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People Making a Lot of Money Still Don’t Have Enough to Retire

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I have a friend who knows a lot of people who make extremely good incomes. We are talking well into the 6 figures. She has noted that more than once they are living paycheck to paycheck. It reminds me a little of this story of getting by on $1,000,000 a year. It has been easy for me to dismiss this as just anecdotal stories, not evidence of any kind of trend.

However, analysis from SCEPA (Schwartz Center for Economic Policy Analysis) says even the highest earners don't have enough retirement savings. While that's not the same as saying that they live check to check, it is noteworthy.

The research looked at people in the 50-64 age range and divided them into four groups based on income. They found that 75% of the people have annual incomes below $52,201 and an average retirement account balance of $26,395.

I know you are probably saying, "Hey these aren't the people making a lot of money. You are pulling a fast one on us Lazy Man." You caught me. I'll get to the top 25%ers rather than the bottom 75%ers in a minute. I took you on a detour because I found it particularly interesting that there's going to be a large percentage of the population in "near retirement" on what amounts to about 18 and a half months of maxed-out 401K contributions. I put "near retirement" in quotes because that's what the study considered those in the 50-64 age group.

So let's get back to the top 25% earners. These are people making more than $52,001 a year. They have an average retirement account savings of $105,012. While that is certainly a lot better than the $26,395 of the 75%ers, it represents just slightly more than two years of annual income... The study also showed that 50% of these people (sorry to go heavy of statistics) have retirement account balances of $52,000 or below, so this is another 12.5% of the population that's really on the light side of savings.

I should note that the people making $52,000, while in the top 75 percentile, are not those making six or seven figures like I mentioned in the opening paragraph. However, it does paint a picture of a problem of the upper class not saving adequately for retirement.

Personally, I have mixed feelings about seeing this. On one hand, my wife and I are doing much better than the averages here and we are only 36. (I wonder if my generation saves more or if we are truly far ahead of the masses.) On the other hand, this paints a pretty bleak picture for dozens of millions of people in America in the coming years. When put that way, my feelings are no longer mixed, it's just down. I don't like to end things there, so here's an unrelated inspirational video:

Editor's Note: The link to the research comes courtesy of Jeremy from GenX Finance. I believe I saw it through a mention on his Twitter feed.

Posted on September 20, 2012.

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12 Responses to “People Making a Lot of Money Still Don’t Have Enough to Retire”

  1. Money Beagle says:

    It just goes back to lifestyle inflation, the second many people get a raise in income, they spend 100% of it. They figure at some point in the future, they’ll start saving, but let’s face it, that someday never comes. Best strategy is to increase your savings every time you get a bump in income.

  2. Contrarian says:

    Hate to say it, lazy, but we are all confronted with a rather bleak financial future.

    We are in the midst of the largest transfer of wealth mankind has ever seen, and it’s the ordinary people who will suffer collateral damage as unwieldy governments struggle to hang onto power while grappling with colossal deficits.

    We’re witnessing an historic and frightening end game. We are in the early stages of a ‘Weimar’ event. The US is awash in debt, the EU is teetering on the verge of collapse, China’s economy is falling far faster than anyone is willing to acknowledge, and Japan is barely hanging on to the last knot in the rope. Just one falling domino will topple the whole global financial system.

    With our elected “leaders” hiding from the reality of our situation and central banks around the world printing to infinity in order to keep the Ponzi from imploding yesterday, even those who have saved, planned and prepared may find in the end that they don’t have enough to retire.

  3. Second money beagle. Lifestyle inflation. Strange though: The people who make more are probably the more educated, the more logical, the ones who think a bit more about money. It isn’t hard to do a couple of calculations and realize the future will cost money. You’de think that the more money you had, the more you’de invest the thought and action required to smooth out the future. I’m like you, far better than the stats you gave.

  4. MJS says:


    As you know, I design 401k plans for a living and then advise the participants in the plan. There are four factors at play, I believe.

    1. People watch commercials of people talking about 7 figure 401k balances and say “I’ll never get there, why bother to do anything. I’ll let the government take care of me.”

    2. They don’t know how to invest or what to invest in, think its a rigged game and just don’t bother.

    3. What people commonly believe is that they should build up a big retirement account with the purpose of spending it down. Most people run out of money because they live too long and don’t account for many factors that can suck you dry. The notion of a retirement plan was to never touch the principle and solely use the gains. It is why an income annuity for elderly has become so popular. Guaranteed income for life, even if you think you can do better, is a pretty good deal.

    4. I think in the end, it comes down to this. The 401k was NEVER created or intended to be a persons sole retirement account. There were still pensions everywhere. Once companies realized they could make the employee a partner in their own retirement, pensions went goodbye. The government never adjusted to this when they could have raised contribution limits or even created better tax advantages options at the time. It is in the governments best interest for people to be asself sufficient as possible in retirement.

    Fidelity did a study which says you should start with a number of 8x salary the day you retire. I think that is soft, but at least a good start.

    One last thing that almost everyone misses. Your 401k number is not your number. It is the number the government allows you to think you have. All statements should have your account balance and below it, what your account looks like at a 28% haircut. Not everyone is in the 28%, but enough are to at least illustrate how much you actually have.

  5. Meghan says:

    I can definitely see this. My parents are 61 and 63 and are upside down on a far too large of a house in a second home community. They own 4 cars, a 5th wheel, a few ATVs, camera equipment (you get the picture). He may have $150,000 in retirement (maybe…) but is used to making $130,000 and is UPSidE down on the house. I have coworkers who are the same age and are all now in the low 6 figure range; none of them can retire. Frankly, I have not seen fiscal responsibility out of that age group. My mother just got the first installment of inheritance money from her mother. The total will end up around $300,000 or so I think (since she isn’t sharing, I don’t know). Want to know what she did? She bought a brand new 2012 Expedition and put vanity plates on it. There goes a good 45,000 on a 4th vehicle when they are upside down with a HELOC. Foolish! When my dad gets on a political rampage about fiscal responsibly, I really would like to punch him in the face.
    Personally, I’d be so upset with myself if I had a mortgage past 55 and know I need good assets. Thankfully I’m one of the few with a pension, so retirement is a little less scary. Still scary though!

  6. […] People Making a Lot of Money Still Don’t Have Enough to Retire @Lazymanandmoney […]

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  8. Andy says:

    Yikes! I think folks will be working well into their 70s/80s given the slow rate of growth and the structural changes are economy is going through.

  9. I love this Free Hugs video. It always makes me feel good to watch it.

    The best idea I have heard yet for increasing retirement savings is defaulted 401K plans. Whenever someone joins a company they would automatically put 5% of their pay into their 401K. If an employee doesn’t want to participate, they can opt out. They can also choose a different amount. It would greatly improve participation, especially for younger employees.

  10. […] – People Still Don’t Have Enough to Retire – No Matter What They Make @ Lazy Man & Money. […]

  11. It all goes back to the story of the grasshopper and the ants. We used to be a nation of ants. Now we are becoming a nation of grasshoppers. And that’s not to say that American are becoming lazy and wreck-less by choice. Wages are frozen and the cost of everything else is going up. We are going to have to be a lot thriftier and a lot smarter if we want to make it.

  12. Lazy Man says:

    Well said, Davey.

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