Here’s How Much the Average Retiree Has in Savings — And Where They Keep It
Written by
Gabrielle Olya
Edited by
Molly Sullivan
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Despite what traditional financial advice might dictate, the average retiree isn’t sitting on a million-dollar nest egg. A recent report from the Transamerica Center for Retirement Studies found that only 17% of current retirees have total household savings of $1 million or more, excluding home equity.
Here’s how much the average retiree actually has saved, plus where they’re keeping their money.
Average Retirement Savings: Just $126K
The report found that the estimated median total household savings for retirees, excluding home equity, is $126,000. One in 10 retirees (12%) have no savings, 25% have saved $1 to less than $100,000, 18% have $100,000 to less than $500,000, 12% have $500,000 to less than $1 million, and 17% have $1 million or more.
Yet, despite these figures, many retirees are doing just fine.
“What we see in the survey data is retirees are faring well in retirement,” said Catherine Collinson, CEO and president of the Transamerica Institute. “They’ve adjusted their expenses and their cash flow so they’re able to make it work — for the most part.”
Why $126K May Not Be Enough for Retirees
While retirees are able to get by on a day-to-day basis, Collinson did note that their household savings might not hold up if they face a financial shock. Two common and costly ones are major home repairs or a health incident that requires long-term care.
“Things like assisted living and in-home care have become increasingly expensive — and $126,000 would not go that far,” Collinson said.
It’s also important that retirees have sufficient access to liquid cash. The report found that the median emergency fund balance among retirees is $13,000, which may not be enough.
“More is better,” Collinson said. “That $13,000 might not even cover a roof repair. It is really important for retirees to have cash on hand to be able to cover those types of things. We hope that if we have an emergency, it isn’t as much as that, but it can happen.”
Having liquidity is especially important for retirees.
“Retirees are more susceptible to fluctuations of the financial markets,” Collinson said. “You don’t want to take a withdrawal from a down market because it further depletes your savings. So retirees [should have an] adequate amount of emergency savings available in liquid assets, like cash or money market funds.”
Top Places Retirees Store Their Savings
When retirees were asked where they keep their savings and investments, they most often cited a bank account (78%), primary residence (54%), IRA (41%), brokerage account (38%), life insurance policy (37%), 401(k), 403(b) or similar plan (27%), and annuities (22%). Only 9% have real estate other than their primary residence and 5% have a health savings account.
There is no ideal spread for where retirees should keep their funds, but it is important to use these different accounts and assets strategically.
“A big part of financial planning is, how do you make your savings last your lifetime? And there are pros and cons associated with each of these types of accounts and the value of those accounts,” Collinson said.
When considering where to keep their money, she said that retirees should think about:
- Liquidity
- Susceptibility to market risk
- Taxation
- Function
“It’s so personal, and it requires a lot of homework,” Collinson said.
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