The rule of thumb for people who are 55 and have another decade of work before reaching traditional retirement age is to have already withdrawn about eight times their salary into their retirement accounts. But the average savings of today's 55-year-olds 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, Prudential Financial's 2024 Pulse of the American Retiree Survey found. The report fits another recent study on Gen X's retirement readiness, which found that half of those surveyed believe it would take a “miracle” for them to be able to retire.
The new findings come as the oldest members of Generation X, or people born between 1965 and 1980, are now entering their pre-retirement years, giving them a brief period in which to strengthen their savings before retiring from work. But many who are already behind on those savings milestones may end up unprepared, at least financially, for retirement, given that it would likely be difficult, if not impossible, to build a sizeable nest egg in just a few years.
Still, a Plan B is emerging with the group, with a quarter of current 55-year-olds telling Prudential they plan to rely on family financial support in retirement, and twice as many 65- and 75-year-olds saying the same About 1 in 5 Gen Xers, the so-called “silver squatters,” also expect to need housing support in their old age, Prudential said.
“If you know you're in trouble, you know you need 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 also be from their children.”
He added, “Parents may have made a great sacrifice to send their children to college,” and there may be a sense of financial obligation that will return. But at the same time, those expectations could put more financial pressure on younger Americans like Gen Z, born between 1997 and 2012, who may be struggling to buy homes or save for retirement.
The truth is that workers and retirement planners need to be realistic about what is possible to achieve in the last decade of their careers, Blanchett said. For example, he noted that he often hears from retirement planners that their clients will need to work well past 65 to save enough to retire, but that ignores the reality that most people retire years before they should. planned, he said.
“Difficult Choices”
For example, an Urban Institute study that tracked workers from their early 50s to at least 65 found that only 19% took voluntary retirement, and most had to stop working before reach retirement age due to layoffs, ill health or other problems they were in. out of your control. The typical worker retires three years before they plan to, Blanchett said.
“Planners say, 'Oh, they're behind, they're only going to work until they're 70 or 72,' and it's like people retire before they think about it,” Blanchett said. “If you're already behind, you'll be further behind.”
In other words, people who are 55 today may only have seven more years of work, not a decade, putting more pressure on them to figure out how to fund retirement, he noted.
“What can you do over the next seven years to get in better shape? It's going to come down to tough decisions,” Blanchett said.
While saving more can help, most workers don't have a lot of extra money to put into their retirement accounts, he noted. But if a worker ends their career earlier than planned, they might get a part-time job or switch to another type of job later in life, with the goal of earning enough to at least pay her household expenses, which would help her. avoid reducing your retirement savings.
Second, older workers should plan to delay claiming Social Security for as long as possible, since the monthly benefit increases with each year it's delayed, until you reach age 70. This means that the monthly benefit is approximately 75% higher at age 70 than if claimed at 62, the earliest age to start receiving the benefit.
“The key is to save until you're 63 or 64, but try not to claim or access your benefits” for as long as possible, Blanchett said.
