Many American workers don’t have enough retirement savings.

Among American workers aged 21 to 64 with any defined contribution savings, the median balance was $40,000, according to 2023 Census data recently analyzed by the National Institute on Retirement Security.1

When the researchers included workers without retirement savings, the median amount saved in defined contribution plans was a paltry $955.

Retirement in the U.S. is often described as a three-legged stool, with people relying on Social Security, pensions, and individual retirement savings. But fewer workers have pensions. As a result, many retirees rely heavily on Social Security.

According to the NIRS study, Social Security benefits comprise nearly half of seniors’ retirement income.1 Workplace retirement savings, annuities, and life insurance made up just 19% of retirees’ income.

Yet for those who feel behind in saving for retirement, it’s possible to start catching up.

Saving even a little, starting when you’re young, can make a big difference. If you invest $200 a month starting at age 25, you would have more than $620,000 at age 65, assuming an annual return of 8%. By contrast, if you started investing that same amount beginning at age 45, you would have less than $110,000 at age 65.

Plus, if your employer offers a 401(k) plan, make sure to take advantage. With a 401(k), your upfront contributions are deducted from your taxable income, which can reduce the amount of taxes you owe. If you receive an employer match, try to contribute enough to receive the full match, as that’s essentially free money.

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