The average US family should have an extra $7,039 a year to invest.

The US government has some really fantastic data sources freely available to the public. I recently discovered the Bureau of Labor Statistics Consumer Expenditure Survey, which is absolutely chock full of information on the financial lives and spending habits of the average American. A great summary of this data is contained in "100 YEARS OF U.S. CONSUMER SPENDING" by Michael L. Dolfman and Denis M. McSweeney. Particularily interesting is the last portion of the report, from 2002-2003 (pdf).

From this report, in 2002-2003, the average American family had 2.5 members. It's after tax income was $47,787, and it's expenditures were $40,748. In order, these expenditures were as follows:

Housing: $13,359 (32.8%)
Transportation: $7,770 (19.1%)
Food: $5,357 (13.1%)
Personal insurance and pensions: $3,978 (9.8%)
Healthcare: $2,384 (5.9%)
Entertainment: $2,069 (5.1%)
Apparel: $1,694 (4.2%)
All others (lumped): $4,137 (10.15%)

The others category includes such thing as tobacco, reading and education, alcohol, personal insurance, etc. Read the report for more detail.

Present Value of Potential Savings

I found the present value of potential retirement savings using the following assumptions:

- Inflation rate of 3%
- Savings of $7,039 per year, increasing at the rate of inflation.
- Savings compound at 8% (low, considering the stock market average return has been 12.2% over the long run, but I'm being conservative.)
- Savings being at 21 (2003) ending at 65 (2046)

By the age of 65, the family will have $3,644,023 saved. The present value of this amount is $983,480.


In 2043 dollars, the family will have $3,644,023 saved and expenses of $145,247. Assuming expenses increase at 15% annually to cover increased health care costs, how long will their savings last? Until mid 2079, when they are 79.5 years old. Life expectancy in the US is around 77.6 years, so they should have plenty of money to last through their retirement.


According to the Consumer Expenditure Survey, the average family should be able to save 14.7% of their after tax income. If this amount were placed in a tax free retirement account every year, it should be more than adequate to cover the cost of retirement.

Unfortunately, the US savings rate is currently -0.5%, mostly I believe due to massive overconsumption (for example - in giant houses).