Are you a Baby Boomer, Gen X, or Millennial? What has been the average retirement savings in each generation? How do you know it’s enough?
Tune in as Chris Miles shares the REAL statistics that may shock you, and what you can do to NOT become a discouraging statistic.
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Has Your Generation Saved Enough For Retirement
Welcome fellow ripplers. This show is for you. You work so hard for that money and you want your money to start working harder for you right now. You’re sick and tired of waiting for that 30 or 40-year timeframe because you want prosperity and freedom today. That is what it means to be free. It’s not just about getting your work money and working harder so you don’t have to keep working so hard for that money. It’s not just about getting rich. It’s about living a rich life because as you are blessed financially, you have a greater capacity to bless more people’s lives.
That is exactly why this show exists today. That’s the ripple effect I’m here to create for you. Thank you for tuning in, for sharing, and for being a rippler. Thank you for being somebody who has that integrity and somebody who wants something more than just to pay bills and die. That is why you’re here today. Thank you so much for being a part of this.
Speaking of which, if you don’t want to just pay bills and die, I also recommend, if you haven’t done so already and you want to know how much passive income you could create in the next twelve months, go to MoneyRipples.com. Take our passive income calculator and find out what your number is. Find out how much you could be creating. The number might surprise you. It might not be great. It might be awesome, but it’s definitely worth a look to see how you can change your life right now. Check that out.
I’m going to talk about a subject that is pretty important. This comes from two articles, both from about late July, that came out with recent numbers about retirement savings. The question you have to be asking yourself and maybe you’ve asked this is, “Am I on track? Do I have hope? Do I have enough money or will I have enough money that I have time to enjoy my life or even that time of freedom while I’m younger? What can I do? Is it possible?” The statistics that are coming out are a little bit frightening right now. It’s pretty scary.
I’m going to talk about that. Hang in there because, in the end, there’s going to be hope. I’m going to give you the answer. I’m going to give you another solution. If you’ve been on the show long enough, you already know the solution is there. I want to address the reality of what’s going on with people’s retirement plans, even those who are saving for retirement right now, and what’s really going on. Especially, understanding the psyche that you might be dealing with too.
If you’re watching this on YouTube, I recommend putting a comment here. Tell us how you’re feeling about your own retirement. Whether you’ve fallen into this category that we’re going to talk about here or not. Especially, we’re going to talk about some of us Gen X-ers, my generation, and what’s going on with us. We tend to be the ones forgotten. Everybody talks about Boomers and Millennials, but the X-ers, everybody is like, “They’re a tiny little group.” We’re going to talk about them today too.
Ready Or Not: Generation X Faces Bleak Retirement Horizon
Let’s go to this first article that I found on Yahoo Finance. It is called Ready or Not: Generation X faces a bleak retirement horizon. That sounds awesome, doesn’t it? It’s interesting that Finance knows me enough to know that I like to read these articles. It’s talking about the typical Gen X household only having $40,000 in retirement savings, and those savings are concentrated among the top earners. This is what’s interesting. I talk a lot about the average, but this has something additional that’s very important. This is coming from the National Institute of Retirement Security. These are not my numbers. This is an independent study.
This separates us by demographics, specifically our race. You can see that Whites and Asians are leading there. Shout out to our Asian clients because we have a lot of you out there. Notice that the dark blue is the average balance. It says the mean. This is going back to my statistics class in college. The mean is your average. The average balance among everybody is quite a bit higher than what’s called the median. The median is the dark green. That’s the middle number. Notice these numbers are hugely different.
Here’s the thing, average is this. Let’s say you have three people. One person has $1 million in a retirement account, another has $500,000, and the other one has $50,000. That means between the three of them, it’s $1.55 million. You’ll say the average is roughly about $520,000. The median, the middle person, or that second person right in the middle has $500,000. Watch this because they’re about the same there. What if the upper person was $1 million, and then the lower two are lower? It was $1 million for one, $100,000 for the other, and then $100,000 for the third one too. Let’s say it’s that. That’s $1.2 million total divided by 3. It’ll say the average retirement balance is $400,000, but for the median person, the balance is only $100,000. That’s what’s happening here.
This is sad with both Blacks and Hispanics here. Right in the middle where there’s say $3 million on one side, $3 million worse off than them, if you’re Black, it’s $1. That’s it. If you’re Hispanic, they say that 2/3 of Hispanics have 0 as a balance, which is why the median person is 0. The average is higher. Most people focus on the averages but understand that most people, even among Whites, it’s still not an impressive number. It’s way less. This means that most people have little to nothing in their accounts while there are other people who have more.
I wanted to dive deeper into this. Luckily, this article goes down the same line of thinking and questioning that I had. They asked here in the article, “Why is Gen X so behind?” They said that one factor is that there are relatively few workers with access to them. They say only 14% of Gen X-ers have traditional pension plans, while 55% have 401(k)s plans for their work. Just a little over half of us have access to that.
It does say that there are some people who are working part-time, which could be part of the issue there. They did say in the article, “Part of it is because 401(k)s didn’t come on the scene until after us Gen X-ers enter the workforce. That’s kind of true and not. You could make that excuse for Baby Boomers too who didn’t have those retirement plans either. When they try to use that as Gen X’s problem, that’s not totally a problem because it’s been around for at least 30-plus years that it’s been more mainstream to have a 401(k).
Here’s what’s interesting. As I said, the average balance is $148,000, while the median is $44,000. With those that have employer-sponsored plans, the average is higher. It’s $173,000, while the median comes at $50,000. It’s a little bit better. Here’s also what it says. The top earners or those who earn at least $76,000 a year had about $250,000 on average, while those who come under $44,000 basically had nothing. No doubt. If you don’t have cash, you’re not going to have anything.
This might seem like common sense. When you think about real life, it’s true. Think about this. Many people think that they’re on track. I know there are a lot more people who say, “I haven’t started anything.” I know many of you reached out saying, “I haven’t started anything. I don’t even have a retirement plan. I’m a business owner. I would have to set up my own. I’m just barely starting to make some money right now. Should I do my employer plan or not? Chris, I’ve heard from you that 401(k) sucks.” It’s true, they do. “What should I do?”
It’s okay. Not everybody that has a 401(k) plan should be doing a 401(k) plan. If you learn from us, you realize you probably don’t want one anyway. It’s very important to understand that many people are sold that they’re going to be able to retire. Even if you took the group or the 55% that can sock money away into their plans, that means the average is around $250,000. Should the Gen X-ers be fine? Not necessarily because of this reason right here.
This article is saying, “We have no idea how much we’ll need for retirement.” It’s a survey that was taken. It’s a guessing game. I could have told you that before. Most people are just saving mindlessly. You’ve been taught to “set it and forget it.” You’ve been taught to put money away, and the reason you’re doing that is because you’re probably scared. You’re a little bit scared that it’s not going to be enough. What does that mean for you? What does that say about you? It’s not just about your financial situation, it’s also about your own ego. It’s about, “Is it going to be enough? I don’t know if I’m going to be able to make it. I hope things will just somehow work out. I’m saving. Maybe it’ll be enough, maybe not. Maybe the market will come around and because they tell me if I just keep putting money in here, I’ll be fine.”
We are getting reassured by financial advisors and experts that this is all going to work out. As I’ve mentioned in many episodes before, the proof is it hasn’t worked out. That could swing you in the other direction saying, “I’ll continue a blind eye. I hope this works. Please make it work.” Maybe there will be enough Social Security. Just so you know, most of us Gen X-ers don’t believe in Social Security, but we’re latchkey kids. We’re pretty much raising ourselves. We don’t trust anybody to take care of us.
If you’re a Millennial, you expect people to take care of you. You want the government to help out and step in. They say that the baseline median numbers here estimate that they’ll need $500,000 by the time in order to retire financially secure. I want to talk about that. Do you think $500,000 will be enough? I’ll break down the generations a little bit. The older you get, the more reality sets in. With $500,000, financial advisors say you can only pull off 3% a year if you don’t want to run out of money. That means you’re living on $15,000 a year in retirement.
The older you get, the more your reality sets in. Click To TweetHow many of you can live on $15,000? I know there are many of you who have heard of old dumb financial people out there teaching the 4% rule so you get $20,000 instead of $15,000. Still, $500,000 is not much. It does say here that Baby Boomers think they need $750,000. If it’s 4%, they’re thinking that they can live on $30,000 a year plus Social Security. If it’s 3%, you’re closer to $22,000 a year plus Social Security. Gen X and Millennials were $500,000. Gen Z estimates, and I don’t know where this number comes from, $250,000 is enough to live on. I don’t know if they realize that money doesn’t grow that fast. I thought that was interesting.
They say approximately 1 in 5 workers across generations estimate they’ll need to save $2 million or more, including Baby Boomers. About a quarter of Baby Boomers, 22% of Gen X, 21% of Millennials, and 70% of Gen Z believe they’ll need to save $2 million. This is closer to what it is because if it’s 3%, that’s $60,000 a year. If you believe in 4%, it was $80,000 a year. It’s $60,000 a year that you’re going to be recommended to pull off of $2 million. The real question is this. Is $2 million enough? After inflation, what will $2 million be worth down the road? What will $60,000 a year be worth down the road? Will it be enough? That’s the big question.
Here’s the key thing. How did they come up with these lofty figures? They apparently threw a dart. Nearly half of workers said they guessed the amount they need to save for retirement. They’re just pulling numbers out of their butts. That’s what’s happening here. Unfortunately, that’s the reality. I’m not judging this. I’m not saying that’s bad. I’m just saying the numbers that often people come up with that you hear from other people don’t have any rhyme or reason behind it. You say, “That number sounds good. I’m going to go with that.” That doesn’t work, guys. You have to be a little bit more intentional in that, especially if you’re going to save in these credit retirement plans. You have to be very intentional. You have to sock away a lot of money just to have an even lower middle-class lifestyle.
Don’t even worry about having an upper-middle class or even a middle-class lifestyle if you save in your 401(k). It’s not going to happen by itself. I know you probably won’t like that, so you can put it in a comment if you don’t like it because I don’t care. This said that’s a big worry because retirement security is shaky enough and many workers have not taken it seriously. It must have representation. For those who guess their needs, it’s been roughly almost half.
They also say that many people prefer not to think about it. About 42% of workers agree with the statement, “I prefer not to think about or concern myself with retirement investing until I get closer to my retirement date,” including 13% who strongly agree, and 29% who somewhat agree. Think about almost half said, “I’m not going to worry about it. We’ll kick that can down the road.” Generation Z and Millennials are more likely to agree with this statement. Gen X and Boomers are less likely. Just so you know, for Gen Z and Millennials, it’s about 50% or higher.
The person was saying here that it’s stunning. It’s not really negotiable. I prefer not to think about it. Estimating savings, retirement income needs, and goal setting serve as the basis for future financial security. This is the thing. One in three Gen X-ers and over a quarter of Baby Boomers do not have any strategy for retirement. They talk about those that thinking about investing, we had those numbers come out. For those who usually have professional help, it’s very little. Who can blame you? How many financial advisors want to deal with very little cash? Not many. You’re left to do this on your own. You’re basically thrown out to the wolves. That is what’s happening.
Another thing that you’re worried about is outliving your savings. They say Americans have a 45% chance that they’ll outlive their savings. That’s still guessing. One-third haven’t taken any steps to address that. On average, Americans expect they should save $1.27 million to afford a comfortable retirement. This is the Northwestern Mutual study I’ve mentioned before. How did they get that number? It’s the same thing. They thought the 4% rule would give them $50,000 a year. They said the troubling thing is they’ve only saved $89,000 or 7% of that. We’re getting all this stuff and this is just a study they’d done with 2,700 adults, 18 and over.
Should You Get Help From Financial Advisors?
This is an interesting thing that I’m going to say. They’re going to tell you that you should either go to a retirement calculator online, you can put in your numbers, find out how much you need to save, and/or use a financial professional to help you run those numbers. Here’s the problem with that. I was that financial professional. I was the advisor that was telling you, “Let’s put the numbers in here and see what you got to do.” The problem is, even as a financial advisor, I can’t make you any promises. I can’t give you any guarantees. I didn’t even want to give you conservative numbers because if I gave you conservative numbers, you would be depressed.
This is true even with the people I was talking to early on in my career. A lot of them were young married couples like myself just starting out. I would say, “Here’s what you got to start saving today for the next 40 years to retirement.” The problem is it didn’t look good if I didn’t put at least 10% or 12% rates of return. It also didn’t look good if I went over and put any inflation in there at all, and then I’d tell them to pull out money and hopefully, they made enough in retirement. I would assume that they would still make a lot of money in retirement. I’d say, “You’re still making 8% a year,” even if it’s a conservative number in retirement.
The truth is that 8% a year is high for the stock market. It’s not that great. You can not do very well in the stock market. You might be able to make more short-term like what we saw in the 2010s. As we’ve moved to the 2020s, it’s not as great. It hasn’t been as high as before. That’s a problem because you get these unrealistic expectations. If you’re a Millennial right now, you’ve been saving. Even for some of you Zoomers or the younger generation, you’re starting to enter the workforce. If you’ve seen some big market swings, you’re thinking, “I can make a lot of money in the market.”
You Can’t Save Enough
If you’re a Gen X-er like me or the Boomers, we’ve seen Y2K and the Great Recession. Some of us have even seen other recessions prior, like in the ‘90s. There were other recessions then. It affects your 401(k) balance and what’s going on. As promised, what do we do? I’ll tell you right now, you can’t save enough. Let me show you why.
Let’s assume you have 40 years to retire. You start off from nothing, but you’re going to save $10,000 a year. That’s a pretty good sizable amount. I’m going to put the interest rate at 6.5%. Why do we say that? The truth is if you’re saving in a 401(k), let’s say Fidelity. Fidelity’s mutual funds perform over 2.5% worse than the average. Just so you’re aware, when Fidelity came out with these numbers, they were showing these target date retirement funds, which most Millennials and Zoomers are using right now. The problem is that they’ve been averaging a lot less. The stock market has been averaging for the last 30 years about 7.75%. It has gone up lately because this year has been good.
Unfortunately, it’s done about 2.75% worse on the 401(k) Fidelity funds, the target date funds you pick. This means you make about 5% a year if that is the case. I’m going to put in 6.5% because assuming you have a match, a match will give you a little bit more. It won’t give you a 100% return. That’s not possible. It doesn’t work that way. Long-term is more like 6.5%. I’m being pretty liberal here with my numbers, but I believe I’m also being conservative on the inflation rate. I put it at 5%.
Some of you might say, “They say 2% or 3%.” It has never been 2% or 3%. Ever since they took us off the dollar, they’ve been manipulating the numbers to show us a lower amount so that they don’t have to raise Social Security benefits as high, letting Social Security last longer. We’re already at the point where in the next presidential term, whoever is the next president going to be, whether it’s Biden again or somebody else, Social Security is going to be a big thing of debate because it’s about to go bankrupt. It’s about to start losing more money than it’s making significantly more. They have to make a change.
What they’ve been doing is stretching out those numbers and kicking the can down the road so that it’s only now in the 2020s. It hasn’t been earlier like in the 2000s or ’90s. They’ve been using a different inflation number that they report saying it’s less. In truth, inflation is almost about 6% or 7% higher. If you’re not convinced, check out ShadowStats.com. There’s some good stuff on that. Put it in 5%. I’m being pretty conservative on that number while being liberal on interest rates.
Just to play devil’s advocate against my point of view. Look at your imbalances, $1.87 million. You might say, “That’s not too bad, Chris. Three percent it’s not quite $60,000 a year, but it’s still in the 50s. That’s not bad, right?” Was that after inflation? Inflation buying power is like $265,000. If you pull off 3% of that, it means you’re living on an $8,000-a-year lifestyle.
Notice, you save $10,000 to live on $8,000 a year. This is why retirement plans don’t work. I can make this number higher. Let me put in 8%. I’m going to be really liberal now. We jumped up $2.8 million, but after that, it’s less than $400,000. $400,000 times 3% is $12,000 a year. Finally, you got a little bit more than that $10,000 you’ve been saving. This is why I tell people that whatever you’re saving per year in your 401(k) plan or even for your own retirement plan, it’s even less. Whatever you’re saving per year into your own retirement plan, that’s about what you’ll live on per year if you don’t want to run out of money. There’s an answer and there’s hope, but it requires you to do it differently.
What if you did it differently? What if you instead earn more money? I’ve shown other videos that show this but just look at this example. If you saved $100,000, you’re supposed to live on 3%. That’s $3,000 a year. What if that $100,000 makes me 1% a month or 12% a year? 1% a month means that my $100,000 makes me $1,000 a month, not $250 a month based on retirement planning, but $1,000 a month. I make quadruple the income with the same money. Do you want the answer to how to get out of that? Do you want it to be better? Stop worrying about saving in these dumb retirement plans. I’ll tell you, they are drastically under-saved.
Stop worrying about saving in these dumb retirement plans anyway. Click To TweetI’m sure there’s a percentage like myself who is in this category that’s not saving in their 401(k). My median 401(k) balance is zero because I put zero in my 401(k). I refuse to use them. I haven’t used it since 2004 when I learned differently. Even as a financial advisor, I learned that 401(k) sucked. I haven’t had one since 2004. I got that money out and I used it elsewhere. You can do the same thing. You have hope that you can take that freedom into your own hands today. If you’re working for an employer, you can’t get your money out. If you’re a working employer and they have a 401(k) plan, why put more money in there to only lock it up and not use it, to not make those returns, only to find out down the road it wasn’t enough? Just like everybody else.
The Baby Boomers are at retirement age right now. They’re there and they still don’t feel they have enough. Even if you get over $1 million, which is way beyond the average. Remember, there was another study I shared. Thirty-five percent feel it will take a miracle for them to be able to retire. A third of people with over $1 million in their retirement accounts think that’s still not enough. Some of that’s mental and emotional, but a lot of that’s because they found out when they started meeting with financial advisors because financial advisors pay attention when you have $1 million. They meet with you and say, “You pull out 3% a year.” Just like Dan, who was on our show before said, “I don’t want to live on $30,000 a year. I want to do more.”
That’s where you can do alternative investments, where you buy real assets, not a stock market that goes up and down. It causes your stress level to go up or down and you wonder if the market goes down. That year you have to tap into your savings account instead so you don’t run out of money faster and you’re just constantly worrying about whether you have enough. What if you didn’t have to worry about that? What if you knew you still had enough money that you could do whatever the heck you wanted? You could travel in that RV across the country, and take months off at a time when nobody else is traveling. You can do it at a time when everybody else is in school and you get that freedom.
What if you want to homeschool your kids and you want the freedom to do that same thing to travel during the middle of the year? It’s what I do. We do it with some of our kids. We go and snowboard each winter or leave the winter and go somewhere warmer, and experience something different when everybody else is in school trapped or they’re trapped in their jobs. You don’t have to be trapped in that situation day after day, week after week, month after month, and year after year. You can make changes now to create freedom and give you options to essentially be what we say, “work optional.” You can work because you want to, not because you have to. That requires you to do something different.
That’s why we talk about real estate investments. That’s why we talk about things like oil and gas, businesses, franchises, doing things in the self-storage space, and apartment space. You can do things with raw land. There are all these options that you can get into that have real backing to it. Real assets protect your money more, but they also provide income. You need that difference. The income is what’s important. It’s not about the money that you have in a summer retirement account. It’s about what that money does for you to create income month after month, year after year. There is where you get that freedom.
As I said at the beginning, check out our passive income calculator, and see what you could be doing right now. I’m also going to challenge you to do something more. Don’t just keep educating yourself. I want you to educate yourself, but at a certain point, you have to ask yourself, when is enough enough? When am I willing to make a change in my life today? If that’s the case, don’t just do the calculator. Ask us questions and see what we can do for you. You can reach out to us at MoneyRipples.com. Regardless, use this to empower you not to be depressed. This education is here to empower you to see that other path that you could have taken that doesn’t work. Choose your own adventure path that doesn’t lead to financial freedom.
We’re seeing it right there in those two articles and those studies will keep coming out. I’ve been saying this for years. These articles will come out more and more. They say, “You haven’t been planning well enough. You don’t have professional help.” That’s not what you need. You don’t need a financial advisor to sell you more crap. You don’t need a calculator to tell you what you’re not going to make. You’re just guessing the numbers. You need something that can create income now. All you can control is today. We don’t know if you’re going to be alive 30 or 40 years from now.
Right now, you can make a change in your life that impacts you, your family, and generations beyond you. It can allow you to be able to pass on legacy and wealth beyond yourself. You can be the one person in your family, the one person in your life, or maybe among your own friends who make a change that alters the course of your family’s destiny. I challenge you to make that happen today. Go and make it a wonderful and prosperous week. See you later.