It makes sense that starting to save earlier in your working life would give you a leg up in preparing for retirement.
Now, a new report by Wells Fargo puts numbers to this notion. Researchers found that working Americans 60 and older had begun saving for retirement on average at age 37, while those between the ages of 55 and 59 had begun on average at 31.
The difference in savings accrued are telling: a median $150,000 toward a retirement savings goal of $500,000 for the younger cohort versus a median $50,000 toward a $300,000 retirement savings goal for those who started later.
“The fact that people in their late 50s have three times the savings of those age 60 or older shows that starting early and saving consistently are key to retirement saving,” Joe Ready, head of Wells Fargo Institutional Retirement and Trust, said in a statement.
Harris Poll interviewed 851 working Americans 40 or older and 400 retired Americans by telephone from July 13 to Aug. 10, surveying attitudes and behaviors around planning, saving and investing for retirement. Working Americans were employed full-time or at least 20 hours if they were working part-time or self-employed. Retired Americans self-identified as retired regardless of age.
Respondents’ reported median annual household income varied by age:
- 40–49 years old: $87,000
- 50–54 years old: $91,000
- 55–59 years old: $100,000
- 60+ years old: $70,000
Waiting Till Later
According to the report, many working Americans assume they can put off saving, as they expect to have more time and money to save later in life.
A third of working Americans in the survey, ages 55 to 59, said this was their approach to retirement saving, compared with 21% of those 60 or older with the same plan.
In addition, 63% of those 55 to 59 and 49% of those 60+ hoped to earn more money in the future to save enough for retirement.
Fifty-four percent of the working 60-plus group planned to work until “at least 70” in order to have enough savings for retirement, compared with 40% of the younger group.
But working longer may not be the solution: 49% of the retired respondents said they had retired earlier than planned, many as a result of conditions beyond their control, such as health or because of an employer’s decision.
Only 7% retired earlier than planned because they had adequate savings.
“Unforeseen circumstances crop up, and this is really important for people to recognize,” Ready said.
Health care costs in retirement is one area that people may not predict correctly. Fifty-one percent of retired respondents said they were spending “more than they expected” on health care in retirement.
Forty-seven percent of retired respondents and 45% of those 40 or older and still working said they had or have saved for retirement consistently since the first day they started working. Wells Fargo called these individuals “consistent savers.”
The study found that income level was not necessarily a factor in being a consistent saver, as 31% of current workers with less than $50,000 in household income said they had consistently saved since they began working.