The rule of thumb for people who are 55 and have 10 more years to work before reaching traditional retirement age is that they should already have about eight times their salary saved in their retirement accounts. But a new study finds that today’s median 55-year-olds have just $50,000 saved, hardly enough to retire comfortably.
In fact, only one in five people age 55 has saved more than $447,000 for retirement, which is eight times the average U.S. salary, according to Prudential Financial’s 2024 U.S. Retirement Study. foundThis report is separate Recent Research A study on Gen X’s retirement preparations found that half of those surveyed believe they’ll need a “miracle” to retire.
The new findings come as the oldest members of Generation X (those born between 1965 and 1980) are approaching retirement age, giving them a short window to build up savings before they retire. But many who are already behind on their savings milestones may end up not being ready for retirement, at least financially, because it will likely be difficult, if not impossible, to save a significant amount in just a few years.
Still, a Plan B is emerging among this group, with a quarter of 55-year-olds today telling Prudential that they plan to rely on financial support from family in retirement, and twice as many 65- and 75-year-olds saying the same. About one in five Gen Xers, the so-called “silver squatters,” also expect to need housing assistance in retirement, according to Prudential.
“If you know you’re in trouble, you know you’re going to need to borrow money from somewhere,” David Blanchette, head of retirement research at Prudential, told CBS MoneyWatch. “You might borrow from your parents if they’re still alive, but you might also borrow from your children.”
“Parents may have made big sacrifices to send their kids to college,” he added, and a sense of financial obligation may return. But at the same time, those expectations could put additional financial pressure on younger generations, like Gen Z, those born between 1997 and 2012, who themselves may be struggling to buy a home or save for retirement.
Blanchette said workers — and retirement planners — need to be realistic about what’s achievable in the final decade of their careers. For example, she said, retirement planners often tell their clients they have to work well past 65 to save enough for retirement, but that ignores the reality that most people will retire years earlier than they planned.
‘Difficult Choices’
For example, an Urban Institute study tracking workers ages 65 and older found that only 19% left their jobs voluntarily, with most being forced to leave before retirement age because of layoffs, ill health or other issues beyond their control. The typical worker retires three years earlier than planned, Blanchette says.
“Planners say, ‘They’re behind, they’re only going to work until 70 or 72,’ but people are retiring earlier than they planned. If they’re already behind, it just puts them further behind,” Blanchette said.
In other words, someone who is 55 today may only have seven more years to work instead of 10, which will increase pressure on them about how to fund their retirement, he noted.
“What can I do to get myself in shape over the next seven years? It’s going to be a tough choice,” Blanchett said.
While saving more can help, most workers don’t have much extra money to put into retirement accounts, he noted. But if workers end their careers sooner than planned, they could take part-time work or switch to a different line of work later, aiming for at least a household income, which would help them avoid dipping into retirement savings.
Second, older workers should plan to postpone claiming Social Security as long as possible, because monthly benefits increase for every year they postpone until age 70. This means that monthly benefits at age 70 will be about 75% higher than if they had claimed at age 62, the earliest age at which benefits can be collected.
“The key is to save until you’re 63 or 64, but avoid claiming or using benefits for as long as possible,” Blanchette said.
