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.
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