Keeping your retirement savings on track helps you meet your retirement goals. That seems like a very simple concept, and in a way it is. But living with that plan every day isn’t quite so simple. Knowing how much one should save for retirement is useful — it can motivate you to take action. And it can be interesting to compare your savings to the average savings rates for every age.
Why You Need to Save for Retirement
More than 1/3 of Americans don’t have a written retirement plan. But with people living longer, you could need to fund retirement for 20–30 years or more. Without being in the workforce, that money has to come from somewhere. And that “somewhere” will your retirement savings.
But, what about Social Security you say? Well, Social Security isn’t intended to sustain you on its own. And unless your retirement lifestyle goals are extremely modest, it can’t (Learn about the reality of living on Social Security alone).
So what should you do to ensure a financially stable retirement?
- Know how much you need to save.
- Save consistently.
- Invest your savings.
- Develop a retirement withdrawal plan for your assets that insures your money lasts while minimizing the impact of taxes, inflation, market fluctuations, and other unknowns.
How Much Should I Save for Retirement?
For every person who will ultimately retire, there’s “a way” to plan and save for it. However, there’s no single right amount to save, and there’s also no ultimate wrong amount.
Unless, of course, you don’t plan or save at all.
The important thing is getting started, getting caught up if you need to, and staying on track until you’re ready to start taking those distributions.
How much YOU need to save is dependent on your lifestyle, how old you are, how long you will live, where you live, when you will stop working and MANY other factors unique to you and you alone.
The best way to figure out how much to save for retirement is to use a detailed retirement planning tool. The NewRetirement Planner can help you devise the perfect retirement plan for you. And if your situation changes, as life has a habit of doing, you can work up a new plan and reroute your course accordingly.
You can use a simple retirement calculator to get a quick estimate for how much you should be saving, but a more detailed and comprehensive tool will give you more confidence and help you discover the many different paths to a secure future.
Look. You are not average. The following average retirement savings numbers are not going to be that useful in terms of setting savings goals. Why? Average numbers are skewed by the highest and lowest earners. And there is a significant wealth disparity in the United States.
Below you will find the data on average retirement savings by age as well as an idea for how much you should be adding to your accounts each decade — assuming you would like to retire at age 65 and sustain an average lifestyle.
Again, to get a personalized estimate for what YOU should be saving, you really need to use a detailed planning tool like the NewRetirement Planner.
According to Federal Reserve SCF data, the average retirement savings for people in their twenties is:
- $4,745 for people ages 18–24
- $9,408 for people 25–29
To be frank, that’s not a whole lot.
People in their 20s generally earn less than they will later on. But saving is still important, no matter what you earn. In fact, the irony is that it is more powerful to save (and invest those savings) when you are young.
Investing your money in your 20s means that you have many more years for that money to compound. The more you save now, the less you need to save later. Fidelity senior vice president Jeanne Thompson says, “When you are young is precisely the time to start saving for retirement. Even though it can be a challenge to save for the future, giving your savings those extra years to grow could make the struggle worth it.”
Many financial experts recommend that people in their twenties save 10–15% of their income, which would be about $5,000 a year at an average salary that would net you to $50,000 by the end of this decade.
Now, consider this:
That $50,000, invested in the stock market with historical average returns of 11%, can turn into just shy of $2,000,000 by age 65. That’s without adding anything afterward! Starting early allows you to embrace the power of compounding fully. Because of this, we too agree with Thompson when she claims this is “precisely the time to start saving.”
The more you can sock away now, the better!
According to Federal Reserve SCF data, the average retirement savings for people in their thirties is:
- $21,732 for people ages 30–34
- $48,710 for people 35–39
The average savings numbers probably won’t be adequate for a secure retirement. It would be better to have closer to $50,000 or more saved at 30 and have amassed another $108,000 by the end of the decade for a total of $158,000.
So, think about how you can save more than $10,000 a year in your thirties.
Tips: Earnings tend to improve in this decade as you get settled in a career and start building working relationships. And the savings you started in your 20s keep adding up. Fidelity suggests you also boost your savings rate to 18% of your pre-tax income. The pain of giving up more spending money can be made easier if you put your raises directly into your retirement account. And if your employer offers a 401(k) match, take it! That’s free money, and who would turn down free money?
Also, if you didn’t do it in your 20s, consider setting up a Roth IRA while your earnings are still relatively low compared to what you might be earning in your 40s. Roth IRA contributions are taxed when you put them in, but the distributions — after they’ve had 40 years to grow — are tax-free.
Average Retirement Savings in Your 40s
According to Federal Reserve SCF data, the average retirement savings for people in their forties is:
- $102,000 for people ages 40–44
- $149,000 for people 45–49
Nope, this won’t be enough to sustain an “average” lifestyle in retirement. Though, do remember, you are not average. (Find out how much YOU should be saving with the NewRetirement Planner.)
It would be better to have closer to $158,000 or more saved at 40 and to amass another $140,000 by the end of the decade for a total of $298,000.
(Though, yes, you can always catch up or make adjustments to your lifestyle or retirement date later…)
And, remember, you are not average. The average salary for someone in their forties is around $70,000 a year. You may be making much more or much less than this and that can help determine how much you should be saving. But, your earnings are not the only determining factor. Your future plans, your home equity, and other factors will impact your savings needs.
While you may be raising a family and be overwhelmed with expenses, now is the time to boost your savings rate. You are beginning to close in on retirement and you don’t have that many years to allow your money to grow.
Average Retirement Savings in Your 50s
According to Federal Reserve SCF data, the average retirement savings for people in their fifties is:
- $146,000 for people ages 50-54
- $249,000 for people 55-59
Yikes, the averages are still not adding up to be enough for an average retirement.
The average American worker in their 50s earns $75,000 to $80,000.
If that is the course you are on, it would be better to have closer to $298,000 or more saved at 50.
And, closing out the 50s, you should add another $156,000 for a total of $454,000 by the time you are pushing sixty. That’s quite a leap from a decade earlier, but the more that you save the more that it grows and the more confident you can feel about your future security.
Your 50s are a particularly crucial decade for retirement. One thing to keep in mind is that workers over 50 are more likely to be laid off than younger workers, and the Center for Retirement Research at Boston College estimates that 75% of workers between 50 and 62 don’t have an employer-sponsored retirement plan. This is the decade where keeping up-to-date on your retirement plan is absolutely crucial.
However, you have options. Side gigs can bump your income. And, did you know that most entrepreneurs are over 50? Learn more surprising facts about starting a business when you are older. Plus, here are 12 business ideas.
More good news? You can contribute more to your 401(k) and IRA when you are over 50. Learn more about catch up contributions.
And an offering to those who might have found themselves in a position wishing that they had saved more and earlier:
“The best time to plant a tree was twenty years ago. The second best time is now.“ (An ancient Chinese proverb.)
Average Retirement Savings in Your 60s
According to Federal Reserve SCF data, the average retirement savings for people in their sixties is:
- $221,450 for people ages 60–64
- $206,800 for people 65–69
Saving? Saving in my 60s? Shouldn’t I be retired and spending those savings at this point?
Well, the average savings for most 60-year-olds is still not going to support an average lifestyle. So, yes, if you are average, it is advised that you keep working and saving.
At 60, the average you should probably have is around $454,000 in retirement savings. And, if you were to max out all tax-advantaged catch-up savings opportunities for 401(k)s AND IRAs, you could be saving an additional $34,000 a year to amass another $170,000 between ages 60 and 65.
That is a lot in just five years, but totally possible. Your 60s may be the pinnacle of your earning years. By age 65, the average American salary is $80,000 (though only $31,000 for the lowest 25%).
At this stage, you have probably put some major costs (kids and housing) in the rear view mirror and can really accelerate your savings.
You also need to get serious about when you will retire. If you haven’t saved enough, you still have options. Tapping home equity, working longer, reducing expenses, part time jobs or side hustles are all viable ways to make retirement work.
What to Save If You Are Not Average?
Averages are not a good benchmark. Almost no one is average and there are huge differences in earnings and the costs of living in various areas of the country.
So, how do you know how much you should be saving?
The widely accepted rule of thumb is to save 20% of your salary. But rules of thumbs are like averages, they just don’t apply to everyone.
The best way is to know how much to save is to create and manage a comprehensive retirement plan. The NewRetirement Planner makes it easy. Just answer questions about what you have now and the life you want to live in the future. The system will help you determine how much you should be saving and put you on a proven path to achieving those goals. You will also discover opportunities for making more of your money — saving on taxes, utilizing your home equity, maximizing investment returns, protecting your money from risks and more.
Forbes Magazine calls the NewRetirement Planner “a new approach to financial planning.”