According to a new report, the average retiree has $177,787 in retirement funds, which is just 39% of the report’s stated “recommended amount” of at least $465,000.
The report from real estate data company Clever, “The State of Retirement Finances: 2021 Edition,” is based on a survey of 1,500 Americans (including 500 retirees) about their retirement funds, debt and financial worries. Despite expecting to have expenses for 20 more years, two-thirds of retirees reported they have less than $50,000 in retirement funds.
Sparse retirement funds leave many retirees heavily reliant on Social Security income to cover their expenses. In fact, nearly 60% of older adults’ household wealth comes from Social Security, which is less than ideal considering SSI is only about $1,514 per month on average—much less than the typical spending of about $3,900 monthly (the report cites data from the Center for Retirement Research, the Federal Reserve and Pew Research Center).
Retiree debt doubled in 2020?
Another key finding in the study is rising retiree debt. According to the report, the average retiree now holds nearly $20,000 in non-mortgage debt, with their debt more than doubling in 2020 due in part to the ongoing COVID-19 pandemic.
The average retiree took on an additional $9,779 in debt 2020, increasing their debt by 104%. Non-retirees, on the other hand, accumulated an additional $5,035, only increasing their debt by 13%.
According to the Bureau of Labor Statistics, retirees’ average post-tax income from all sources is about $39,591 annually, which doesn’t even cover typical annual spending ($47,259 as cited by Pew Research Center).
The $7,700 difference between income and expenditures means many are falling behind despite living relatively modestly, as the majority of retirees live below the standard of living they experienced prior to retirement. The average worker, for instance, spends more than $63,000 annually.
Instead, retirees are spending less than they did before retirement while still spending more than they earn. In fact, nearly 60% of retirees said they struggle to pay for necessities and bills.
Some of that increased debt is due to more retirees carrying credit card debt. In fact, the report says the percentage of retirees carrying credit card debt has increased over the last decade, including a 48% increase between 2019 and 2020.
More findings
- 59% of retirees retired earlier than planned, including 65% who retired early because of health issues. Only about 3 in 10 retirees actually retired when they planned.
- 35% of retirees think they prepared adequately for retirement; one in four worry they’ll outlive their savings. The majority (56%) said they waited too long to start saving for retirement. About 63% said they wish they better understood savings and investments when they were working.
- An interesting juxtaposition is that 57% of non-retirees think they’re preparing for retirement well, which actually could be the case. The average non-retired respondent in the survey reported saving about 10% of their income for retirement.
- 42% of respondents cited “Social Security ceasing to exist” as a primary financial concern, higher than any other concern.