors with both IRAs and 401(k)s have managed to save. And the results aren’t that depressing:

“The findings show a combined average balance of $212,600,” the company reports. Better still, among those ages 65 to 69, the combined average balance is $359,000. Depending on where you live, of course, that may not be enough to ensure a comfortable retirement. But it’s far higher than the $123,400 the average 65 to 69 year-old has in his or her 401(k) alone.

In a written statement, Kathleen A. Murphy, president of Fidelity’s Personal Investing unit, says the analysis “clearly underscores the importance of using both an IRA and 401(k) to help maximize long-term, tax-deferred growth potential.”

Steve Utkus, who oversees the Vanguard Center for Retirement Research, recently published a blog post that debunks the notion of a crisis in retirement savings. Among the highlights:

  • A new report suggests 60% of Americans are prepared for retirement. Most studies, Mr. Utkus adds, “suggest that over half of Americans are on track in their retirement planning.”
  • Of those who are not fully prepared, Mr. Utkus argues many are within striking distance – and can reach their goals by saving more or working longer. “I’d argue that probably 20% to 30% of Americans are in this partially ready camp,” he says.
  • “Finally, there’s a smaller group—I’d estimate between 15% and 25% of all Americans—who are likely to be very poorly prepared for retirement. The distinguishing characteristic of this group is that they’re struggling financially in their working years. In other words, a difficult life while working usually translates into a difficult life in retirement.”

In conclusion, Mr. Utkus notes that “much of the national dialogue on retirement assumes that there are few Americans in the first two groups (on track or close to being on track for retirement) and many of us in the third group (poorly prepared for retirement)—exactly opposite of what the data suggest.”


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    • I think, that you are not right. I can defend the position. Write to me in PM, we will discuss.

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    • This article appears to be saying that since Fidelity’s client’s with both an IRA and 40lk are very prepared for retirement, the idea that most Americans are not prepared for retirement is a myth. In other words, since those people with money to fund a 401k and IRA are prepared for retirement, then all Americans must be prepared. Either a poorly planned study or a poorly worded study. The truth remains that most Americans are not preparing for retirement anywhere like they have in the past.

    • I’m retired, age 61, and my wife and I have total assets of $2.2M, not including house, cars and personal belongings. We live in the Southwest, in a no income tax state, with moderate cost of living and I don’t feel like I’ve got it made with our assets. We should be alright if I can get 1.5% – 2% over inflation on my investments, probably doable, but $200k to $300k is nothing today, that won’t last long as a supplement to Social Security and Medicare. If people are comfortable with that kind of asset buildup they are living in a dream world.

    • TIPS bonds are yielding slightly negative real (after inflation) return. OPtimistically assume a zero after-inflation, after any taxes return. Having made it to 65, hope for another 25 years with healthy habits. So $250,000 lump sum converts to $10,000 annual pension – imagine buying a big pile of food cans and slowly using them. The Social Security cheques will be the main income for many people. Frugality will become very fashionable!

About Encore

  • Encore examines the changing nature of retirement, from new rules and guidelines for financial security to the shifting identities and priorities of today’s retirees. The blog also explores news that affects retirement, from the Wall Street Journal Digital Network and around the web. Lead bloggers are reporter Catey Hill and senior editor Jeremy Olshan. Other contributors include The Wall Street Journal’s retirement columnists Glenn Ruffenach and Anne Tergesen; the Director for the Center for Retirement Research at Boston College, Alicia Munnell; and the Director of Research for Pinnacle Advisory Group, Michael Kitces, CFP.