The Average Older American Has This Much in Retirement Savings

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Given that Social Security only pays the average retired worker about $23,000 a year, it's important to have savings of your own to supplement that income.

Of course, contributing to an IRA or 401(k) isn't easy -- not when you have many other bills to cover that you can't put off. But it's essential to prioritize your long-term savings so you don't wind up struggling financially once your career ends.

Now you may be curious to know how much money the typical American is bringing with them into retirement. And the Federal Reserve has some data there that you may find interesting.

What older Americans have saved for retirement

Among Americans aged 65 to 74, the average retirement savings balance is $609,000. But the median retirement savings balance for people in that age group is only $200,000.

When you have a median that's well below the average for a given data set, it usually indicates that a small percentage of people are pulling the average up. So while $609,000 does represent the average of all retirement plan balances the Federal Reserve accounted for, this data tells us that $200,000 is more indicative of what the typical senior actually has available to them.

What's also interesting is that the median retirement savings balance among Americans 75 and older is $130,000. This tells us that some retirees may be spending their savings pretty quickly, given the fairly wide gap between $200,000 and $130,000.

How to set yourself up with a large nest egg for retirement

Even though $200,000 is more representative of the typical older American's nest egg, you'd probably rather kick off your senior years with $609,000 -- or even more. And the good news is that with the right strategy, that may be more doable than you'd think.

The first thing you need to do to meet that goal is to start funding an IRA or 401(k) consistently from a young age. You may not be able to do so the year you start working. But if you're able to begin contributing to one of these accounts by your late 20s, you'll generally be in good shape.

Next, you'll need to invest your savings in the stock market for strong returns. Over the past 50 years, the market's average annual return has been 10%, which accounts for good years and bad. Scoring that same return in your IRA or 401(k) could lead to a large amount of wealth.

So let's see what numbers we might be dealing with. Let's assume you have a 40-year savings window and that your portfolio gives you a yearly 10% return during that time. Here's the ending balance you're looking at based on your monthly contribution.

These numbers show us that with the right approach, you can retire with far more money than the average older American today. So if you've yet to start funding your IRA or 401(k), let this serve as motivation to get moving. Your future self will thank you.

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