Amazingly, you are 40 years old this year. Interestingly, you do not belong to Generation X. Yes, the generation that came of age during the housing crash and major recession is now just a few short decades away from retirement. This generation still carries massive student loan debt and has been priced out of the housing market.
Professionals agree that by the time one reaches age 40, one should have a sizable nest egg saved for old age. As disappointing as it may be, the numbers don’t add up. In light of the hardships they’ve endured and continue to face in today’s economy, this generation isn’t as bad as you might think.
Now you can get a rough idea of the state of things, even though there isn’t a friendly little data source that breaks down balances by the age year. Data from the most significant investment brokerages, Fidelity and Vanguard, will be examined in detail.
For instance, Fidelity presents its age-related statistics in 10-year intervals. The median defined contribution plan balance for those between the ages of 30-39 is $51,200. The average balance doubles to $121,200 if the age range is expanded from 40-49. Since a person of middle age (40) is likely to fall between these two distributions, their average account balance is around $85,700.
However, various vendors have different breakdowns. In particular, we can examine the age group from 34 to 44. The average balance in their company-sponsored retirement accounts is $97,020.
Differentiating between mean and median
Those figures may seem promising at first glance, but closer inspection may reveal that they are less so than they appear. The averages are what you see there. A small number of people with substantial balances can rapidly push up overall standards.
The median values (the midpoint between the highest and lowest values) provide a more accurate picture of the situation.
The median Fidelity account balance for those between the ages of 30-39 is only $18,400. Those in the next age bracket, 40 to 49, are doing roughly twice as well, with a median balance of $37,600. Therefore, a person can earn $28,000 after averaging the two figures.
Moreover, the median account balance for users in the age range of 35-44 is $36,117. While some people may be in a good spot financially, many others need to catch up to the retirement savings targets recommended by experts. However, things might be better than they appear.
The primary problem with these statistics is that they only consider one type of retirement savings vehicleâ€â€those provided by employers. Particularly, programs that are currently active with two designated brokers.
However, this data does not consider additional retirement savings vehicles like IRAs. As a further downside, it needs to account for other retirement investments like real estate or company ownership.
To advance their careers and significantly increase their salaries, millennials are much more likely to switch jobs frequently than previous generations. Moreover, they are becoming increasingly independent contractors with access to employer-provided benefits.
Even if today’s 40-something investors aren’t reaping the rewards that some might hope for, they’re probably doing their best given the circumstances. The Federal Deposit Insurance Corporation (FDIC) guarantees the safety of funds and offers competitive interest rates of up to 17 percent.
Many people let their savings sit in a bank account, where they receive almost no interest, instead of investing it elsewhere where they can be sure of making money.
The finest online savings accounts we recommend can earn you over 17 times the rate of the typical American savings account. Please consult us for the top-rated savings accounts that made our list for 2022 as you launch into 2023.
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