Five Surprising (and Scary) Financial Facts

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These scary financial facts highlight just how unprepared many Americans are for emergencies and retirement.

Americans Save Just 3.5% of Their Income

The average American savings rate is a mere 3.5% based on data from the St.Louis Fed. 

• The savings rate is defined as the ratio of savings to disposable income. 
• Savings are calculated as income minus expenses and taxes. 

This savings rate is much lower than the 10.6% that Americans tended to save in 1960 and is due to a combination of factors, including inflation, higher consumption levels and debt.  

Why this is important

A common rule of thumb is to save at least 20% of your take-home pay. It is important to have a healthy savings rate for the following reasons:

• Emergency fund: Everyone needs to have enough money to cover emergencies such as a high medical bill, a roof leak or a broken down car. It is generally advised to carry 3-6 months’ housekeeping money in one’s emergency fund. 
• Setting money aside for retirement: Plan to set aside at least 10% of your income for retirement in 401K, IRA or a Roth IRA. These retirement savings vehicles also help you lower your tax bills either now or during withdrawal time. This is also important if you want to achieve financial independence. 
• Investing: A higher savings rate will help you put money in stocks or other appreciating assets such as real estate. 
• Home buying: Saving for a big goal such as buying a home requires you to save for down payment and mortgage payments. 

Understanding these personal finance facts is essential to strengthen your financial resilience.

42% of Americans do not have any emergency savings

According to a US news & world report survey, 42% of Americans do not have any emergency savings. This means that they cannot pay for any sudden expense of even $1000 with cash, although 60% said they had encountered an unexpected expense in the past year.

Why this is important

• An emergency situation can arise at any time – your car may break down, you may need to make urgent plumbing repairs in your home or there may be unexpected medical expenses.
• It is recommended to keep at least 3-6 months’ pay as emergency savings.
• If you do not have enough saved up, you may have to dip into retirement savings or go into debt to pay for an emergency.

These financial facts underscore the importance of keeping at least three to six months’ worth of living expenses in an emergency fund.

The Median Retirement savings is $87,000 for American Families 

According to data from the Federal Reserve, the median retirement savings for American families is $87,000 while the average is $333,940.

It is important to break this down by age, since younger people will have less saved up for retirement compared to older people.

When we break it down by age, we find that the median retirement savings are as follows:

• <35: $18,800
• 35-44: $45,000
• 45-54: $115,000
• 55-64: $185,000
• 65-74: $200,000
• 75+:$130,000

People who need it the most, i.e., those over 65, have saved up more than younger folks. However, this savings level may not be enough to help the average American through the retirement years. 

Why this is important

Retirement savings are important to ensure financial security and maintain a comfortable standard of living in one’s retirement years. Moreover, with higher savings levels, you can protect yourself against inflation and not be dependent on loved ones.

How much do you need for retirement?

The amount you need to save for retirement depends on many factors, including the age you plan to retire, your desired lifestyle and macroeconomic factors such as inflation. Use Planwell’s retirement calculator to calculate your retirement number and earliest age of retirement within 5 minutes. 

The Average Credit Card Debt in 2024 was $6329 

According to data from Transunion, the average credit card debt was $6329 in 2024 and $5300 in 2023.  The number of consumers carrying a balance was an astonishing $170M.  

Why this is important

• Extremely high interest rates: Credit card interest rates can be very high with an average APR of 22%. For an average consumer with a $5,300 balance across credit cards, the excess APR margin cost them over $250 in 2023. Major credit card companies charged over $105 billion in interest in 2022 alone.
• Credit card debt blocks all other financial goals: When you have a high credit card debt, it is hard to achieve financial independence or save for other goals. It is usually best to pay down credit card debt as quickly as possible using either the avalanche or snowball method. 

27% of Americans Use a Financial advisor

27% of Americans use financial advisors, according to data from Yougov. Financial advisors can be expensive, and they can charge either based on a flat fee or based on Assets under Management (AUM).

• Flat fee financial advisors: Typically fees can range from $2000 to $8000 per year.
• AUM based financial advisors: Advisors typically charge 1% to 2% of assets under management.

How to be Above Average in Making Financial Decisions

While this data about the financial health of the average American can be worrying, you do not have to settle for being average. You can achieve a higher level of financial wellbeing with some thoughtful and disciplined financial planning and saving. By staying aware of scary financial facts like these, you can proactively address gaps in your own financial plan.

This is where Planwell comes in. We are building Planwell, a fully automated AI financial advisor and planner to help people make financial decisions that are super personalized to their goals and financial situation. Planwell uses its own financial models to ensure accuracy under many different scenarios. The data visualizations are intuitive and easy to understand and actionable.

Planwell helps you figure out your earliest retirement age, the amount needed for retirement, home affordability, and many more financial decisions, both major and minor. We also help you run what-if scenarios and make tradeoffs between different goals and financial choices.

We will be launching the product very soon. Stay tuned for an update. In the meantime, check out our blog posts to help you plan your finances.

Planwell can help you plan for financial independence with our fully automated financial planning tool. Find out the earliest age at which you can retire and get your personalized financial plan. Make tradeoffs between early retirement and other goals such as home buying or kids’ college. 

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