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Financial Fitness

Understand Your Finances

How Americans save for retirement, and how it's changed

Money can be difficult to talk about, and many financial issues are complicated to tackle. That's why Chase and Vox Creative created the Five Essentials series, found here and distributed through the Vox Media Network, to explore financial fitness issues that are relevant to you. We're breaking down what's really essential to know about a topic.

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New research shows that baby boomers, many of whom are parents of millennials, have been having the "money talk" with their children because they want to be more open about finances than their parents were with them. This has given millennials more ambition to retire earlier than the generations before them. In fact, according to the Chase Generational Money Talk study, millennials are starting to save for retirement 17 years earlier than their baby boomer parents did.

But how much money should they be saving? That answer has changed a lot over the years.

When the Social Security program launched in 1935 and set the retirement age at 65, conventional wisdom held that men wouldn't live past 58, and women, age 62. Today's 65-year-olds are expected to live until age 84, meaning workers have to work longer and save much more than previous generations.

The introduction of employer pensions, 401(k) plans, and other retirement plans, have helped many Americans. But unexpected events--recessions, job losses, health problems and the rising cost of living--can easily derail retirement goals. If it seems like saving for a comfortable retirement is more difficult, it's likely because the post-work stage of our lives is now longer than the retirement system anticipated.

Here's a timeline of how the American retirement system has evolved:

1875

The first private pension plan is introduced. Several employers across the county from banks to railroads begin establishing retirement plans for their employees.

illustation of life expectancy and retirement

1935

The Social Security Act is signed into law and sets 65 as the retirement age. At the time, life expectancy for men was 58 and women was 62.

1960

Almost a century after the first pension plan was initiated, 41 percent of private-sector workers have a pension.

1975

The personal savings rate, calculated as the ratio of savings to disposable income, reaches an all-time high of 17 percent.

1978

Congress passes the Revenue Act of 1978, which accidentally gives birth to the 401(k) through a provision that keeps employees from being taxed on the money they put into a retirement account. Johnson & Johnson becomes one of the first companies to adopt a 401(k) plan.

1989

As they near retirement, workers age 56 to 61 have saved an average of $58,585 in their 401(k), IRA, or Keogh plan. The average annual expenditure of people 65 and older is roughly $17,000, based on data from the Bureau of Labor Statistics.

illustration of 3 people

1991

One in three Americans expects to be able to retire at age 65, according to the Employee Benefit Research Institute.

1996

Two-thirds of retirees rely on Social Security as their main source of income, followed by their pension plan and their personal savings.

2001

Workers nearing retirement have saved an average of $155,371. The average annual expenditure of people 65 and older is more than $27,000. This suggests a growing retirement-savings shortfall as life expectancy increases.

2005

Only 26 percent of Americans are optimistic about retiring at 65. About 6 percent believe they won't retire at all.

2006

To encourage people to save more, companies can now automatically enroll employees in a 401(k) and set aside a portion of their wages into a retirement account. Contributions increase by 13 percent in the following years.

2007

Forty percent of retirees rely on Social Security as their main source of income—23 percent less than a decade ago—while more depend on their personal savings.

illustration of digging dip

2008

The Great Recession disproportionately affects baby boomers' retirement plans, forcing them to dip into their savings. Thirty-two percent of older Americans saw their homes drop in value, and nearly a quarter of Americans over 50 exhausted all of their savings during the recession.

2009

The personal savings rate climbs to 8.1 percent, the highest since 1993.

2013

Workers nearing retirement have saved an average of $163,577. The average annual expenditure of people 65 and older is roughly $41,400—up by 41 percent from a decade earlier. The retirement-savings shortfall is increasing.

2015

Most workers now expect they won't be able to retire until after they turn 70. About 10 percent believe they won't retire at all.

2016

Workers are still hoping they'll be able to retire earlier, with goals varying by generation. Millennials want to be able retire at 60 years old, Gen X at 63, and baby boomers at 69, according to the Generational Money Talks study.

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