How Valuable is the Average 55 Year Old Prospect to a Financial Advisor?

This consumer also commonly owns their own home. Approximately 75% of all 55-year-olds own their own home or live in a household that does. A homeowner in this cohort has more debt than others, with a median of $130,000 remaining on their mortgage. This individual is likely to also own their own car, with auto debt at a median of $17,000. This is more of a drag on spending, as auto debt is secured by a depreciated asset.

Finally, this generation remains saddled by student debt. A median 55-year-old is still carrying around $41,000 in student loans, and they expect to need another 11 years to pay this debt off.

The average 55-year-old is employed and still in the labor force. Unemployment for this cohort is 2.8%, the second-lowest of any age group, and around 80% of them remain in the workforce.

At this age, some workers are starting to look at early retirement. However, it’s difficult to get good data on how many workers in their mid- to late-50s retire, because entities like the Federal Reserve and the Bureau of Labor Statistics measure (in relevant part) age cohorts of 45 to 54, and age 55 to 64. There is a significant drop in labor force participation between these groups, to be sure, but that reflects the retirement habits of 64-year-old workers as well as 55-year-old workers, groups with two very different wants and needs.

A strong plurality of 55-year-old workers are employed in management or professional services occupations (roughly 44%). Broadly, spread across many different occupations, this cohort is also likely to work in physical roles, such as natural resources, construction, production and direct services. Finally, a significant but smaller cohort works in non-managerial white collar jobs.

By and large, an average 55-year-old is highly likely to still be in the workforce and currently employed.

Between 57% and 80% of 55-year-old individuals have a retirement account. This gap is due to a discrepancy in the data. The Federal Reserve reports the lower number, while the AARP has found the higher. Of these, most have their money in a tax-preferred account such as a 401(k) or an IRA. Approximately 72% of this cohort keeps money in a tax-preferred account, while about 32% have a defined-benefit pension plan. Some individuals will hold both.

Among this cohort, retirement savings are not strong. Only about 38% report their retirement savings as on track and, as noted above, somewhere between two- and one-fifth of 55-year-olds have no retirement savings at all. The median 55-year-old has around $185,000 saved for their retirement. The average individual has $537,560 in retirement savings. Average retirement savings are skewed upward relative to the median by the high savings of particularly wealthy households.

The median household’s retirement savings are significantly below what most experts assume they will need. In general, financial planners recommend that individuals have five to six times their income saved by their mid-50s. At the median 55-year-old’s income of $65,936 per year, they would need to have $395,616 in retirement savings to be on track.

Both Millennials and Generation X have had their career and financial lives defined by two black swan economic events during their prime working years.

A median 55-year-old reached 25 years old in 1995. Their early working life was defined by the strong labor and financial market that ran through the mid-2000s. Much of this cohort’s perspective on money and markets is likely to be shaped by this history, in which their early adult life was defined by an era of low interest rates and low- to no-inflation. This is by contrast with older generations, which experienced the inflation and interest rates of the 1980s and 1970s. It also contrasts with Millennials, which began their working lives with the labor disruption of the Great Recession and have hit their mid-working lives during the current era of high inflation and interest rates.

During the Great Recession, this cohort was exposed to the labor market downturn. However, job loss for this cohort was no more severe than among other working adults over the age of 30.

Homeownership among this cohort is largely connected to their access to  lower housing prices and relatively low interest rates that prevailed from 2000 until the mid-2010s. As working adults during this era, they had the capital to take advantage of this era. That said, homeownership among this cohort (then aged 38) declined in step with all other cohorts over the age of 30 between 2007 and 2013.

This group also lived through the Covid market crash and labor disruption. While this has likely had a significant emotional and psychological impact, the median 55-year-old was not disproportionately financially impacted compared with other cohorts. This group did not experience significantly greater rates of job or financial loss than other groups, and by 2022 their employment rates had returned to 2019 levels.

The significant exception would be among households with children in college, or who had taken early retirement. While assets recovered their value by October, 2020, those households might have needed to take withdrawals during the Covid-related downturn. This could have created serious hardship and financial disruption.

A 55-year-old’s personal finances are likely to be defined by two major issues: family and retirement. Approximately 77% of these individuals have children. For most parents, at age 55 their oldest child will be between 17 and 20 years old. This means they will either be in the final years of saving for college or they will currently by paying tuition.

For a household, this will make the current state of the market a priority. Individuals saving for near-term tuition, or currently making payments, will not have the luxury of waiting out a down market. They need this money soon or now.

Family priorities will not be limited to children in college. A 55-year-old is positioned directly at the intersection of taking care of their children and aging parents. This can put a significant financial strain on households, and as a result liquidity programs such as home equity loans and SEPPs might be particularly attractive.

In relative terms, this is also a cohort that is entering the final stage of their retirement savings. They are approximately 12 years off based on full retirement age, but they are getting close enough to pay heightened attention to their savings. This is particularly true given that the real median retirement age is 62, putting retirement very close at hand. While portfolio structure will be important to this group, a Roth conversion is not likely for this cohort. They are typically at the peak of their earning power and, therefore, the peak of their taxation, rendering a Roth conversion relatively low-value.

Finally, debt payment is likely to be a priority for this cohort. This is due to the dual needs of compound interest and retirement. As the first members of the modern experiment in student debt, Generation X is still paying off its student loans. The median member of this cohort also still has mortgage payments to make. As most financial advisors recommend paying down debt before retiring, it is likely that this cohort will prioritize eliminating debt when possible in preparation for retirement within the next decade.

When a 55‑year‑old engages in financial planning with an advisor, the long‑term outcomes for net worth and retirement income can improve dramatically – even after accounting for advisor fees.

Using the median $82,150 household income for a 55 year old, and the median $364,270 net worth, we can derive estimated values for the average nest egg and retirement withdrawals for the average 55 year old using SmartAsset’s proprietary model valuing the client-planner relationship. The following example will follow a 55-year old’s journey through to age 77, with the option to retire at age 62, 65 or 67.

Other assumptions based on historical data include:

• Inflation: 2.56% annual

• Financial advisor fees: 1% annually, removed quarterly

• Annual return on securities-based investments: 7.62%

• Annual return on bond-based investments: 4.76%

• Annual savings rate during career: 5.69%

Applying these metrics, we derive value estimates for both the client and the planner for the duration of the client-planner relationship and compare it to that of the 55-year-old who remains self-managed.

Financial advisors can help contribute to growing a client’s nest egg in a multitude of ways. SmartAsset’s estimates on the net benefit to this investment pot at age 77, not including any additional retirement income gained from the relationship is as follows.

Besides resulting in a potentially higher net worth, retirement income may also increase due to the client-planner relationship, such as follows.

Beyond the balance sheet, the annual retirement withdrawals (excluding Social Security or other potential sources of income) also highlight the value added by financial planning:

The improved annual withdrawal amounts demonstrate how professional planning can boost spending power in retirement as well as the remaining nest egg, ensuring a better lifestyle even after fees are paid.

In summary, by age 77, the average 55 year old stands to gain between $129,000 to nearly $291,000 in net worth compared to a scenario without professional guidance, plus up to $763 more per month in retirement withdrawals.

From an advisor’s perspective, the lifetime relationship with a 55‑year‑old client can also be highly valuable. Here’s how the numbers break down:

These percentages illustrate that while the advisor earns a healthy fee, the proportion relative to the extra savings delivered varies with the client’s retirement horizon. A shorter time horizon (such as retiring at 67) might result in a higher fee percentage because the window for accumulating surplus is smaller and risk management is more pronounced.

With fee revenues ranging between roughly $150,000 and $200,000 over the relationship, the average 55‑year‑old client is a substantial asset to an advisor’s practice. This lifetime value not only reflects the advisor’s compensation for managing risk and orchestrating a long‑term financial plan but also underscores the mutual benefits of a well‑structured client–planner relationship.

In essence, while the client enjoys increased net worth and higher retirement income, the advisor benefits from a lucrative fee stream that can amount to nearly $200,000 over the course of the relationship. This dual benefit reinforces the value of comprehensive financial planning-not just for the client’s bottom line, but also as a cornerstone of an advisor’s business success.

The median 55-year-old has a job, an income near the national median, and a modest amount of debt. However, they also have significant responsibilities that will create significant financial needs and responsibilities, putting potential strain on households that are nearing retirement.

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Photo credit: ©iStock.com/mheim3011

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This is a hypothetical example and is not representative of any specific security. Actual results will vary.

This is not an offer to buy or sell any security or interest. All investing involves risk, including loss of principal. Working with an adviser may come with potential downsides such as payment of fees (which will reduce returns). Past performance is not a guarantee of future results. There are no guarantees that working with an adviser will yield positive returns. The existence of a fiduciary duty does not prevent the rise of potential conflicts of interest.

SmartAsset.com is not intended to provide legal advice, tax advice, accounting advice or financial advice (Other than referring users to third party advisers registered or chartered as fiduciaries (“Adviser(s)”) with a regulatory body in the United States). The article and opinions in this publication are for general information only and are not intended to provide specific advice or recommendations for any individual. We suggest that you consult your accountant, tax, or legal advisor with regard to your individual situation.

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The above summary/prices/quote/statistics has been obtained from sources we believe to be reliable, but we cannot guarantee its accuracy or completeness. Past performance is no guarantee of future results.

This scenario is for illustrative purposes only and does not represent an actual client. Results may vary.

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