How Much Should Be Saved For Retirement By Age

But How Much Is Enough

Our guideline: Aim to save at least 15% of your pre-tax income1 each year, which includes any employer match. That’s assuming you save for retirement from age 25 to age 67. Together with other steps, that should help ensure you have enough income to maintain your current lifestyle in retirement.

How did we come up with 15%? First, we had to understand how much people generally spend in retirement. After analyzing enormous amounts of national spending data, we concluded that most people will need somewhere between 55% and 80% of their preretirement income to maintain their lifestyle in retirement.1

Not all of that money will need to come from your savings, however. Some will likely come from Social Security. So, we did the math and found that most people will need to generate about 45% of their retirement income from savings. Based on our estimates, saving 15% each year from age 25 to 67 should get you there. If you are lucky enough to have a pension, your target savings rate may be lower.

Here’s a hypothetical example. Consider Joanna, age 25, who earns $54,000 a year. We assume her income grows 1.5% a year to about $100,000 by the time she is 67 and ready to retire. To maintain her preretirement lifestyle throughout retirement, we estimate that about $45,000 each year , or 45% of her $100,000 preretirement income, needs to come from her savings.

Retirement Savings When You’re In Your 20s

Suggested savings: A common recommendation at this age is to have the equivalent of your annual salary saved by the time you’re about to turn 30. The median income of someone in their early-20s is approximately $33,000. Aim to have that amount in retirement savings by the end of your 20s.

Average savings: According to U.S. News & World Report, those under 25 have an average of $5,419 in their 401s, while those 25-34 have an average of $26,839.

In your 20s, you’re just starting your career and your fully independent adult life. You have decades until retirement, which means you have time to learn about personal finance, save for retirement and pay off debt. In particular, reducing student loan debt is a common goal for people in this age group, as carrying significant debt can impact the ability to save down the road.

At this stage of life, having anything saved is better than nothing. Build your budget and stick to it.

Average Savings By Age 30

Everybodys situation is unique, but many people in their 30s are facing a lot of expenses. These could include paying off student loan debt, getting married, buying a home and starting a family. But they have also gained work experience and are likely enjoying a higher income compared to their 20s. When considering average savings by age 30, data shows you should have at least $14,115 to $28,230 in savings and $61,937 in retirement savings.2

If your employer has a retirement plan, your first step should be to sign up. If you are already signed up, see if you can contribute a little more money to it even an extra few dollars from every paycheck will add up. Aim to save 15% of your salary for your retirement. If thats not feasible, consider starting with a lower percentage and adding 1% each year until you reach 15%. If you do not have a retirement plan at work, investigate such alternatives as individual retirement account plans or annuities.2

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What Do These Numbers Tell You

The headline here: Most people arent saving enough for retirement and are entering retirement with very little stashed away.

Thats just one reason why the average retirement savings for someone your age isnt a benchmark. If you use these numbers as your guiding star, youll likely be in the same state as most of the country: unprepared for retirement.

How much you should have saved, and how much you should be saving, have nothing to do with where others your age stand. It has everything to do with your income, planned retirement spending, expected retirement age and life expectancy.

If you want to find out how much you personally will need to retire, a retirement calculator can help. And if that calculator tells you youre behind? An IRA is a good place to start catching up.

Retirements 4 Percent Rule

One of the traditional rules of thumb about how much you should save for retirement is called the 4 percent rule. The idea here is that you should draw down no more than 4 percent of your retirement accounts in a given year, so that you can make your assets last over your retirement. This rule is one of several key withdrawal strategies to extend your retirement savings.

The rule has received some criticism for being less conservative than some advisors think it ought to be, but its still a well-tested guideline that provides you a ballpark estimate of what you can safely harvest from your funds. You can use this rule to work backward to reveal the amount you need to save for retirement: You multiply the money you need each year by 25 to figure out the total amount you need.

For example, if you want $10,000 in retirement money annually, then youll want about $250,000 in funds. But heres the catch: you dont have to have all the money right when you retire if you can generate returns on your investments. So, thinking about how much you need to retire isnt simply about generating enough money by a certain date. You should focus on finding a way to keep that money growing after youve stopped working.

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What Is The Median Household Net Worth

It isnt just retirement accounts that Americans lack. Looking at overall net worth tells a similar story, although these figures have been consistently rising since the Great Recession.

In the Federal Reserves latest Survey of Consumer Finances report, the median household net worth for a head of household age 35-44 years old is $91,300. For a head of household age 45 to 54 years old, that figure is $168,600. In the 55-64 age range, average net worth is $212,500. Including all age groups median net worth rose 18% from the 2016 survey to $121,700.

Retirement Planning Is Personal

Personal retirement plans are meant to be just that: personal. Lifestyle choices go a long way in figuring out how to create the most accurate estimate of your future income needs and wants. Your current health, life expectancy, and any debts can drastically change your future income needs.

With so many different variables about how much you should have in savings, you can follow some general retirement savings benchmarks. They can help you find out whether you are on track for retirement.

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Compounded Investing Based On The Age You Started:

Dedicating 5% to 15% of your pre-tax income to retirement isnt always possible. You may be starting a new career, paying back student loans, or have other financial obligations and arent able to save that much of your salary all at once. And thats okay, because saving for retirement isnt all or nothing. If that is the case, start with a percentage youre comfortable with and increase your savings rate gradually by 1% each year until you reach the 15% mark. If youre getting a 1% annual raise at the same time, you might not even miss the extra money from your paychecks.

Dont panic if youre currently paying back loans or other debts. If you have room to save for retirement at the same time, thats great aim to put away what you can while sticking to your loan repayment schedule. Once youve paid off a debt consider transferring that monthly payment amount toward retirement instead.

No matter your age, tax-advantaged savings and investment accounts, such 401s and Roth or traditional IRAs , can be used to start saving toward your goals.

If youve been saving for a while, make sure to give your retirement accounts regular checkups to make sure youre on track for your goals.

Asset Allocation Can Have A Big Impact On A Portfolios Ending Balance

Assumes a constant asset allocation, a 75% confidence level, and withdrawals growing by a constant 2.47% over 30 years. Assumes a starting balance of $1 million. Confidence level is defined as the number of times the portfolio ended with a balance greater than zero. See disclosures for additional disclosures on allocations and capital market estimates. The example is hypothetical and provided for illustrative purposes only. It is not intended to represent a specific investment product and the example does not reflect the effects of taxes or fees.

Remember, choosing an appropriate mix of investments may not be just a mathematical decision. Research shows that the pain of losses exceeds the pleasure in gains, and this effect can be magnified in retirement. Picking an allocation youre comfortable with, especially in the event of a bear market, not just the one with the greatest possibility to increase the potential ending asset balance, is important.

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Average Savings By Age 40

Individuals in their 40s have probably paid off student debt but are still working their way through mortgages and the expenses that come with a family, ranging from daycare to college tuitions. But the good news is that theyre also in the prime of their career, having worked their way up the ladder over the past two decades. When considering average savings by age 40, data shows you should have at least $17,799 to $35,599 in savings and $185,811 in retirement savings.2

If you are behind on your savings, dont worry. You can still catch up and reach your retirement goals. Paying off your debt and funding your 401 at the maximum amount is a great start. Consider maximizing your savings through tax advantages that come with an IRA if your employer doesnt offer a 401, or in addition to your 401.3

Social Security Pensions And Other Reliable Income Sources

The good news is that, if you’re like most people, you’ll get some help from sources other than your savings, such as your Social Security benefits. For most people, Social Security is a significant income source.

But the percentage of income that Social Security will replace is typically lower for higher-income retirees. For example, Fidelity estimates that someone earning $50,000 per year can expect Social Security to replace 35% of their income. But someone earning $300,000 per year would have a Social Security income replacement rate of just 11% on average.

If you aren’t sure how much you can expect, check your latest Social Security statement, or create a my Social Security account to get a good estimate based on your work history.

If you have any pensions from current or former jobs, be sure to take those into consideration. The same goes for any other predictable and permanent sources of income. For example, if you bought an annuity that kicks in after you retire, or youre tapping your home equity through a reverse mortgage.

Continuing our example of a couple that needs $8,000 in monthly income to retire, let’s say each spouse is expecting $1,500 per month from Social Security, and that one spouse also has a $1,000 monthly pension.

This means that, of the $8,000 in monthly income needs, $4,000 will come from guaranteed income. The remaining $4,000 will need to come from sources such as investments and savings.

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How Much Do I Need To Save To Retire

Many retirement experts recommend strategies such as saving 10 times your pre-retirement salary and planning on living on 80% of your pre-retirement annual income.

That means if you make $100,000 annually at retirement, you need at least $80,000 per year to have a comfortable lifestyle after leaving the workforce.

This amount can be adjusted up or down depending on additional sources of income, such as Social Security, pensions, and part-time employment, as well as factors like your health and desired lifestyle.

Order your copy of the print edition of Investopedia’s Retirement Guide for more assistance in building the best plan for your retirement.

Retirement Savings By Age: What To Know

The amount of Americans 55 and older that are deciding to retire is growing, with about half of people that age opting to step away from the workforce, according to Pew Research.

Yet some are returning to the working world as inflation and bumpy markets slash into their nest eggs. That may have you wondering about your own retirement plans – no matter what your age.

The earlier you start preparing for retirement, the more your money works for you through compounding interests, noted Danielle Harrison, a certified financial planner and founder of Harrison Financial Planning in Columbia, Missouri.

“When you start saving as a young adult, time is on your side. You can begin setting aside a small percentage of your paycheck, let compounding do the hard lifting, and be well prepared for retirement,” Harrison said.

While it’s never too late to start, the longer you wait, the more you’ll have to sock away to reach your retirement goals, Harrison noted. By waiting, you “lose years of compounding,” Harrison said. “The percentage of your salary you must devote to retirement savings increases substantially.”

That’s why it makes sense to start right away. Start earning more money on your savings and build toward your retirement goals.

If you don’t have one, a Roth IRA could help you meet your retirement goals. Start exploring your options today.

Strategies and options, however, depend both on your age and how much you need and want to retire with.

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Personal Capital Average 401k Balance By Age

*Note: Averages are rounded up to the nearest dollar. Numbers are based on aggregated and anonymous data from the Personal Capital Dashboard. Accounts included are the following: 401k, former employer, Roth 401k. Excludes test and invalid accounts. Excludes any account value greater than $100,000,000 or less than -$100,000,000. Excludes spouse accounts. Snapshotted balance as of 9/7/2022.

Average Savings By Age In Canada

Now that we know what is expected to meet your retirement savings goals based on your age, let us look at the average retirement savings for Canadians.

Statistics Canada tracks assets and debts held by economic families and individuals. Looking at the most recent numbers from 2019, we get a picture of the average savings for various age groups.

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How Comfortably You Want To Live

The amount of money you have saved for retirement also depends on how comfortably you want to retire. While some people choose to downgrade their home and expenses after retirement, others want to retire in comfort, buy a recreational vehicle, and live in a large estate.

If you plan on keeping up with your current lifestyle after you retire, then you should follow the 20% savings rule. However, if you want to retire lavishly, then I recommend saving up to 30% or more of your income.

How Much Should I Have In Savings

How much a 25-year-old should have in savings is a tricky question. Many factors go into this number, but it is advised that you have 3 to 6 months worth of living expenses saved up for emergency savings. It should be noted that your emergency savings are not part of your retirement savings. However, it may be difficult for people at this age to even save for an emergency, let alone retirement. It may ease your mind to know that a 25-year-old can expect to be on their way of having 25 to 50% of the above $40,000 saved away for retirement.

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Emergency Funds Its All About Your Monthly Spending

The ideal size of your emergency fund will likely fluctuate throughout your life based on your monthly expenses. Rule of thumb? Aim to have three to six months worth of expenses set aside.

We know this can feel impossible, especially if youre just starting out. Remember, you dont have to build an emergency fund overnight. Instead, focus on consistently putting away what you can afford. Strategies like microsaving can help you find safe-to-save money you might not have realized you had.

To figure out how much you should have saved for emergencies, simply multiply the amount of money you spend each month on expenses by either three or six months to get your target goal amount. Weve mapped out what that would look like based on national averages in the table below.

Keep in mind: The national averages shown above may not resonate with your lifestyle, as everyones situation is different. While you might choose to use these numbers as a benchmark, its more important to determine how much of your own monthly spending goes toward essential purchases and aim to save three to six times that amount.

What Are The Average Savings By Age

Unless youre an actuary, you probably have only a vague idea of how much money you should have saved for future expenses and retirement — and whether or not you are on the right track. The amount you should be saving each year is a complex calculation, economists say, so theres no right answer. Still, knowing Americans average retirement savings by age can help you gauge your progress.

The Economic Policy Institute , a non-profit, non-partisan think tank specializing in research on the economic situation of low- and middle-income workers, published a revealing 2019 report called The State of American Retirement Savings. Using data from the Federal Reserve Boards Survey of Consumer Finances, conducted every three years, the institute arranged the retirement savings statistics by six-year cohorts. The study looks at families headed by someone age 32 to 61 a 30-year period before the Social Security early eligibility age of 62 when most families should be saving for retirement.

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