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Don’t be a Staggering Statistic!

We looked at the lie of “hard work will get you ahead” recently. Intuitively, I think we know it is a lie but let’s look at some of the data. Warning! What I am about to share with you is shocking. I think median savings is a better measure than average savings for a snapshot. I believe average gives an unrealistic measurement. Let’s take a simple look at two 60-year-olds, Bill Gates and me. Bill has tens of billions of dollars, I do not. But if we average those two we have two multi-billion-dollar portfolios (not true).

According to EPI analysis of The Survey of Consumer Finance data, 2013, most American families are way behind in their finances for retirement. Scarier yet, most either don’t know it or ignore it. Looking at the chart below, the median savings for a 60 year-old is $17,000. Wow! A couple of questions come immediately to mind. How does that happen? How do you work for 40 years and save only $17,000? That means that if you worked for 35 years, you saved $485/year with no capital growth. Another way to look at it is $485 per year comes out to $40/month. That tells me that there was little (or no) focus on savings and no discipline to do so.  According to a 2016 GOBankingRates survey, 35% of Americans have only several hundred dollars in their savings accounts, 34% have zero savings and close to half of U.S. families have no retirement account savings.

Do these people recognize the dire financial situation that they are in? I’m sure most (if not all) did not plan this but here they are nonetheless. Now what? (You don’t want to be a staggering statistic!)

Here is a simple 1, 2, 3 step plan (simple is not the same as easy):

  1. Saving money is a mindset. If you don’t have it, adopt it. Today.
  2. Save money consistently- pay yourself first out of every weekly, biweekly, or monthly paycheck
  3. Enlist the help of financial tools and experts.

Median retirement account savings of families by age, 1989–2013 (2013 dollars)

  32–37   38–43   44–49   50–55   56–61
1989 $0 $542 $0 $1,808 $1,808
1992 $0 $812 $812 $2,275 $1,024
1995 $379 $2,429 $3,795 $7,589 $4,857
1998 $2,144 $7,148 $9,006 $8,291 $12,866
2001 $1,313 $6,566 $12,607 $14,445 $15,759
2004 $1,233 $3,699 $9,372 $12,331 $21,580
2007 $1,123 $5,951 $15,158 $26,386 $35,929
2010 $289 $1,929 $10,181 $13,932 $7,609
2013 $480 $4,200 $6,200 $8,000 $17,000

Note: Scale changed for visibility. Retirement account savings include 401(k)s, IRAs, and Keogh plans.

Source: EPI analysis of Survey of Consumer Finance data, 2013.

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