How Do You Compare? Average Retiree Savings, Home Equity and Other Balances

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This story originally appeared on NewRetirement.com.

According to reporting from the Transamerica Center for Retirement Studies, retirees have a wide variety of savings and investments.

Keep reading to see how your accounts and investment types compare to those of most retirees.

Note on average versus median: The average numbers you will review below are usually higher than median figures because very wealthy individuals can inflate the average. The median is just the middle number in a set of numbers.

Cash and cash accounts

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You want money in cash accounts that you will need for shorter-term living expenses and emergencies.

  • Living expenses: You want cash available to cover your spending needs that are not met by existing income. Ideally, you have cash available for the next six months to two years of spending. Use the NewRetirement Planner to see the delta between your income and expenses.
  • Emergency cash: Most experts recommend that you have enough emergency cash to cover three to six months of living expenses. In a pinch? Explore the best and worst sources of emergency money.

There are three common types of cash accounts: checking accounts, savings accounts and cold, hard currency.

Checking account: 77%

Before e-banking, it was almost impossible to function without checking. And Transamerica reports that a full 77% of retirees have this type of account.

The Fed’s most recent Survey of Consumer Finances announced that the average checking balance in 2016 was $10,545 (with the median balance being only $3,400).

Balances are only slightly higher for older Americans at:

  • $10,337 for those who are 45-54 (median is $3,400)
  • $11,098 for those who are 55-64 (median is $5,000)
  • $15,752 for those who are 65-74 (median is $7,000)
  • $15,803 for those who are over 75 (median is $7,600)

Savings account: 62%

Transamerica reports that 62% of retirees have a savings account.

The balances listed below reflect the averages across savings accounts, money market accounts, call deposit accounts and prepaid cards.

  • $30,563 for those who are 45-54
  • $46,102 for those who are 55-64
  • $51,948 for those who are 65-74
  • $35,597 for those who are over 75

Cash on hand: 46%

Transamerica reports that 46% of retirees are keeping cash at home.

Since the good old days of the Y2K panic (and before), it has been a common practice for people to keep some amount of cash on hand at home. Whether it is stashed in the mattress or a coffee can in the freezer, cash can be useful in a natural disaster when the grid might be down.

Some experts do recommend that you have about three days’ worth of cash to get through a tough spot. Think through what you might absolutely need to buy in a disaster and have that amount on hand.

However, also remember that keeping cash at home means that the money is not earning returns and is also vulnerable to theft and fire.

Homes

Senior couple at home
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Three out of four retirees own their homes. And home equity accounts for a significant portion of household wealth — growing significantly as people age.

According to Census Bureau data, households aged:

  • 45-54 have $70,860 in home equity, totaling 64% of their net worth
  • 55-64 have $103,400 in home equity, totaling 61% of their net worth
  • 65-69 have $136,670 in home equity, totaling 61% of their net worth
  • 70-74 have $153,300 in home equity, totaling 72% of their net worth
  • 75 and older have $149,860 in home equity, totaling 75% of their net worth

Home equity can be a critical component of a retirement plan. This money can be tapped by retirees in a wide variety of effective ways, most commonly through downsizing or securing a reverse mortgage.

Retirement accounts

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Retirement accounts are tax-advantaged accounts that are typically not used until you are in retirement. In most cases, there are hefty tax penalties for withdrawals made before you are age 59½.

IRA: 36%

The Investment Company Institute (ICI) reports that 36% of all Americans have an IRA — the vast majority of those accounts being traditional IRAs as opposed to Roth IRAs or SEP IRAs, SAR-SEP IRAs or Simple IRAs.

However, Roth IRAs are growing in popularity. In fact, it can be a savvy tax strategy to convert money to a Roth IRA. (Learn more about Roth conversions.)

The Employee Benefit Research Institute (EBRI) reports that the average IRA balance is $123,973. However, IRA accounts that have been held for 20 years or longer are valued at $283,200 on average.

401(k), 403(b) or similar plan: 45%

According to the Pension Rights Center, 45% of all workers participate in a workplace retirement plan and 34% participate in a retirement savings plan.

According to Fidelity, the average 401(k) balances by age cohorts are:

  • $93,400 for those ages 40-49
  • $160,000 for those ages 50-59
  • $182,100 for those ages 60-69
  • $171,400 for those ages 70-79

Types of investments

Portrait of investment advisor consulting with retired woman at home. Business adviser and old woman planing the future.
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Not all investments are equally valued by retirees. Ownership in the stock market is the most popular.

Stocks, mutual funds and exchange-traded funds (ETFs): 58%

According to Gallup, 55% of all Americans and 58% of those over 65 own stocks.

And the Pew Research Center found that the median holding for those over 65 is $100,000. Most of that investment is in 401(k) accounts, and some of it may be represented by pensions that invest in the stock market.

Certificates of deposit (CDs): 20%

A certificate of deposit is a deposit you make with a bank that includes the promise that you won’t withdraw the money for a set period of time. To make that deal attractive, the bank gives you a better interest rate than you get with a regular savings account.

After a long decline in use, CDs have been making a comeback. Transamerica reports that 20% of retirees have CDs.

Bonds: 12%

A bond is debt you can buy from a government or a corporation. You loan the bond issuer money for a set period of time, and they pay you a premium for that loan that’s known as the yield of the bond.

Overall, direct household participation has fallen largely due to low interest rates. Transamerica reports that 12% of retirees have bonds.

Real estate investments: 9%

There are many different ways to invest in real estate beyond owning rental property. Transamerica reports that 9% of retirees have real estate investments.

No investments: 12%

Cue the sad music: The reality is that many retirees don’t have investments at all. The good news? It is possible to live on Social Security alone!

Own their own business: 1%

While this percentage is low, more and more retirees are starting businesses after retirement, and they are good at it.

According to the Global Entrepreneurship Monitor (GEM), the highest rate of entrepreneurship worldwide has shifted to the 55-64 age group. And, entrepreneurial activity among the over-50s has increased by more than 50% since 2008.

In America, 34 million seniors want to start a business.

Learn more about financial success later in life and explore 12 business ideas for people over 50.

Annuities: 18%

Transamerica reports that 18% of retirees are getting income from an annuity.

An annuity is a payment stream that you purchase with savings. You are paying a fixed sum of money for a predetermined revenue stream.

The most valuable asset — a plan — is done by just 18% of Americans

Senior couple making financial plans
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Odds are good that because you are reading this article, you are doing better than the averages — far better. But, do you have what is actually perhaps the most valuable and underutilized asset? A plan? A written plan for your retirement finances?

According to Fidelity, a mere 18% of Americans have a written retirement plan.

When you retire, you are no longer living month to month or year to year. When you stop working, you are dealing with a finite set of financial resources that need to be budgeted to fund the rest of your life. You really do need a plan.

It is easy to create, manage and track a retirement plan with the NewRetirement Planner. Best of all, the comprehensive system enables you to do better with your time, taxes, investments, health care and more. That will result in more wealth, security and happiness.

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