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If you're nearing 52, you're probably wondering if you're on track for savings and an eventual retirement plan. You may even be looking at your bank account balance as the official metric for success.
While you can't get the full picture of someone's financial health by one number alone, you may find comfort in seeing how much cash others in your stage of life have stashed. We'll give you the official rundown with data from the Federal Reserve, along with some context to help you put these numbers into perspective.
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What's considered cash in the bank?
There are admittedly many different types of accounts we could track, but the Fed's Survey of Consumer Finances specifically mentions transaction accounts in its data. These accounts include:
- Checking and savings accounts
- Money market accounts
- Prepaid debit cards
- Call accounts
These are essentially liquid funds that you could access today if you wish. "Cash in the bank" in this case doesn't include pensions, 401(k), or 403(b) accounts, IRAs, retirement accounts, CDs, or home/business equity. For this reason, you shouldn't confuse a bank balance number with your net worth; that's a totally different measurement.
The average cash balance for a 52-year-old
The average U.S. family had about $71,000 in transaction accounts among households ages 45 to 54, according to Federal Reserve data, noticeably higher than the roughly $62,400 average across all age groups, since older working-age households tend to carry higher balances.
The average balance is also calculated among families that had transaction accounts. Across all age groups, 98.6% of families had a transaction account, according to the Federal Reserve.
Why the median matters more
People typically like to compare themselves to the "average," but this number is calculated by adding all the balances up and dividing by the number of account holders. It includes both the very high earners, like millionaires, and those with just a few dollars to their name.
For households ages 45 to 54 specifically, the median transaction-account balance was $8,700, dramatically below the roughly $71,000 average for the same age group. That gap illustrates how much higher balances can pull up the mean.
A modest cash balance can still make a difference
Money matters because of what you can do with it, not necessarily how big the bucket is. Take, for example, the different jobs money has, whether it's to fund a retirement, pay for short-term expenses, or act as an emergency fund. When money isn't as liquid (easy to access and spend), it can still add to your total wealth.
That's why a smaller cash balance that's part of a balanced portfolio of accounts doesn't have to be concerning. The data shows that families with retirement accounts had a median retirement-account balance of $86,900, while the median transaction-account balance was $8,000.
The right cash balance for you depends on upcoming expenses, income stability, debt obligations, dependents, and comfort with market risk.
Compare to essential expenses, not a national average
For many people, the cash they keep in transaction accounts needs to cover immediate bills, near-term spending, and an emergency fund of three to six months of essential expenses. This is general guidance, not a universal rule; self-employed individuals, single-income households, and those in high-risk industries may need more to feel safe.
Get your ideal emergency cushion number by adding up monthly housing, utilities, groceries, insurance, minimum debt payments, taxes, transportation, child care, and medical costs. Don't include discretionary extras that you could cut in a crisis.
Take this monthly total and multiply by three for a baseline emergency fund or six for a more conservative target. The Federal Reserve's latest survey found that 55% of adults ages 45 to 59 had set aside enough money to cover three months of expenses, meaning a slight majority of people in this age group reported having this level of emergency savings.
Put cash to work where it counts
Finally, accessibility doesn't mean it has to be in a non-interest-bearing checking account. It's ideal for routine bills and spending, but other places to stash cash include:
- A high-yield savings or bank money market account for emergency savings and expenses months from now
- A retirement/investment account for money not needed soon and based on your goals, tax plans, risk tolerance, and retirement date
FDIC insurance generally covers deposits at an insured bank up to at least $250,000 per depositor, per insured bank, per ownership category. Check that your bank is FDIC insured before adding your emergency fund.
Bottom line
The roughly $71,000 average transaction-account balance for households ages 45 to 54 is a headline-grabbing number, but it doesn't tell the whole story about where you stand financially. The median for this age group was just $8,700, illustrating how much higher balances among some households can pull up the average.
Rather than focusing on a number, consider what you need to feel secure. For most, it's a healthy emergency fund, calculated by running your actual numbers. An annual review can ensure your ideal cash balance is up-to-date and lets you put each dollar to work in the best way possible for your current stage of life.
FAQs
Should I keep more cash as I get closer to retirement?
It can make sense to gradually increase accessible savings as retirement approaches, especially if you expect to need the money within the next few years. Keeping some money outside the market can also reduce the risk of having to sell investments during a downturn to cover an unexpected expense.
Should I pay off debt or build savings in my 50s?
Both can be important. Maintaining an emergency fund can help you avoid taking on additional debt when unexpected expenses arise, while paying down high-interest debt can reduce interest costs and free up more money for retirement contributions.
How often should I review my savings in my 50s?
Reviewing your savings at least once a year can help you adjust for changes in income, expenses, debt, and retirement plans. Major life events, such as changing jobs or paying off a mortgage, can also be good reasons to reassess how much cash you need.
More from FinanceBuzz:
- Retire like the rich: 14 ways you could build wealth in your 50s.
- Find out if you could pay less for car insurance in just a few clicks.
- Make these 7 savvy moves when you have $1,000 in the bank.
- 14 moves seniors could benefit from but often forget about.
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