Retirement Weekly: A secure retirement is possible even if you haven’t saved enough — yet

Retirement Weekly: A secure retirement is possible even if you haven’t saved enough — yet

The most important retirement investing lesson I take from this week’s publication of “How America Saves” is the importance of patience and discipline.

I’m referring to what is perhaps the most comprehensive report on the state of retirement finance in the U.S. It is published annually by Vanguard, which describes the report as “our annual deep dive into the saving behaviors of nearly 5 million defined-contribution plan participants across Vanguard’s business.”

Some of Vanguard’s findings are disturbing, showing that many individuals haven’t even begun to save enough to support themselves in retirement. Nevertheless, the firm’s report also shows how these individuals can at least begin to dig themselves out of their holes. But it will take patience and discipline—a lot of it—for that to happen.

Perhaps the most alarming of Vanguard’s findings is the size of the median retirement account at $27,376. A portfolio that small translates into a tiny retirement monthly income, of course, and half of the accounts at Vanguard aren’t even that big. If this were the only data point we took away from the Vanguard report, we’d have to conclude that the U.S. retirement crisis is even worse than previously thought.

The grounds for hope that are embedded in the Vanguard report are the other characteristics the firm found for the median account holder. He is 43 years old, for example, and therefore has 24 more years before hitting full retirement age. Vanguard also reports that this median account holder has an annual salary of $82,000 and is allocating 10.6% of his annual salary to his 401(k)—between his own deductions and his employer match. He furthermore allocates 72% of his retirement account to equities.

These numbers enabled me to calculate how big a retirement portfolio this hypothetical median account holder would have in 24 years. I made a number of assumptions, such as that his salary grew at the historical inflation-adjusted rate of the last two decades, that the non-equity portion of his 401(k) is invested in bonds, and that the equity and bond markets perform in the future as well as they have on average since 1793 (per the database maintained by Edward McQuarrie of Santa Clara University).

Under these assumptions, this individual at age 67 would have a retirement portfolio worth $523,000 in today’s dollars. If he were to annuitize that amount using today’s annuity rates (courtesy of, this individual could lock in a guaranteed monthly income of $3,175 in 2023 dollars. Add in the average Social Security benefit of $1,782 per month, and this individual would have guaranteed monthly income of nearly $5,000 in today’s dollars—nearly $60,000 per year. It would certainly appear that this hypothetical individual can meet at least his minimal retirement financing needs.

Theory and reality

That’s in theory. But, as the old proverb tells us, “there’s many a slip ‘twixt the cup and the lip.”

One way of measuring the magnitude of this “slip” is to consider how much the portfolio of this median account holder from 2018 should be worth today. I used data from that year’s edition of “How America Saves,” inputting into my model the median account holder’s salary that year, 401(k) contribution and employer match, median equity allocation, and so forth. Given these assumptions, my model calculated that this median account holder’s portfolio “should” have been worth over $50,000 at the end of last year—not the $27,376 that Vanguard reported was the actual size.

No doubt there are many sources of this slippage, some of which are benign. The median account holder is a construct that reflects no one actual individual, for example.

One thing you can’t blame, however, is last year’s bear market. Even though the bond market since 2018 has produced a return that is below the historical average, the stock market has cumulatively beaten its average. On balance, investment returns since 2018 are close to the long-run average.

My hunch is that one of the biggest sources of the slippage, if not the biggest, was the absence of patience and discipline. Perhaps the median account holder didn’t actually invest 9.9% of his salary each and every year in his 401(k). Perhaps he engaged in market timing in his portfolio, which—as is usually the case—caused his return to be worse than it would have been otherwise. He also could have withdrawn an amount from his 401(k) to meet current needs, or borrowed from it.

The investment takeaway is clear: Assuming your situation is anywhere close to the hypothetical median in the Vanguard report, you still have the time and the means to secure a comfortable retirement. But you must be utterly patient and disciplined to save and invest in your 401(k) each and every year, not trade, and to resist the temptation to prematurely withdraw anything from it.

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at

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