In a recent announcement on Varney & Co., Nick Nefouse, BlackRock’s Global Head of Retirement Solutions, unveiled a plan aimed at expanding retirement investment options. This initiative comes in light of a revealing study conducted by the National Institute on Retirement Security (NIRS), which highlights the alarming state of retirement savings for American workers.
The study finds that the median American worker has saved only $955 through defined contribution plans, such as 401(k) accounts. This figure starkly contrasts with the retirement savings targets established by financial firms like Fidelity. For instance, Fidelity recommends that individuals save an amount equivalent to their annual salary by the age of 30, scaling up to ten times their salary by age 67. Unfortunately, the NIRS study indicates that none of the median respondents, regardless of age, race, education, or gender, had retirement savings or net worth meeting these recommended benchmarks.
Looking at the broader picture, among all workers aged 21 to 64, the average account balance in defined contribution plans—a figure that includes those who have not saved anything—stands at $93,229. However, those with at least $1 saved in such a plan have a much healthier median savings balance of $40,000, with averages reaching $179,082.
NIRS’s findings also shed light on the disparity in retirement savings among various demographic groups. On average, men saved 19% of their target, while women saved 17%. When broken down by racial categories, Asian and White workers fared better than Black and Hispanic workers, saving 23% and 20% of their targets, respectively. Educational attainment is another critical factor: workers with only a high school education saved just 10% of their targets, while those with advanced degrees saved up to 26%.
The study further reveals that the youngest workers, aged 21 to 34, are leading the way in terms of saving relative to their targets, achieving 21%. In contrast, workers aged 55 to 64 saved 19%.
Despite these insights, NIRS emphasizes that the retirement savings figures are concerning, especially for those relying on defined contribution plans as a significant income source in retirement. The study suggests a pressing need for improved financial education, access to better investment options, and policy changes to enhance retirement savings among American workers.
