Retirement In America: Comparison Is The Thief Of Joy? Not In This Case

You’ve heard the term “comparison is the thief of joy”.  I think it’s generally true in many aspects of life, but not always.  As I mention in that post, comparing yourself to your younger self as you continue to get wiser – or more fit in my case – is a good thing. 

The annual Price Waterhouse Cooper Retirement In America report was issued a while back, and check this out. (click to enlarge graphic)

Retirement In America
As a reader of this financial independence and early retirement blog, I highly suspect you’re doing better than most Americans.  I could be wrong of course, and for some of you seeing that graphic might indeed be the thief of your joy today. 

But I suspect the graphic will bring you joy because you’re probably doing much better than most in saving for retirement. 

Having only $120,000 saved for retirement in your late 50’s to early 60’s is not ideal, to say the least.  Let’s take a look at some other highlights of the report.

 

Not On Track

From the report:

According to estimates, just 36% of the US workforce thinks their retirement savings plan is on track. Combined with rising life expectancy and increasing healthcare costs, this inevitably calls into question the preparedness of US households for retirement.

Well, at least the majority knows that they’re retirement savings plan is not on track.  The first part of fixing a problem is admitting you have a problem.  It would be a far more dire situation if the majority thought they were on track after seeing the graphic at the top of the post.

Our research shows the median retirement account balance for those approaching retirement would likely generate less than $1,000 per month over a 15-year retirement span. That’s hardly enough for individuals whose financial security is dependent on these savings, not to mention a participant base that is living longer. 

Less than a grand a month.  Ouch.  That’s an income that falls below the federal poverty line.  And that’s only for 15 years, those who live longer would be out of money.

I don’t know about you, but I plan on living (and living actively) well past 80.

 

It’s All About Time

Another graphic from the Retirement In America report:

Retirement In America

It appears Millennials and increasingly Gen Xers feel they’ll need to tap into their 401ks and IRAs before retirement.  This is not good. 

I’m a Gen Xer and I never once thought I’d ever have to tap into my retirement accounts, until retirement age of course.  Once that money left my paycheck to my TSP (like a 401k but for federal employees), I knew it was gone to me until at least age 57, and 59½ for my IRA contributions.

I suspect many who fear they’ll need their retirement money early will not and their fears are unwarranted.  But the chart above shows a certain level of “retirement anxiety” which is likely a result of the insufficient funds most have put away for retirement as shown in the first graphic. 

 

HSAs

If you read the full report, there’s another interesting graphic.

Retirement In America

It’s clear that the popularity of  HSAs (health savings accounts) has increased steadily, with a big bump in 2019.  If you’re not familiar with an HSA it’s a tax-advantaged account similar to a 401k to save for qualified medical expenses. 

As Investopedia explains

Contributions are made into the account by the individual or their employer and are limited to a maximum amount each year. The contributions are invested over time and can be used to pay for qualified medical expenses, such as medical, dental, and vision care and prescription drugs.

To qualify for one you must have a high-deductible health plan (HDHP), which to me is a bummer as these plans often wind up costing the consumer more annually in out of pocket expenses.  Additionally, many folks who have them avoid annual checkups or routine care because they don’t want to pay the full price.  That can create long term problems such as missing an early cancer detection or chronic condition.   

To be clear I feel that HSAs are a net positive overall if and only if the person who has it uses the tax-advantaged account benefits of the plan. 

And full disclosure, I do not have an HSA.  HSAs came about when I was already well on my way to financial independence.  I would have had to switch health plans to a high-deductible plan, and at that time I had just had knee surgery and a HDHP seemed too risky for me. 

Plus, even though most insurance companies and plans suck in America, mine sucked less than others despite the hassles I detailed in that blog post.  Over the years I’ve generally had acceptable experiences with my provider.  I tried a different provider one year to save money and they were horrid, so I switched back.

 

Compare Away

That’s what I’ve got this week folks, data on retirement in America.  I wanted to bring the PWC report to your attention knowing that you, my dear readers, are likely doing way better than most.   

And when you see the numbers and compare yourself to the average it’ll bring a little joy to your day 🙂

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Dave @ Accidental FIRE

I reached financial independence and semi-retired in my mid-40's through hard work, smart living, and investing. This blog chronicles my journey and explores many aspects of personal finance including the psychological and behavioral factors that drive our habits.

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21 Responses

  1. Steve says:

    I’m currently looking at ACA plans for 2023. Nearly all of the plans have high deductibles ($7k+), but only one is HSA eligible. (plans vary by county in most states, so YMMV) Third year using the ACA and first HSA eligible plan I’ve seen. It’s nearly identical to my current plan, so might be time to make a change.

    • Julie says:

      Steve, i noticed the exact same thing! Lots of high deductible plans, yet they’re not HSA eligible. Why is that?? I thought the criteria for having an HSA was having a ‘high deductible health plan’, yet I’m looking at plans with deductibles that are higher than the HSA eligible plans. I guess it really just comes down to what the government deems is HSA eligible. Really confusing and frustrating.

      • Dave @ Accidental FIRE says:

        Confusing and frustrating to say the least. I once went on my states exchange to browse around and let’s just say it was a miserable experience.

    • Dave @ Accidental FIRE says:

      Ugh, I’m not looking forward to my inevitable future with the ACA…

      • Steve says:

        I’ve found the ACA to be quite okay. The PA website is relatively easy to use and the plan choices really aren’t too bad. HMO, PPO, EPO all available from 4 or 5 insurance companies, two with national networks. Cost is ~$300/month less than my Cobra plan for the same coverage (not including the ACA subsidy). I looked at S. Dakota a year ago and the choices were pretty bleak. HMO for the western half of the state or HMO for the eastern half, with a few choices regarding deductibles and co-pays. That would be difficult.

        I’m retired (39 months) and my income can fluctuate quite significantly, so guessing my income for the coming year and then providing documentation to support that guess is a challenge. I pay monthly and get the tax credit when I file my 1040. Not ideal, but not an issue for me.

        • Dave @ Accidental FIRE says:

          I hope my state’s exchange has improved, I checked it out in 2020. The income guessing game as an entrepreneur is also something I’m not thrilled about dealing with, but there’s worse things in life 🙂

  2. Glincoln says:

    I wonder if the Coast FI “movement” would help this. It’s nice to see how working/saving hard up front and having that time in the market. It’s reassuring/empowering for me. Gives me options like part time work, switch jobs, etc

  3. I enjoy reviewing studies, and appreciate you sharing the PWC version. It’s always shocking to me how poorly positioned the “average” person is for retirement, it really makes me wonder how they’ll deal with life in retirement. I always think of an 80-year-old lady who works at our local Wendy’s, and it does bring some sadness. We can only control ourselves, and I hope folks who need the help take the time to learn some of the basics of personal finance before it’s too late (if it’s not already…)

    • Dave @ Accidental FIRE says:

      Oh man.. in some cases I guess an 80 year old lady would do that on purpose to get light exercise and social connection, but in most it would not be the case. And even if so a job at Wendys of all places would not be the one to get.

  4. i have a woman at work i talked to the other day who is ready to start saving for her future. she just turned 65 this year.

  5. I sometimes read those stats and become skeptical, because retirees are the ones with all the money where ever I go. They are the ones with the means to buy nice houses (they’ll stay in their 5 bedroom house even though 4 of them are empty) and they use their senior discounts to the max.

    Maybe I need to go to different parts of the state and see the seniors that didn’t save for retirement, or maybe had more difficult life circumstances to ground myself!

    • Dave @ Accidental FIRE says:

      I think everyone’s experiences are fully painted by where they live and hang out at. That’s why coastal people don’t relate to those who live in middle America and vice/versa. As a financially smart person maybe it’s just cause you probably hang out in nice areas 🙂

  6. vivek says:

    This number is outside of Social Security Check. So if these american’s do get social security, it will be bump up to atleast $2,000 per person. If you look at household level it may shoot up to $2500 which doesnt look as bad especially if they got thier house paid.

    • Dave @ Accidental FIRE says:

      The survey is showing saving in investment accounts. Social Security would be extra but the average SS monthly payment for an American is about $1500 not $2k. Social Security is not enough to live on no matter how you look at it and the program faces massive solvency problems and will continue to pay out less or have a higher withdrawal age in the future, there’s no getting around it.

      • bdub says:

        I think Vivek means the total available, including retirement accounts and 401K and SS, will be $2k. As you point out, that is actually closer to 2.5 – 3k monthly. Not too shabby for a lot of parts of the US. My parents live the life they wanted on SS alone. They have retirement accounts but just haven’t needed to tap them because their costs are low. YMMV, of course, but I think everyone should have a plan to live on a lot less than they’re expecting in case things don’t go as planned.

        • Dave @ Accidental FIRE says:

          Yeah thanks for that I might have misunderstood her comment. Either way given the status of SS I feel no one should count on it as a key part of their plan, especially if they’re under 50 and very especially if they’re under 35. My Mom is in her 90’s and lives on a small pension from my deceased father and SS. Her SS money is the smaller of the two and she barely gets by covering her living costs.

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