How does my retirement balance compare to other people of my same age?

[00:00:00] Ralph Estep, Jr.: Are you falling behind in your retirement savings? Imagine reaching your golden years and realizing you can't afford the retirement you've always dreamed of. Unfortunately, it's a scenario that's all too real for many of us. But what if I told you there's still time to turn things around? Today, we're diving deep into retirement savings, and trust me, this is an episode you don't want to miss. Today, we're going to explore how your nest egg stacks up against others and what you can do to boost it. Stay tuned for some eye-opening stories that might just change your financial future.

[00:00:37] Ralph Estep, Jr.: Now before we jump in, if you missed yesterday's show on seeing scripture with fresh eyes, make sure to check it out. You do that at askralph.com. It's a powerful episode that might just reignite your passion for God's word. It certainly helped with mine.

[00:00:53] Ralph Estep, Jr.: Now let's dive into a message from one of our listeners. This one comes to us from Nevada and this lady's name is Debbie, and she writes this.

[00:00:59] Ralph Estep, Jr.: "Dear Ralph, I'm 45 years old and I've been putting off saving for retirement. I always thought I had plenty of time but now I'm starting to worry. How does my retirement balance compare to others at my same age? What are the long-term effects of not saving enough? And most importantly, what can I do to catch up? I feel like I'm drowning in financial anxiety."

[00:01:22] Ralph Estep, Jr.: Well Debbie, first off, thank you for your honesty. Your situation is more common than you might think, and I'm glad you're taking steps to address it now. So let's break this down and tackle each of your concerns and remember, this show is all about answering your questions. If you've got a burning financial question, don't hesitate to send it over. After all, that's why we call it Ask Ralph.

[00:01:46] Ralph Estep, Jr.: Well, welcome to today's episode of the Ask Ralph show. I'm your host, Ralph Estep Jr., and I am thrilled you've chosen to join me today. Your commitment to improving your financial future while growing in faith is truly inspiring for me. Now, before we dive in, I want to remind you to visit our website. That's at askralph.com. I want you to join our community and share this episode with someone who might benefit from it. And here's a little bonus for you. When you join our email list, you'll get a free copy of my book, “Mastering Your Finances.” Now, if you bought this on Amazon, it would cost you 10 bucks but it's my gift to you for being a part of our community.

[00:02:20] Ralph Estep, Jr.: Got a question for the show? Send it to ralph@askralph.com or visit askralph.com and click on the microphone icon at the bottom and it's that simple. You can record your message. I would love to hear from you.

[00:02:35] Ralph Estep, Jr.: As we delve into today's topic, let's keep in mind the wisdom from the book of Matthew 6:21. It says this. "For where your treasure is, there your heart will be also." This verse reminds us that our financial decisions often reflect our deeper values and more importantly, our priorities.

[00:02:57] Ralph Estep, Jr.: Now let's address Debbie's question and explore the critical topic of retirement savings. Let me start with a story that I believe will resonate with many of you. Let's meet Tom and Linda. This is a couple I've been working with for years. When he first came to me, they were in their mid-40s. Much like you, Debbie. Tom was a successful salesman and Linda was a teacher. They had a nice house, two cars and took annual vacations. From the outside, they looked like they had it all together, but here's the kicker. They had less than $50,000 saved for retirement. Tom always assumed his company's pension would be enough to cover it. Linda thought her teacher's retirement fund would cover their needs. They were living in a financial fantasy world, and they didn't even know it. Fast forward 20 years, Tom and Linda are now in their mid-60s,

[00:03:44] Ralph Estep, Jr.: and the reality of their situation has hit them hard. Tom's company went through a restructuring and his pension isn't nearly what he expected. And unfortunately, Linda's teacher's retirement fund while helpful isn't enough to maintain their lifestyle. They're faced with a harsh reality that they need to work well into their 70s just to make ends meet.

[00:04:05] Ralph Estep, Jr.: Now, contrast this with another couple I work with, Mike and Karen. They started planning for retirement in their 30s. It wasn't always easy. They had to make sacrifices. Their sacrifices meant fewer vacations, driving older cars, living in a smaller house, but here's what they did. They consistently put away 15% of their income into their retirement accounts. Fast forward to today

[00:04:30] Ralph Estep, Jr.: and Mike and Karen are also in their mid-60s. But their situation couldn't be more different from Tom and Linda's. They have a retirement nest egg of over $1.5 million. Right now they're planning trips around the world considering buying a vacation home. And most importantly, they have peace of mind knowing they won't be a financial burden on their children.

[00:04:51] Ralph Estep, Jr.: Now these two couples illustrate the long-term effects of not putting enough away for retirement versus planning well. Unfortunately, the difference is stark and it's life changing. So Debbie, to answer your first question about how your retirement balance has compared to others at your age, according to recent data, the average 401(k) balance for people in their forties is around $120,000. But here's the thing. Averages can be very misleading. Many financial experts suggest that by age 45, you should have about four times your annual salary saved for retirement. That was stark.

[00:05:30] Ralph Estep, Jr.: Well now let's talk about some hard data. This comes from an article in NerdWallet from the Federal Reserve Board. I'm going to put a link to that article in the show notes. Based on data from the 2022 survey of consumer finances, the average retirement savings for all families, regardless of age, is $333,940. Well, let's break that down by age. For those of you who are under 35, the average household retirement savings is $49,130 with a median of just under $19,000. In the survey consumer finances, nearly 50% of families headed by someone under age 35 had retirement accounts. What they mean here is, an IRA, a Keogh, a certain employer sponsored accounts, which is a 401(k), 403(b), and thrift savings accounts of the families in this age group who have retirement holdings, like I said, the average value of those holdings is just under $50,000.

[00:06:28] Ralph Estep, Jr.: Well, let's move to ages 35 to 44. Now the average for this group is $141,520 with a median of 45,000. So according to the data, nearly 62% of households headed by someone in this age range had a retirement account. We already talked about the average and the medians on those.

[00:06:49] Ralph Estep, Jr.: Now let's move into the age of 45 to 54. Now here we find an average of $313,220 and a median of $115,000. And we still have 62% of households having some sort of retirement account.

[00:07:06] Ralph Estep, Jr.: Let's move into ages 55 to 64. I'm getting closer to that age than I was a couple years ago. Here the average household retirement savings has jumped to $537,560 with a median of $185,000. Now the thing they mentioned in this article, this age range is close to social security's definition of full retirement age, which ranges anywhere from 65 to 67, depending on your year of birth and in this range, 57% of households headed by a baby boomer have some retirement holdings.

[00:07:37] Ralph Estep, Jr.: Now, the next age bracket they talk about is a 65 to 74. So if you find yourself in this group, the average household retirement savings has peaked at $609,230 with that median being $200,000. Now the bulk of these households include someone who is already in retirement or is of retirement age. And according to this survey, 51% of the age group have retirement accounts.

[00:08:05] Ralph Estep, Jr.: And then the final group is those ages 75 and older. Now, here we start to see that that average has decreased because frankly people are getting into those monies and are using them. So the average household retirement savings for those 75 and older is $462,410 with an average median of $130,000. After this point, the truth is averages and median account retirement balance is beginning to fall as does the percentage of people who have these retirement accounts.

[00:08:33] Ralph Estep, Jr.: Now listen, I read this, and I started to panic because I am nowhere near what I should be for my age, but don't panic if you're not there yet. The key is to start taking action now. Which brings us to your last question, Debbie. And that's what can you do to boost your retirement account balances starting today?

[00:08:49] Ralph Estep, Jr.: The first thing you want to do is maximize your contributions. If your employer offers a 401(k) match, take full advantage of it. It's essentially free money. One of the first things I talk to clients about when they come in and get their taxes done. I look at their W-2 form. I see if they have a retirement account. And if they've got that box marked the yes, they have one. The first thing I say to them is, are you contributing to this? And if they say to me, well, you know, I really, I was like, you're leaving money on the table. I asked them, you know, does your employer match. If your employer matches, this is a no-brainer, you should be contributing up to at least the amount of the match. If not, you're giving away money.

[00:09:26] Ralph Estep, Jr.: The second thing you might want to consider is if you don't have a retirement plan through work, or if you've maxed out your 401(k) or don't have access to one, consider opening an IRA. Now that can get a little bit hairy if you've got another account that you're subject to. So you want to talk to a tax pro before you get into that.

[00:09:43] Ralph Estep, Jr.: Now, one of the big things this leads me to is number 3. If you want to put aside money for retirement, one of the things you're going to have to do right away is cut unnecessary expenses. You've got to look at your budget and find areas where you can cut back. That's the place to redirect that money to your retirement savings. This is what we talked about with that second couple I mentioned. They made the decision to sacrifice. They drove cars until they couldn't drive them anymore. They lived in a modest home, but they really set their plan at putting 15% per year until their retirement. And that has grown that money to over one and a half million dollars.

[00:10:21] Ralph Estep, Jr.: Well, another thing you consider. Number 4 on my list here is consider a side hustle. Use the skills God has blessed you with to earn extra income that can go directly into your retirement accounts. I've got a few clients that actually do side jobs, and they take all of that money, every dollar of it, after they put aside some for taxes and put that into their retirement account and it really does grow. Now it doesn't have to be a pretax retirement account, and it could be something like you're going to invest in real estate. You're going to invest in something other than, it doesn't have to be those retirement accounts. That's what we're talking about today, but it could be other things.

[00:10:56] Ralph Estep, Jr.: Number 5. This one is critically important. You've got to educate yourself. The more you understand about investing in retirement planning, the better decisions you're going to make. If you don't know what you don't know, you're never going to accomplish those things.

[00:11:11] Ralph Estep, Jr.: So Debbie, one of the things I'm going to say too right now is get a better understanding of what accounts you have, get a better understanding of what things are out there that your employer offers. You didn't mention to me if you're working, maybe you're working a side business or something like that. Look at some options. And the final thing. Leads me right to this one.

[00:11:30] Ralph Estep, Jr.: Number 6. Seek professional help. You have got to consider working with a financial advisor who can help you create a personalized retirement strategy. One of the things I do in my practice every single day is when I meet with new clients, or I meet with new business clients. Well, the first thing I talked to them about is okay, that's great. Let's grow your business. Let's make it profitable. What are you doing for retirement? Because listen, in less than a month, I'm going to be 52 years old. And I truly started my retirement planning a little bit too late. Now I've got some other things that I'm not going to get into because it's not the thing you share on a podcast, but you have to focus on that early.

[00:12:05] Ralph Estep, Jr.: My son is in the coast guard. He just turned 27 and he has for the last several years focused on retirement. Yes. And you're going to say, well, he's 27 years old, but yes. He's doing that 15% plus. So you've got to remember this. It's never too late to start. Yes, you may need to be more aggressive with your savings, but with discipline and smart planning, you can still build a comfortable retirement.

[00:12:28] Ralph Estep, Jr.: So Debbie, even at age 45, it's not too late. And this is where I'm going to circle right back into where your faith comes in. In the book of Luke chapter 14, verse 28, it tells us this. "For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?" This verse reminds us of the importance of planning and preparation in all aspects of our lives, including our finances and including our retirement. Your retirement journey is not just about accumulating wealth. It's about creating a future where you can serve God and others without financial stress. It's about having the freedom to say yes to opportunities

[00:13:09] Ralph Estep, Jr.: God may bring your way in later years. So Debbie and everyone else listening, I encourage you to take action today. Start today with some small steps if you need to, but start. Your future self will thank you.

[00:13:22] Ralph Estep, Jr.: Well to recap, we've explored the importance of today is that whole idea of retirement planning. We talked about average savings and listen, I'm not one of these people that says to compare yourself, but I think it's an eye opener, so you know where you stand. We talked about some strategies to boost your retirement accounts, but remember this, it's not about keeping up with others. But it's about securing your own financial future and the ability to serve God in your golden years.

[00:13:48] Ralph Estep, Jr.: Well, thank you for joining me today on this journey of financial wisdom and faith. Now tomorrow, we're going to tackle another crucial topic. It's technology Tuesday so we're going to be talking about, am I using technology for connection or am I using it for what we call escapism? It's a question that touches on both our digital and spiritual lives. So be sure to tune in tomorrow.

[00:14:07] Ralph Estep, Jr.: And now, let me leave you with a call to action. If you're feeling overwhelmed by retirement planning or any aspect of your finances like Debbie, I'm here to help you. You can schedule an appointment with me at askralphpodcast.com/store. Together, we can create a personalized plan to help you achieve financial success. But more importantly, why I do the show, to live out your God given dreams. Remember this, every step you take towards financial health is a step towards peace of mind and the ability to serve God more fully. So as I always say, stay financially savvy and God bless you abundantly.