Americans Falling Behind on Retirement Savings


While the post-2016 performance of markets made more 401(k) millionaires than ever before, not everyone benefited from this rising tide. And with inflation now taking a big bite out of the purchasing power of everyone’s investments, more Americans are falling behind on their retirement savings.

This isn’t necessarily a new problem, either, as Americans from all walks of life have often had difficulty forecasting their monetary needs in retirement. But with a recession on the horizon, the lack of retirement savings right now could result in many more people having even less to live on in retirement than they thought they would.

The Truth Behind the Numbers

One of the reasons Americans may not understand how bad the retirement situation is is because of the use of averages in reporting retirement finance statistics. What we should be focusing on rather than averages is medians and percentiles.

Using averages tends to skew the perception of retirement savings and make it appear that people have more money than they actually do. The reality is that many American households have nothing saved at all.

Take for example a situation in which there are ten households. Seven of them have nothing saved at all. The other three have each saved $600,000 apiece. The average savings is therefore $180,000 per household, which sounds pretty good. The median, however, which is the middle point, is zero.

Let’s translate that then to real life. A recent Vanguard study on retirement savings found that the average person between the ages of 55 and 64 held $256,000 in retirement savings.

Once again, these numbers were skewed higher due to some high earners and big savers. When looking at the median, however, that $256,000 number turned to only about $90,000. That means that 50% of all 55- to 64-year-olds have less than $90,000 saved up for retirement.

With many experts saying that you need $1 million in order to live comfortably in retirement, $90,000 obviously isn’t going to cut it. But even that higher $256,000 figure isn’t that great in comparison either. It’s obvious that Americans need to save more and invest better in order to prepare themselves for the financial reality of retirement.

How Americans Save for Retirement

Pension plans used to be the way many Americans expected to have money in retirement. But outside of the government sector, pension plans have largely gone the way of the dodo. Even those pension plans that remain are often woefully underfunded. As a result, workers today are expected to foot the bill for their own retirement funding.

Tax-advantaged retirement accounts such as 401(k) and IRA accounts have become the primary drivers of retirement income. Americans invest trillions of dollars in these accounts, and rely on them for growing their wealth.

Many 401(k) plans offer matching employer contributions, offering employees extra money that they can use to help increase their retirement savings. But many employees don’t take advantage of that free money, leaving it on the table and handicapping their ability to build up a nest egg.

Even worse, nearly 60% of workers don’t even participate in their workplace sponsored retirement plans. Presumably these people aren’t investing in brokerage accounts, so in all likelihood they’re not saving anything for retirement.

The advantage of tax-advantaged retirement accounts like 401(k)s and IRAs is that they allow investment gains to accrue tax-free. Taxes are only paid when you decide to take a distribution. By contrast, gains made in investments in many normal brokerage accounts can result in capital gains tax liabilities both on an annual basis and when you decide to liquidate investments.

Those who have the ability to invest in both types of accounts obviously do so, as even with the higher contribution limits on IRAs and 401(k)s in 2023 those limits are still far lower than the amounts big earners can save. But if most Americans aren’t even taking full advantage of the benefits offered to them by IRA and 401(k) accounts, those contribution limits aren’t a limiting factor in Americans’ ability to save.

Instead, American families are hamstrung by rising debt levels and rising inflation. It becomes more and more expensive each year to maintain the same standard of living, and people are falling behind. Even those fortunate enough to be able to sock away enough money in their retirement accounts to live comfortably have to worry about whether they’ll be able to maintain those assets into retirement.

Protecting Wealth With Precious Metals

That’s where alternative assets like gold and silver can help play a role. Gold and silver have served as safe haven assets for centuries, acting as a store of wealth and a hedge against inflation.

The performance of gold and silver during past eras of financial crisis and economic turmoil have made them popular options for those looking to protect their wealth today. Many who remember the 2008 financial crisis remember how gold gained 25% while markets lost over 50%, and then went on to set record highs while markets struggled to regain their footing.

Gold and silver performed even better during the stagflation of the 1970s, with annualized gains of over 30% over the course of the decade. Many investors are undoubtedly hoping that the two precious metals will repeat that same kind of performance if inflation becomes entrenched today.

With a recession on the horizon and inflation remaining stubbornly high, the investing atmosphere today is anything but welcoming, and investors need to do everything they can to make sure their assets are protected. With a gold IRA, you can make an investment in physical gold coins or bars while still enjoying all the same tax advantages as any other IRA account. And you can roll over or transfer assets from existing 401(k), 403(b), TSP, IRA, or similar retirement accounts into a gold IRA tax-free, allowing your existing retirement savings to benefit from the protection of gold and silver.

If you want to learn more about a gold IRA and about how gold and silver can benefit you, call the experts at Goldco today. Don’t let your retirement savings risk falling further behind.

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About the Author: Trevor Gerszt