Personal Savings Finance Question

Why is there a difference in amounts between “savings account balance” (average $3,800) and “amount saved for retirement”(average $35,000)? Does the latter include retirement pension funds?

A Savings Account is a bank account with easy access to funds. Most people also have stocks, bonds, or mutual funds in their retirement accounts, not just cash.

Isn’t the difference that savings accounts are funds that you can get at if you need to, while pension funds cannot be accessed until you retire, no matter what? That’s certainly how it works in the UK. E.g. I have a couple of years’ salary in my pension fund, but my savings that I can actually get at amount to pretty much zip, as I have been paying down debt.

In the United States, retirement accounts (Traditional or Roth IRAs) can be accessed at the discretion of the account holder, however, because of the tax advantages the holder receives from having them, if any money is withdrawn prior to the holder turning 59 1/2 there is a penalty for doing so.

A savings account is simply a place to store money. In the past there might have been an effective interest rate on such accounts. These days it is strongly contra-indicated. Most savings account interest rates are below the rate of inflation and using one as a holding place simply ensures that the holder loses purchasing power.

When you say “pension funds” you might be confusing two different things.

The amount saved for retirement would include IRAs, 401ks and similar retirement accounts (usually referred to as “qualified plans”). It probably also includes some savings outside qualified plans if those are intended for retirement. As stated, these funds are accessible to the individual but may result in tax penalties.

Amounts saved for retirement also differ from savings in that they’re usually investment in long-term financial instruments like stocks, bonds and annuities. Savings accounts pay low interest (really low interest nowadays) and are best used for money that you might need access to quickly - they’re good for your emergency fund, not your retirement fund.

However, a pension is usually different. These are defined-benefit plans, and the company maintains the savings for the pension. The recipient doesn’t own anything except the future right to their pension payments and they cannot access the funds except by waiting for their monthly payments to start in retirement.

So this kind of pension (including Social Security) would NOT factor into a person’s amount saved for retirement. As a result, the statistics in the OP can sometimes lead to false conclusions. A guy with $200,000 in his 401k but no pension is probably worse off than the guy with $0 in a 401k, but a $3,000/month pension.

As another note: the linked page defines savings account quite narrowly. My “savings account” is an interest-bearing checking account that pays 3% interest and I’ve got nearly $20,000 in there right now. However, because it’s defined as a checking account (I can write checks, use debit cards, etc.) those statistics would tell you that I have $0 in savings. So, again, you have to use a little caution in interpreting those numbers.
(If anyone’s interested in the account, look up Harborstone Credit Union).

“Right”? If you’re lucky. Just ask those airline employees or millions of others. The board which manages pension funds abandoned by bankrupt employers almost ran out of money itself.

Yes, pension funds, prsumably “defined benefit”, you get “promised” $X/month when you retire. Theoretically the employer promises to have sufficient funds and promises not to welch on the deal before then… but who knows? Since it is not a specific dollar amount dedicated to you, it does not count as a dollar amount toward “Retirement savings”. You can make an educated guess at a dollar amount based on life expectancy and current interest rates, but that’s as close as you come.

Retirement savings, as others point out, probably means IRA and such savings. In canada they are called RRSP’s, and deposits are deductible from taxable income, withdarawals are added to your taxable income. Presumably USA rules are quite similar. The theory is youput money in during high-earning years, save a lot of tax, and withdraw when your other income is substantially lower and pay substntially less tax. Depending on tax rates you lose a portion of your money to tax, it’s not all disposable income, so it makes less sense to consider it the same as the savings account for your new car or next vacation.

they’re two distinctly different types of savings accounts, so they tally them separately.