British retirement savers get a lot of flak about not saving enough – but the Americans seem just as bad even though they typically earn more.
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The average US household aged between 55 and 61 years old has $163,577 in savings for retirement that gives an income of just $6,500 a year.
Only the wealthiest households are in a better position – and that’s only 0.1% of the population approaching retirement.
Most have at least $1 million in the bank, says think-tank the Economic Policy Institute.
Of course, although everyone would like a $1 million retirement fund, most people can get past on a lot less.
Starting to save early is the key
Starting to save early in life is the key.
How early depends on how much money you want and the lifestyle you crave after stopping work and the date you wish to retire.
Saving around $450 a month over a 40-year working life, assuming an average 7% a year return, will hit that magic $1 million mark around your 60thbirthday.
But the longer a saver waits to start, the more difficult the task becomes because ramping up savings means parting with a huge chunk of income.
Setting a retirement age of 60 and failing to save any significant cash before the age of 30 almost doubles the monthly amount someone needs to set aside to reach $1 million.
Spending priorities
A 30-year-old would have to contribute $885 a month for 30 years to reach that $1 million savings target.
Leave the financial decision to 40 -years-old and that monthly savings amount becomes an almost impossible $2,000 a month for 20 years.
The figures make the reason why so many people lack enough retirement savings obvious.
They make the choice not to save from an early age and lack the finances to make good what they have missed in later life.
To a youngster with other spending priorities, $450 is a lot of money, but by the time they reach middle-age, the sum is not so significant. Digging deep to find $2,000 or $3,000 is a much bigger call for any saver – especially when they are aged 40 or 50 years old.
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