Retirement Statistics Are a Square Peg in a Round Hole
The question "Is my retirement plan on track?" can send us down all kinds of rabbit-holes. Inevitably, we go looking for numbers to compare ourselves against. Unfortunately, these can leave us with more stress than we had to begin with.
Let’s look at the two figures people usually reach for:
The average, or mean, can make people feel like they’re behind when they aren’t. A small group of wealthy households lift the whole number way above what a typical family has set aside, so the average can end up describing a set of households that aren’t actually there.
The median gets offered as the fix. It’s the middle household, and isn’t dragged upward by a wealthy few. That said, it can give you a false sense of safety. The common median only counts households that already have a retirement account, and close to half don't have one. It also omits everything else: your other savings, home, pension, and Social Security. And those provide the majority of income for about half of retirees. So, one number frightens you and the other reassures you with an incomplete picture, and neither were answering a question about you to begin with.
Retirement savings statistics are meant to answer one question: “across a large group of people, where does the typical balance fall?” That’s their purpose, not to be used as benchmarks against our own personal progress.
Here’s how to actually answer whether you’re on track: Start with your own life. What does the year you want to retire look like? What will your monthly cost be when you get there? The question is not how you compare to a statistic. It is whether your saving, spending, and investing are pointed toward the life you’re planning for.
A disciplined plan shaped around your needs offers a kind of stability no statistics can, because it doesn’t change every time the headlines or markets do. Try to stop asking how you stack up, and start asking what “enough” really looks like for you.
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Laurel Financial Group is a separate entity from WFAFN.
This material is intended for informational and educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.
Let’s look at the two figures people usually reach for:
The average, or mean, can make people feel like they’re behind when they aren’t. A small group of wealthy households lift the whole number way above what a typical family has set aside, so the average can end up describing a set of households that aren’t actually there.
The median gets offered as the fix. It’s the middle household, and isn’t dragged upward by a wealthy few. That said, it can give you a false sense of safety. The common median only counts households that already have a retirement account, and close to half don't have one. It also omits everything else: your other savings, home, pension, and Social Security. And those provide the majority of income for about half of retirees. So, one number frightens you and the other reassures you with an incomplete picture, and neither were answering a question about you to begin with.
Retirement savings statistics are meant to answer one question: “across a large group of people, where does the typical balance fall?” That’s their purpose, not to be used as benchmarks against our own personal progress.
Here’s how to actually answer whether you’re on track: Start with your own life. What does the year you want to retire look like? What will your monthly cost be when you get there? The question is not how you compare to a statistic. It is whether your saving, spending, and investing are pointed toward the life you’re planning for.
A disciplined plan shaped around your needs offers a kind of stability no statistics can, because it doesn’t change every time the headlines or markets do. Try to stop asking how you stack up, and start asking what “enough” really looks like for you.
Investment products and services are offered through Wells Fargo Advisors Financial Network, LLC (WFAFN), Member SIPC. Laurel Financial Group is a separate entity from WFAFN.
This material is intended for informational and educational purposes only and should not be construed as investment advice, a solicitation, or a recommendation to buy or sell any security or investment product. Please contact your financial professional for more information specific to your situation.