The average retirement savings by age is a useful place to start and a bad place to stop. The data says most American households are far behind. It also says the comparison itself won't answer the question you actually care about, which is whether you have enough.
Nearly half of households have nothing saved
According to the Federal Reserve, 45% of American households have nothing saved for retirement. That figure covers every age group at once, so it sweeps in 25-year-olds who haven't started yet. Having nothing at 25 is survivable. Having nothing at 45 or 55 puts you in real trouble.
Looking at the actual data helps, because savings balances rarely come up in conversation. You see the neighbor's house and the cars in the driveway and assume things are going well over there. For most people, they aren't. If you're reading this, you probably have something saved, which already puts you in a different group.
The median at 45, 55, and 65
Two numbers matter here, and they tell very different stories. The median is the true middle. The average gets pulled upward by the households with very high net worth. When you want to know where you actually stand, use the median.
At age 45, the median retirement savings is $114,000. The average is much higher at $313,000. The gap between those two numbers is the wealthy skewing the average. If you're 45 and you have more than the median in your retirement accounts, you're already ahead of half your peer group, and you're in your peak earning years with time left to build.
In the pre-retirement bracket, ages 55 to 64, the median is $185,000 and the average is $537,000. Sit with the median for a second. Apply the standard 4% withdrawal rate to $185,000 and you get about $7,400 a year, or roughly $600 a month. That's the middle of the pack, five to ten years out from retiring.
For ages 65 to 74, the median is $200,000 and the average climbs to $609,000. If you look at that $609,000 and think it sounds reasonable, remember that it's a skewed number. The reality for the middle of American households is closer to $200,000 in retirement accounts at the age most people stop working.
Social Security is running on a clock
Numbers like those mean most people are counting on Social Security, pensions, and Medicare to carry them. If you have a pension, that's a strong position. If Social Security is the plan, things get tight.
Social Security benefits get paid out of a trust. Workers pay in through payroll taxes, retirees draw out. In 2021 the flow flipped, and more money now comes out each year than goes in. As the baby boomers retire, they stop contributing and start collecting. The Social Security trustees report indicates the trust is likely to run out by 2034. Once the reserves hit zero, incoming tax revenue covers only about 75% of the benefits owed each year.
Lawmakers have a short list of options. They can raise the Social Security tax from 12.4% to 14% or 16%, which crushes younger workers. They can raise the claiming age. They can cut benefits. Those last two are the least popular things a politician can do. Or they can print the money, which feeds inflation and devalues every benefit check anyway. None of these are good outcomes, and all of them argue against building a retirement plan on that one program.
You are the pension fund manager now
Retirement funding has been shifting from institutions to individuals for decades. Back in 1990, half of workers aged 50 to 60 had a pension from a company or the government. You worked 30 years, got the watch, and the checks kept coming for life. Market risk sat with the employer.
That safety net has practically evaporated. Pension coverage is now closer to 25%, and in the private sector it's basically zero. The burden moved to defined contribution plans, 401(k)s and IRAs. You're the employee and also the person managing the pension fund for your own future, and most people were never trained for that second job.
Why the playbook breaks around 55
Under 50, you're in the accumulation phase and the strategy is simple. Low-cost, broad-market ETFs. You're earning an income, so you can ride out volatility. Save as much as possible during your peak earning years, let it grow tax-deferred or tax-free, keep it in equities that track the broader market.
As you move into the 55 to 65 window, the job changes. It stops being about accumulating the largest possible balance and starts being about generating income you can live on every month. Keep running the accumulation playbook into retirement and the math turns against you, because of sequence of returns risk.
Picture retiring at 55 or 60 with everything in equities, and the market drops 20% or 25%. You still have a mortgage, groceries, and utilities, so you sell stock to pay them. You're selling at a discount and locking in losses that would have recovered if you'd been able to leave the money alone. Being forced to sell into a down market is what devastates a retirement portfolio.
Building an income floor
What's needed in that window is a shift from growth at all costs to capital preservation plus yield. The goal isn't doubling your money anymore. It's keeping your capital in place while it produces enough income to cover your life.
The products the financial industry pushes during this phase are often poor fits. Annuities promise safety and frequently come with very high fees, capped upside, and surrender charges that lock your money up for years on terms written to favor the insurer. Before anyone sells you one, go find somebody who bought an annuity several years ago and ask whether they'd do it again. Most people I've talked to say no.
Target date funds are convenient, and they're a blend of equities and bonds that can be weighted wrong for your timing. Sometimes they're heavy in equities when you need bonds. Sometimes they hold bond funds, which get repriced daily like stocks. When the bond market took a hit in 2022, those funds underperformed badly.
Preservation strategies often move away from public markets and into secured debt. High-yield corporate bonds are one version. Secured mortgage notes are another. With a note, you're acting like the bank. You lend to an investor or a homeowner buying a property, you take a first lien on it, and you do it at a conservative loan-to-value ratio. If the borrower stops paying, you get the property. The terms are contractual and fixed rather than set by daily market sentiment or price-to-earnings ratios, which is the point of holding them.
The takeaway is to stop measuring yourself against the median or the average. Work backwards from the monthly amount you need, then figure out what your money has to generate to produce it. If you're still working, keep saving aggressively, because you're going to need it. If you're near the finish line, start moving part of the portfolio from accumulation into preservation. Don't leave your financial survival to a government program headed for insolvency or a stock market that is historically volatile.