Achieving a Comfortable Retirement: Insights from Vanguard's Report
The recently published retirement savings report has highlighted a striking contrast between two figures: $148,153 and $38,176, sparking queries about their relative significance.
A new report from Vanguard, titled "How America Saves 2025", sheds light on the retirement savings landscape in the United States. The report offers two benchmark figures for various age groups: the mathematical average (mean) and the median.
Savings by Age Group
The data reveals a substantial variation in retirement savings across different age groups, with both averages and medians generally increasing as people approach retirement. However, median values tend to be significantly lower than averages, indicating a wide disparity in saving.
| Age Group | Average Retirement Savings | Median Retirement Savings | |-----------|----------------------------|--------------------------| | Under 35 | $20,540 / $7,351 (401k) | $5,400 / $2,816 (401k) | | 35-44 | $41,540 / $91,281 (401k) | $7,500 / $35,537 (401k) | | 45-54 | $71,130 / $168,646 (401k) | $8,700 / $60,763 (401k) | | 55-64 | $72,520 / $244,750 (401k) | $8,000 / $87,571 (401k) | | 65-74 | $100,250 / $272,588 (401k) | $13,400 / $88,488 (401k) | | 75+ | $82,800 | Not specified |
Average savings figures include all retirement-related savings like IRAs, 401(k)s, and other accounts; medians are lower due to the skew from very large balances held by some.
What Should an Individual Investor Aim For?
Financial experts and Fidelity guidelines suggest savings targets as multiples of annual salary by certain ages to fund a comfortable retirement:
| Age | Recommended Savings Target | |-----------|-----------------------------------| | 30s | 1× your salary saved | | 40s | 3× your salary saved | | 50s | 6× your salary saved | | 60s | 8× your salary saved (10× by age 67) |
For example, if you earn $75,000 at age 40, the target to aim for is roughly $225,000 in savings by then.
Key Takeaways for Funding a Comfortable Retirement
- Start early: Due to compounding, even modest amounts saved in your 20s can grow substantially.
- Aim to save progressively more over your career, according to salary multiples as guidelines.
- Median savings are often far behind averages, underscoring the importance of proactive saving and investment.
- Budgets and spending plans are essential in retirement, especially since savings tend to peak around early retirement and may decline later.
- Working with a financial advisor can help tailor savings goals to personal circumstances and plan withdrawals wisely.
In summary, Americans’ retirement savings typically increase with age but vary widely, with median investors often far from recommended targets. Aiming to save multiple times your annual salary by each decade, as per Fidelity's guidelines, helps create a retirement fund large enough to sustain a comfortable lifestyle.
The question remains which of the two numbers (mean or median) is more relevant for an individual's personal retirement savings. A deliberate and decisive approach to saving, such as investing 15% of annual salary into a market-tracking index fund for at least 30 years, can help maintain standard of living after retirement.
- For an individual investor aiming for a comfortable retirement, it's crucial to strive for savings targets that are multiples of their annual salary by certain ages, similar to Fidelity's guidelines.
- The median retirement savings are often far below the averages, highlighting the importance of proactive saving and investment, especially to bridge the gap towards recommended targets.
- A deliberate and decisive approach to saving, such as investing a consistent percentage of one's annual salary into a market-tracking index fund, can help maintain a desirable standard of living during retirement.
