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October 04, 2017


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I wouldn't be as worried. Keep in mind, the vast majority of these families (in the 90th percentile or otherwise) are a long way away from retirement -- if you survey all families, you end up with families in their 20s, 30s, 40s, and 50s, many of whom may be planning on working up until 65 or beyond. Many may have pensions (although that number is diminishing, there are still plenty of cops/teachers/firefighters/state and local government workers and military men and women who will receive a pension in retirement), many may have homes with equity that they plan to sell as they downsize (not accounted for in the study), and/or many may be getting their homes paid off in such a way that their Social Security will be enough to cover their living expenses (a married couple that has both worked could end up with $36k-$48k per year in Social Security, which goes a long way if you own your home outright).

It's obviously a worry, but it's not all bad news.

If I recall correctly the top 1% of American households by net worth is above ~8M USD. That 1.08M includes only retirement accounts so it doesn't count investments in businesses, partnerships, rental real estate, and other taxable accounts which form the bulk of net worth for most of those at the top end, in the same way that primary residence makes up most of net worth around the median.

Also many households have more than one retirement account (for example multiple 401ks from job changes plus maybe an IRA). It's not clear whether they used raw account balance data or combined it by household, I believe the Fed SCF data they used can be taken either way.

As for your target investment net worth, I think it depends upon (1) spending rate (2) other sources of income and (3) your age. So if you are 60+ and want to spend X dollars per year and have income from pensions and social security of Y dollars per year, your retirement portfolio net value target should be 33*(X-Y) if X>Y.

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