Americans are not saving enough for retirement while still working

Didier Malagies • March 29, 2023


While there are numerous well-known challenges that seniors face during retirement, Americans are still not saving enough money to outlive their resources, according to a study by Bank of America (BofA)..

According to BofA’s retirement research and insights, measured in December, the average retirement contribution rate across all age groups is 6.4% of income. The average contribution rate among all age groups in 2022 dropped from 6.6% one year prior.


And, that number is even lower for 26% of study respondents, dropping to only 3% or less. Of those saving 3% or less, about half are baby boomers (43%). While nearly 50% of baby boomers contribute 3% or less to their accounts, just 24% of boomers are saving at least 6%.


Meanwhile, millennials are the generation with the highest percentage of people contributing 7% or more of their income to their retirement accounts. Per the study, about 43% of millennials are contributing 7% or more of their incomes to retirement.


All of these figures fall below retirement savings recommendations by financial professionals. According to Fidelity Investments’ “retirement roadmap,” the recommended savings rate while working is 15%.


“After analyzing enormous amounts of national spending data, we concluded that most people will need somewhere between 55% and 80% of their pre-retirement income to maintain their lifestyle in retirement,” Fidelity said. “Not all of that money will need to come from your savings, however. Some will likely come from Social Security. So, we did the math and found that most people will need to generate about 45% of their retirement income (before taxes) from savings. Based on our estimates, saving 15% each year from age 25 to 67 should get you there. If you are lucky enough to have a pension, your target savings rate may be lower.”


A recent story in the Washington Post noted that many Americans are not ready for the “crushing costs” associated with care in later life. Home health aide worker supply and nursing home aversions also limit the ability to address these needs, and are exacerbated by the average person not considering these issues until later in life.



The reverse mortgage industry in recent years has tried to position itself as offering a product that can aid in the development of a financial plan, especially as senior-held home equity has increased to its highest levels in recent years. However, there are indications that senior-held home equity growth could be starting to slow.

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