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Americans squeezed on saving money even while hoping to retire at 60

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When it comes to retirement, there is some work to do—financially speaking—to close the gap between expectations and reality.

A recent Varo survey1 showed that while many Americans hope to retire between 50 and 60 years old, many don’t have enough to cover a $500 emergency bill tomorrow, let alone have the savings plan in place they’ll need to get them there.

Here, we’ll do a deep dive into what these survey results tell us about retirement savings trends, as well as discuss how to start closing the gap between retirement expectations and actually saving for it.

6 in 10 Millennials don’t have $500 saved

Overall, the survey results showed that people in all age groups are squeezed when it comes to saving. 6 in 10 (61%) millennials and 55% of respondents across all age groups don’t have $500 in cash to cover an emergency expense. Here are some of the other key takeaways.

  • 49% save less than 5% of their income.

  • 24% are saving nothing at all.

  • Boomers are most likely to have $500 in emergency cash (63%), but 26% of them don’t have any savings at all, such as a savings account, 401(k), etc.

  • 43% of all people who don’t have access to $500 also do not have health insurance.

  • 4% were “super-savers”, putting away at least 25% of their income.

A national trend

Survey respondents underscore the broader trend in the United States. The national saving rate is currently less than 5% as of January 2023, according to data gathered by the Federal Reserve. This marks a substantial dip from the 1970s when Americans had a personal savings rate well over 10% on average. Financial experts recommend that people save at least 10-15% of their income across cash and retirement savings goals.

There are many factors behind the savings crunch—economists have pointed to broader macro trends over the decades in the United States, including higher costs of living, wage stagnation, and rising student loan debt, to name a few.

Other factors are more recent, including things like social media. A recent Varo survey showed that people are more likely to spend money after looking at social media in order to feel better about themselves.

Are savings accounts the missing link?

According to the survey, 45% of people don’t have a savings account, and they are more likely to save money in cash or checking than a savings account.

Among those who do have a savings account, nearly one-third (30%) said they did not know the Annual Percentage Yield (APY) for that account. Of those who did know their APY, the majority (56%) said they are getting less than 1.00% APY.

With a 3.00% APY, Varo offers one of the highest yield savings accounts in the country2, which underscores our social mission to help people improve their overall financial health.

“Saving money is a key to long-term financial health,” Colin Walsh, Varo Founder & CEO, said. “That’s why we offer one of the highest Annual Percentage Yields (APY) for a savings account in America. We want saving money to be as easy as possible and earn you real returns on interest.”

Expectations vs. reality

So, how will Americans who plan to retire by 60 and live into their 80s live on little to no savings? The numbers show an increasing disconnect between expectations of retirement and the reality of saving for it. 

  • One in five (23%) of millennials currently receives monthly financial assistance from relatives, and more than half (58%) don’t have a comprehensive financial plan.

  • The reality of the situation isn’t stopping people’s dreams of retirement, the survey showed. Most respondents under 60 (59%) said they plan to retire by 60, and many said they expect to live into their 80s (37%), with another 20% believing they’ll live into their 90s.

  • More than one-third (35%) of millennials without $500 in emergency cash still say they plan to retire by 60, and despite their current situation, nearly a third of millennials assume they’ll be living on $100,000 a year when they do retire.

  • The 22% of people who said they have no money saved still think they could retire by age 50 or younger. Just 35% of those with no savings still have a goal amount in mind  in order to retire at their target age.

  • Only 40% of respondents have access to a retirement savings plan through their employer, and of those with access, 81% participate in it. Gen X and Millennials are most pessimistic, thinking they’ll never be able to retire (19% and 16%, respectively).

  • Four in 10 (41%) of respondents feel that enjoying themselves every day is most important when it comes to money, followed by 35% who think saving for periodic big events or purchases like a vacation is most important. 

  • Less than a quarter (24%) think saving for retirement is most important.

The good news?

Even as saving money is a struggle, many people say they don’t need (too) much to feel happy or rich. The majority of people (70%) think they can be happy living on less than $100,000 a year. And almost a third (31%) of respondents indicate they only need to make $25,000-$49,000 in annual income to be happy. What’s “rich”, then? More than a quarter of respondents (28%) defined “rich” as earning $100,000 to $249,000 per year as “rich”.

Most respondents feel they are not financially better off than their parents were at their same age (56%). But they also feel that their life and career options are better than their parents were (61%). Respondents are split on whether or not they are happier than their parents were at the same age (50%). Gen Xers are the most positive in this regard (55%).

Tech is making it easier

Can technology make it easier for people to save? 4 out of 10 people say they haven’t even set foot in a bank in the last 6 months (and the top reason to do so is to deposit a check, according to 60% of respondents.) Meanwhile, the majority of people (69%) say tech has made it easier or the same to manage their finances. 

Walsh commented, “We absolutely believe technology can help people save. At Varo, 75% of our customers use technology—like automated savings tools—to help them save on a regular basis.”

It’s never too early or too late to start saving

Despite the general disconnect between savings habits and retirement goals, it’s important to remember that it’s never too early or too late to start planning for the future. Although retirement may seem too far away to even think about, as with any type of saving, the sooner you’re able to start, the better, even if you’re behind on where you should be.

Bit by bit, you can start a nice nest egg by with building up just $10,000 in your 401(k) or other retirement investment account. Part of your success in doing so relies on developing a saver’s mindset and taking advantage of retirement savings accounts, as well as other financial tools and services like high-yield savings accounts, automatic savings tools, and accounts with no hidden fees.

By taking even the very first steps you need to, especially those that are currently the most manageable, you can soon put yourself in better financial shape for the future than you were before.  

1 December 2018 survey for Varo conducted by Qualtrics of 1,200 U.S. consumers between the ages of 18 and 75.

2 According to The Ascent’s review.

Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.


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