How’s this for a somber retirement forecast: The typical American worker has less than $1,000 saved for retirement, according to a new report from the National Institute on Retirement Security (NIRS).
“The data are clear: Outside of high earners, Americans are choosing survival over savings and hoping to catch up later,” NIRS executive director Dan Doonan told Yahoo Finance. “Even for those approaching retirement age — 55-to-64-year-olds — the median amount saved for retirement is only $30,000. We’re looking at a looming crisis. These aren’t just statistics — they represent millions of families who are doing everything right but still can’t get ahead.”
The report analyzes workers with 401(k) and other retirement plan savings, as well as the millions of US workers who lack access to an employer-sponsored retirement plan.
The median savings — half have saved more and half have saved less — for all employed adults ages 21 to 64 tallied $955, per the nonpartisan group, which analyzed data from the US Census Bureau’s Survey of Income and Program Participation.
When you look exclusively at Americans enrolled in an employer-provided retirement plan, the numbers are more encouraging.
In Fidelity’s 26,000 defined-contribution plans at companies across the country, covering 24.8 million participants, account balances last year clocked in at record highs, with an average 401(k) balance of $144,400 and an average IRA account balance of $137,902.
For these folks, the average 401(k) savings rate was 9.5%, and the average employer contribution rate was 4.7%, bringing the combined employee and employer 401(k) contributions to a record high of 14.2%. Fidelity’s suggested savings rate is 15%.
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The NIRS snapshot of US workers, however, is grimmer. The typical employee contribution rate is between 5% and 6%, and the typical employer contribution rate is just under 3%.
“There is modest variation in contribution rates across different demographic cohorts with employee contributions generally increasing with age, education, and income,” per Tyler Bond, co-author of the report.
The real truth is that many workers do not start saving as soon as they enter the workforce, Bond said. In fact, many don’t start saving until mid-career. The timing of retirement can also be unpredictable. A late-career health crisis, job loss, or economic downturn can derail even the best plans for a financially secure retirement, he said.
How much is enough? One guideline: At 30, you should have retirement savings worth one year of your annual income, and double that by age 35, according to Fidelity. By 60, the typical worker should have eight times their annual income socked away for their retirement. By 67, you should have 10 times your income saved.
Here’s the biggest factor in the dismal retirement savings rates. Roughly half of US workers don’t have employer-provided retirement plans that divert money straight from their paycheck into a retirement plan and frequently include a matching employer contribution.
These workers are freelancers and contractors, or they work for small businesses (even their own) that don’t offer a retirement plan. In fact, only one-third of employees at small businesses have access to an employer-sponsored retirement plan, according to the Bipartisan Policy Center.
Public sector workers, however, are more likely to participate in a retirement plan compared to private sector workers, the researchers found. Hispanic workers and those with lower incomes or lower levels of education are significantly less likely to have access or participate, per the NIRS data.
With the April 15 deadline for making 2025 retirement contributions just around the corner, it’s time to get it done. If you have earned income, you can save for retirement in a tax-advantaged savings option, like an individual retirement account (IRA).
Once you tally up your 2025 income and your tax bill, the opportunities to reduce your taxable income with a contribution to a tax-deferred IRA or solo 401(k) should be enough of a spur to start saving.
The problem is that only a slim percentage of independent workers open a retirement savings account on their own.
“The bottom line is that if Americans are not saving for retirement through their employer, then they are probably not saving at all,” Bond said.
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Income from retirement plans accounts for only about a quarter of a retiree’s income on average, according to the report.
And that’s where the troubling uncertainty of Social Security comes in. Many workers are not confident Social Security will be there for them when they need it, the NIRS researchers found. They figure either Social Security will go belly up before they’re eligible to claim benefits or the benefits will be slashed.
The looming concern: Social Security’s reserves could vanish in seven years, according to the latest projection for the Old-Age and Survivors Insurance (OASI) Trust Fund, according to the 2025 Social Security and Medicare Trustees annual report.
At that point, if no adjustments are made, the entitlement program’s trust fund will be able to pay out just 77% of benefits to seniors.
This issue is critical. For about half of seniors, monthly Social Security benefits provide at least 50% of their income, and for about one in four seniors, it provides at least 90% of their income.
Home equity represents about a third of a worker’s financial assets. Across all respondents, more than half (57%) of the average value of total financial assets comes from home equity and retirement savings alone. The average value of home equity surpasses the average value of retirement savings, except among adults ages 55-64, according to NIRS data.
Home equity represents 47% of total financial assets for 21-34-year-olds, but 27% for those ages 55-64.
Two sides of the coin for student loan borrowers. Workers with student loan debt are more likely to have access to a workplace plan, participate in a plan, and have a positive account balance, according to the NIRS data. But they also have lower account balances, fall further behind in meeting savings targets, and have much lower net worth than those with no student loan debt.
“It’s a long-term financial issue, not something people simply age out of,” said Priya Punatar, director of workplace research at Fidelity.
The upshot: How you divvy up your income comes with difficult trade-offs. “Most retirement programs today rely on workers saving voluntarily, with the tension between saving and the cost of buying a home, day care, and college creating enormous challenges for the middle class,” Doonan said.
