The American retirement system rests on three main pillars: Social Security, employer-sponsored savings plans—the most widespread being the 401(k), and individual retirement accounts known as IRA (Individual Retirement Account).
Unlike many Latin American pay-as-you-go systems, in the United States the responsibility for saving falls largely on the worker: each person decides how much to contribute, what to invest it in, and when to start withdrawing it.
You have to save for retirement: your boss can add some cash
The employer can make additional contributions—the so-called employer match— but he is not legally obligated to do so. Social Security, for its part, functions as a minimum income: it is not designed to replace full income, but to supplement savings accumulated during one’s working life.
But, once again, it is actually your responsibility to start and maintain a plan with subsequent, monthly payments and constant monitoring on your savings.
What the average American has saved for retirement
The average savings recorded are not the same at all ages. Americans in their 40s have an average retirement savings balance of $573,660, while the median is $208,390. The difference between the two figures is significant because high-net-worth individuals considerably raise the average. If we look only at 401(k)s, the average balance for people in their 40s is $370,879, with a median of $154,212.
However, financial advisors recommend having saved the equivalent of three times the annual salary. For someone with an income close to the national median—about $64,000 a year—that means having approximately $192,000 in retirement accounts.
Those who aspire to retire early or maintain a more comfortable lifestyle should aim for higher figures. Most American workers do not reach that threshold at this stage.
At 50 years old
Americans in their 50s have an average retirement savings balance of $1,020,838, with a median of $438,866. Regarding the 401(k) specifically, the average is around $592,285, with a median of $252,850.
At this age, the bar is raised considerably: the standard recommendation is to have accumulated six times the annual salary, which for a worker with an income of $64,000 is equivalent to about $384,000. Some experts raise that threshold to between 3.5 and 5.5 times salary, depending on the projected lifestyle in retirement.
The good news is that from age 50 onwards, the tax system allows for what are known as “catch-up contributions”—additional contributions of up to $7,500 annually to the 401(k) and $1,000 additional to the IRA—precisely so that those who are lagging behind can accelerate the pace of saving in the final stretch of their working life.
Important context to consider
The median is the most representative statistic of the typical worker’s reality, as the average is skewed by those with very high savings. More than half of U.S. households (54%) report having no savings dedicated to retirement.
With a median income of around $64,000 per year, most Americans fall well short of the recommended savings goals for each stage of their working lives.
