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01:43 Age
04:34 Income
07:02 Current Balances
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Record High Savings & 401k Balances At Record High Levels | Where Do You Stand?
It’s no secret that the COVID-19 pandemic has had a profound impact on economies worldwide. Businesses have shuttered, people have lost jobs, and the overall financial outlook has been uncertain for months. However, amidst all of this chaos and uncertainty, there’s a silver lining – record high savings and 401k balances.
According to recent reports, American households saved an astounding $3.6 trillion in 2020, a sharp increase from previous years. This surge in savings can be attributed to multiple factors. For one, pandemic-related lockdowns and restrictions forced people to limit their spending on non-essential items such as entertainment, dining out, and travel. These enforced lifestyle changes, while undoubtedly challenging for individuals, have inadvertently resulted in significant savings for some.
Additionally, the government stimulus packages played a crucial role in boosting savings. Stimulus checks and expanded unemployment benefits injected much-needed liquidity into households, allowing many to set aside extra funds. Instead of immediately spending these additional resources, individuals decided to save or invest their money wisely.
Moreover, another contributing factor to the surge in savings is the reduced debt burden. With lower interest rates and forbearance options, people were able to pay down debt or defer their payments, leaving them with extra income that they could save. This reduction in debt coupled with increased saving opportunities has helped American households build up their financial safety nets.
In addition to record-high savings, 401k balances are also flourishing. Despite the market turmoil in the early days of the pandemic, stock markets have rebounded, and retirement accounts have seen a substantial recovery. According to data from retirement services provider Fidelity, the average 401k balance reached a record high of $121,500 in the first quarter of 2021. This increase is primarily driven by a combination of market growth and diligent contributions by employees.
While these record high savings and 401k balances are certainly impressive, not everyone has been able to take advantage of these opportunities. The pandemic’s economic impact has been devastating for many individuals and families, particularly those in lower-income brackets, who have experienced job losses or reduced incomes. For them, building substantial savings or contributing to retirement accounts may have been an unattainable luxury.
For those fortunate enough to have benefited from the record highs, the question now becomes: where do you stand? With sizable savings and retirement accounts, it’s essential to assess your financial goals and plan for the future. Consider consulting with a financial advisor to develop a personalized strategy. This may involve diversifying investment portfolios, reassessing risk tolerance, or exploring other avenues for growth.
It’s also crucial to strike a balance between saving and enjoying life. While it’s wise to build up financial reserves, it’s equally important to seize opportunities to travel, pursue hobbies, or support local businesses. The pandemic has taught us the value of life experiences, and it’s essential to find a balance between saving for the future and enjoying the present.
In conclusion, the COVID-19 pandemic has led to an unexpected surge in savings and 401k balances for many American households. With lockdowns, government stimulus, and reduced debt burdens, individuals were able to save more than ever before. However, it’s essential to remember that not everyone has been able to participate in this trend. If you find yourself among the fortunate ones, take the time to assess your financial standing, plan for the future, and strike a balance between saving and enjoying life.
Hi Erin, I tell my kids to go all in. With a 401K or 403B if you max out the retirement account and live on the remainder of your income you will get used to living on less and when you do increase your income you are already maxed out. At the hospital I have mentioned to coworkers, lets say that they are a new RN and making a starting wage (In California at Least) $100,000 a year. These are people that went to school and were not making anywhere near $100,000 and all of a sudden they become newly minted RN's making a great income. If you are not used to making $100,000 or more I bet it is easy to live on lets say $70,000 a year and fund both a 403B and a Roth IRA. anyway that is my advice to all those just starting out.
Actually it’s the only reason why so many indexes are up and not crashing as it should be on news and talking heads
I started saving for retirement very late @42. I’m 46 now. I invest 15% with a 10% match in Roth 401K, max out my Roth IRA, & invest $2,000 per month in a brokerage account. I want to retire no later than 65
I will diversify in many different investments like, gold, BTC, Oil, option trading, etc to maximize the overall return.
Our savings rate is about 33% Have maxed my 401K for many years now. As soon as I turned 50, I logged in and ticked the catch up contributions box to max. Then have outside after tax accounts for bridge accounts and building a REIT ladder for steady monthly income in retirement. Right now most my accounts that are dividend accounts have DRIP turned on. when I retire, I will stop that and have all the dividends come to my bank account for more income quarterly. Looking forward to getting out of the rat race early.
Save about 45% at age 60. Saved more than 10 x income. debt free. I still do not feel comfortable with current inflation rates.
Best YouTube channel
Investing in a stick market which is losing money is not termed as saving. Best to very careful about money. Most people assume that stock markets always go up. No, not really. Stock markets also lose money.
This doesn't set well with my selfish side. There is only so much "pie", if everyone else's piece is getting bigger, mine is getting smaller.
Not truly, as I'm invested. But, wealth is relative. If everyone retired with, say $5M, no one would be rich.
Great video. I'm 36 and well behind the average savings amount and rate for my age. But I'm starting to invest about 2 percent of my income and working my way upwards… You made a great point that those with lower incomes will need less saved in retirement too because their expenses are less.
Thanks for breaking down the numbers Erin!
I started with the employer match at age 31 then increased the amount every time I got a raise until I maxed out. I put 100% of my raises in before so never got used to having extra. After I maxed out I finally saw my take home pay increase. Living off the same take home for nearly 10 years was tough but has paid off. In addition to maxing out the 401k I also maxed out my HSA. The max for me was 21% excluding the max HSA. I now contribute 15% excluding company match.
Currently I'm at 21% total savings rate between 403b, Roth and HSA. If I had it to do all over again, I would've invested 0% in bonds when I was younger. Don't think the downside protection of bonds is really necessary when you're a decade or more from retiring.
Been saving and investing for 25 years now, started at 24, average for total time is 20% (including company contributions), saved a little less in 20s and more in 40s but total is 20% of gross income – believe I’m on track to retire at 56
It's not just about saving, it's WHAT to save in. With 401k roth's, this is a great tool for people just starting out, when their tax rates are low. Investments growing tax free for 30 years!!!! As for how much, I kind of agree with the "save till it hirts" because you may not have the ability to save as much throughout your career. You may lose or change jobs, with different situations. I, for one, may a choice to reduce my 401k contributions at one point, to contribute more to my kid's 529 plans. Fortunately, I never lost a job, or had to take a pay cut, so I could make it up later. When I retired in June, I was contributing 18% towards my 401k and HSA, plus 8% from my employer.
Thanks to this video I just upped my 401k contribution by 1%
Time and consistency is the key.
Keep increasing your 401k percentage every year when you get a raise until you hit the max. You won’t miss the money. It’s nice to be able to lower your taxable income every year by $22,500, or whatever that number continues to increase to in the future. Max out the Roth every year as well if you can afford it. Definitely worth it in the long run.
We are putting 20% in my wifes 401k and 5% in my Roth 401k and plan on adding another 5% to mine next year.
I max out my 401k and Roth IRA each year. I'm 49 so from next year I can invest more with the catch-up contribution funds. I'm excited about it. 🙂
I graduated from law school at 25 in 1981. Higher education was much cheaper in the 70’s. After 8 years of education (work on a Masters Degree also) I only had about $15,000 in student loans at a 3% rate of interest. My first job paid $28,000 in 1981. I started by saving $250 a month. I had a 4 year car loan when I first started working of $150 a month. I received roughly a 5% raise every year. Each year I increased my monthly savings rate by $50. I worked for a municipal law office that had a 457 plan. I contributed 10% per year to that. There was no employer match. When my car loan was paid off I increased my monthly savings by the $150 I was paying on the loan. I left this employment after 10 years. I had a defined benefits pension. When I left, I took a lump sum payout of $50,000 and rolled it into a qualified Vanguard S&P 500 Index fund. I never touched this money. Today it is worth almost $1 million. I worked at my next job for 30 years. This was a Fortune 500 insurance company which also had a 401k that was matched 100% up to 6% of your salary. In addition, I had a defined benefits pension there also. I retired at the end of 2021 at age 66. Unfortunately, my wife passed away 4 months before I retired. I am currently drawing on her social security as a survivor benefit. After the Medicare Part B premium is deducted I receive about $3400 a month. I am letting my social security grow until I reach 70 and then I will switch to mine. I have approximately $6 million in retirement accounts. $5 million is qualified and $1 million is in various accounts, including a money market which acts as my emergency fund. In the almost 2 years I have been retired, I have not had to touch any of my qualified accounts. I can almost live off my wife’s social security which I supplement from money from my money market when I need extra. I am completely debt free and have not had a mortgage since 2000. When I started my career over 40 years ago, I never dreamed I would have this much money. Compounding truly adds up.
I currently save 50% of my household income (wife included) because w moved to a cheaper state during Covid. Now is my chance to save even more than 50% but she doesn't want to. Oh well.
Anything less than 50% should never be called a super-saver.
Hi Erin,
I’m a huge fan of your videos but I think this way of thinking is outdated for many people. The issue is, it assumes that people are going to work a career their whole life and connects (mentally) a savings rate to that job or career. It should be pretty obvious by now that many people are no longer wanting to work a single career until retirement age. And by focusing on a savings rate based on career, it mentally ties you to a working life.
Many people may want to freelance, change careers, be full time parents, start their own business, live off the grid, make money with real estate, etc and this model doesn’t take that into account.
Rather than a savings rate based on income, I think a way better model is: use a compound interest calculator and figure out a “minimum annual contribution” to one’s IRAs, etc based on your goals. (Everything above that is is a bonus.)
For myself as a freelancer, I value the freedom to not work sometimes, or to have time to work on starting a business, etc. I have my annual minimum contribution and I give myself a year to make that goal. This is gives me so much more freedom to try different things out than just to be locked into a job that I may not even like.
I don't fully understand the whole "3x your salary, 5x your salary" thing. I work in tech, so my salary went from entry-level to…pretty silly, pretty quickly. I feel like I'm almost falling behind, because when i get a raise, i need to catch up to fidelity's "5x" rate. Any insight into this? Which I've explained very poorly?
Starting working just about two years ago. Been averaging a little more than 50% savings toward retirement (first year less so since I was building an emergency fund). Only have a $60k income so I’m proud to get to one year’s income saved up in two years. I was aggressive because I graduated from grad school right as the pandemic hit and so was jobless for a bit and felt behind by the time I got employed at age 27. I’m hoping to have $100k in retirement by 30.
It’s been tough though and while I’m on pace to max the 457b, Roth IRA, and 6% to my pension I don’t think I’ll be contributing much more any time soon. I’m getting a big raise soon (11k more in income and 5k strictly allocated to student loans) and I’ll be enjoying the increased cash flow. I might convert some of the 457b into Roth 457b but not a lot of it.
My advice to folks in their 20s and 30s would be to invest enough in a 401k to get the company match. In their 40s and onward, try to hit that 15% mark. Financial management is a balance of saving, spending, and donating to charities, church, etc. Everyone should try to find the balance that works best for them, within their budget.
Who else thinks Erin is a “Super Duper Saver”? 🙂
I started a bit late saving for retirement (~33 years old) but, increased my savings rate steadily each year until I maxed out my contributions to both my TSP and IRA. At 59 I now have >10X my salary saved for retirement and plan to work and save a couple more years. I don't consider myself a "Super Saver" just a disciplined saver. Appreciate all the data, advise, and encouragement your videos provide. It's nice to have some type of comparison to know how well or poorly we are doing to provide encouragement to continue and/or motivation to save more.
Great video. The only thing I see missing is that price is double every 20 years. So if you are paying $1000 in rent today, in 40 years, you’re gonna need to pay about $4000 for the same place. Now imagine doing this with every one of your bills. So in 40 years you will need to save $4 million to have the equivalent buying power today of $1 million. Just something to think about. Start saving on day one and increases often as you can.
25%? Yeah, time to see that therapist a little more 😀