In its August report, the Employee Benefit Research Institute published new data on the account balances of America’s retirement savers, summarized in the chart below.  The results are, shall we say, disappointing.Giving American savers the benefit of the doubt, let’s ignore the bear-market-ravaged 2009 figures and focus instead on 2007.  After five full years of strong bull markets in virtually ALL asset classes, the average 45-54 year old had only $50,000 in his 401(k) retirement account.  55-64-year olds, having the benefit of another decade’s worth of saving, had managed to accumulate an average of $81,000.

There are a couple points worth making here.  First, this illustrates what HS Dent has been saying for years: Americans do not begin to seriously save for retirement until their late 40s to early 50s, when their children have begun to leave the nest.  The problem with this is obvious.  Waiting so late to save and invest, middle-aged investors miss out on two decades or more of compounding.   Try as you may, you cannot make up for two decades of lost compounding by saving more aggressively in your 50s.  The math just doesn’t work out.

Meanwhile, Deutsche Bank estimates that half of all American mortgages will be underwater on their mortgages by 2011, meaning that the house isn’t an asset at all, but a liability.

With little home equity and 401(k) balances embarrassingly small, the retiring Baby Boomers will have to depend on other savings they might have (which are also pitifully small) or, more likely, their Social Security checks or private pensions.  This doesn’t end well.

Charles Sizemore, CFACo-author of the recently-published Boom or Bust: Understanding and Profiting from a Changing Consumer Economy