The Average American Worker Has Less Than $1,000 Saved for Retirement: Why That’s Disheartening If They Own a Home

Retirement preparedness has taken a hit for many Americans recently due to a confluence of factors.

The numbers speak for themselves: A new report from the National Institute on Retirement Security found that “across all workers, including those with no savings, the median amount saved was only $955.”

As for working individuals who have positive retirement savings, the median stood at $40,000.

To put this into perspective, Americans’ “magic number” (the number to retire comfortably) stands at $1.26 million in 2025, according to Northwestern Mutual's 2025 Planning & Progress Study. Yet, among those who have retirement savings, 25% “say they have just one year or less of their current annual income put aside for it.”

For homeowners, this issue can have detrimental consequences.

How limited retirement savings intersect with homeownership

Having little saved for retirement can mean being house-rich but cash-poor.

Seann Malloy, founder and managing partner of Malloy Law Offices, explains that while a home can offer stability and forced savings in the form of equity, it doesn’t mean retirement security.

"Countless homeowners realize that a huge percentage of their net worth is not liquid, accessible capital. Social Security was never intended to be a full replacement of income, only an add-on,” Malloy says. “House-rich and cash-poor, they are also susceptible to missing maintenance, deferring repairs, or even falling into foreclosure if income takes a hit.”

For homeowners who enter retirement with a mortgage paid off, the situation is sunnier, yet it doesn’t mean that the lack of savings will not affect their financial situation.

“Having a paid-off house is great, but you still have maintenance, insurance, and property taxes to cover. If you are relying on Social Security alone, you may not be able to make ends meet, even without a mortgage payment,” says Jay Zigmont, CFP and founder of Childfree Trust.

Zigmont notes that, unfortunately, for many people, the best bet may be to sell their home as they enter retirement and downsize to a lower-cost-of-living location, as it will make their money go further.

For homeowners who enter retirement with little savings and who are still saddled with mortgage payments, the situation may become more dire.

Bobbi Rebell, CFP and consumer finance expert at CardRates.com, says that the fact that the average American worker has $995 for retirement is “shocking and alarming.”

“It seems nice to have a valuable asset like a home, but many retirees want to age in place, and so they don’t want to sell their home to create liquidity. That can force retirees to work longer than they would like, to stay in their home,” Rebell says.

What is the role of home equity, and what homeowners should prioritize if they’re behind on retirement savings

Put simply, home equity is the amount of the home you own, which can allow you to access several types of loans.

Rebell says that tapping into home equity, especially if there is substantial equity relative to other financial resources, can be a solid option.

This route could take several forms, including downsizing to a less expensive home and accessing the extra equity, or renting out a home while moving to a less expensive rental if homeowners want to avoid selling a home for various reasons, she says.

“Other less daunting options could include a home equity loan or a reverse mortgage that can create liquidity even though it does come at a cost,” she adds.

The advantage is that, even though you are house-rich and cash-poor, this can stabilize cash flow and create a cash buffer for unexpected expenses like repairs, higher insurance, or a jump in property taxes, without disrupting your life, Rebell explains.

“Retirees may like the idea of having no mortgage, but if they can’t pay their bills, they should be realistic and consider options to improve their liquidity,” she says.

Guidance on balancing mortgage payments, maintenance costs, and long-term financial security

Michael Micheletti, chief communications officer for Unlock Technologies, a financial technology company, says that retirees who own their homes need to consider several financial factors if their nest egg is small.

First, property taxes can generally continue to rise every few years, and home insurance premiums have risen significantly in many areas of the country.

In addition, he says to keep in mind repairs and maintenance: A general rule of thumb is to budget 1% to 3% of the home's market value each year for upkeep, he says.

“All of these things need to be addressed on an ongoing basis. If you own your home, you need to account for these costs,” he says.

Sergio Altomare, CEO and co-founder of real estate private equity and development firm Hearthfire Holdings, says that even late in the game, people under 50 still have a meaningful runway.

This includes maximizing catch-up contributions to retirement accounts, reducing lifestyle inflation rather than increasing housing costs, redirecting bonuses, and turning windfalls into retirement savings.

“And think about housing strategically, not emotionally. Sometimes downsizing before retirement can improve liquidity,” he says.

Finally, Rebell adds that being a responsible and informed homeowner can also make a meaningful difference.

For instance, by staying current with maintenance and repairs, you can avoid expensive surprises in the future when you can least afford them. And if you think the house will be unaffordable in retirement, consider downsizing before there is an urgent financial need, so you aren’t selling a home in a panic or buying something in a hurry, she says.