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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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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.