As of 2022, the typical American aged 75 and over had $130,000 in retirement savings, according to the Federal Reserve. However, Americans 65 to 74 had a median retirement savings balance of $200,000.
The reason older people have less money may boil down to the fact that by age 75, a lot of people have been retired for quite some time and have been steadily dipping into their nest eggs.
On the other hand, there are people in their mid-70s and even beyond who continue to work. For some, it’s because their jobs are a labor of love. For others, it’s a matter of financial necessity.
Let’s say your father has hit 75 and he’s still plugging away at his desk job. Having just $31,000 saved for retirement, it’s natural you’re both worried about how he’ll get by. That frankly isn’t a ton of money, even for a shorter retirement.
But if your father still works and earns a comfortable salary of $70,000 a year, his situation is far from hopeless. And if he’s able to work a few more years, he has a prime opportunity to boost his savings.
Axios analyzed data from the Bureau of Labor Services and found that almost 19% of Americans ages 65 and over were still working as of 2024. And that alone can help compensate for a lack of savings.
If your father is 75, it means he’s beyond the point where it makes sense to delay Social Security. In fact, he hopefully claimed Social Security at 70, since there’s no financial incentive to hold off on taking benefits beyond that point.
If not, encourage him to file right away and see how much of a retroactive benefit he can get. Those retroactive benefits max out at six months, but at least it’s something.
Meanwhile, if your father is collecting a $70,000 annual salary plus Social Security, he may have more than enough income to cover his expenses. At this point, he should, conceivably, be able to either save some of his salary and/or the majority of his Social Security income.
One thing you should know is that while there are age limits for traditional IRAs, they don’t apply for those funding Roth IRAs or 401(k)s. This year, your father can contribute up to $8,000 to his IRA or $23,500 to his 401(k) plan. If there’s a match in his 401(k), it’s worth capitalizing on it. It pays to save in one of these accounts for the tax benefits.
Of course, one thing to keep in mind is that if your father is 75 years old with a traditional IRA, they may already be on the hook for required minimum distributions (RMDs). With a 401(k), RMDs can sometimes be deferred if the plan holder is still working. Roth IRAs and 401(k)s do not force savers to take RMDs, though. In this case, your father may want to consider rolling over his traditional IRA into a Roth account.
Of course, given your father’s age, it’s important that he not invest any savings he builds too aggressively. He may end up wanting to retire soon, so he needs a good portion of his portfolio in stable assets, like bonds. Your father should also maintain enough cash savings to cover at least a year of expenses.
A recent Northwestern Mutual survey found that Americans think it takes $1.46 million to retire securely. But the savings data above reveals that most people don’t have anywhere close to $1.46 million by the time they reach retirement age.
The reality is that the amount of savings it takes to retire comfortably depends on your needs and age. Someone who’s still working at 75 may not need as much savings as someone who decides to retire at 65.
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What someone in the situation above needs to do, though, is estimate their annual expenses and see how much savings it will take to cover them in the absence of a paycheck — because at 75, it’s unclear as to how much longer it will be possible to keep plugging away.
Now with regard to your savings, you may want to assume a 4% withdrawal rate. With $31,000 saved, that amounts to $1,240 per year, which isn’t a lot. However, keep in mind that’s on top of Social Security.
The average retired worker today collects about $1,980 per month, or $23,760 per year, in benefits. And with $1,240 from his savings, that would bring him to about $25,000 for the year.
However, someone still working at 75 may have delayed Social Security until age 70 for larger monthly checks. So your dad’s total income may be higher.
Let’s say his monthly retirement expenses come to $2,800, requiring an annual income of $33,600. Let’s also say he’s getting about $2,600 a month from Social Security because he delayed his claim past his full retirement age of 66 — thereby boosting his benefits by 32% by waiting to take them at 70.
That leaves your dad with $31,200 per year. With $31,000 in savings, that gives you $1,240 per year, you still have a small shortfall to get to $33,600.
But if you can get your savings up to $60,000, a 4% annual withdrawal rate gives you $2,400 from your nest egg. Add that to $31,200 in Social Security, and you’re where you need to be.
Of course, this does mean doubling his savings. But it may be doable with some strategic moves. Your dad is 75 and is fortunate he has a grown child who cares about your financial well being — maybe your or another family member could allow him to move in for a few years to boost his nest egg. There may also be other expenses he can look into reducing.
Keep in mind, too, that he may have leeway to withdraw from his savings at a higher rate than 4% a year because he’s older. If you use a 5% withdrawal rate, $31,000 in savings gives him $1,550 per year. If you use a 6% rate, you’re looking at $1,860. And if you work with a financial advisor to maximize your savings and trim expenses, you may find that your dad doesn’t need to save so much more to get to a place where he can retire and cover his costs.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
