How Much You Should Have Saved for Retirement by Age

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Saving for retirement requires the kind of long-term planning that can be daunting to put into practice, especially when there's uncertainty about how next year, next month or even next week may look. If this is the situation you find yourself in, breaking down your savings goals by age can help your total retirement savings goal feel more manageable. It can also help you identify whether or not you're on track so you can rebalance short-term and long-term saving and spending priorities if necessary.

Here are the guidelines on how much money you should have saved for retirement at age 30, 40, 50, 60 and 67 (the age at which you can currently start collecting full retirement benefits).

How Much Money You Should Have Saved at Every Age

First, it can be useful to get an overall picture of what's ideal when it comes to retirement savings goals.

Experts have various approaches to the common question of how much to save for retirement in total. Investment firm Fidelity recommends saving enough to cover 45% of your gross preretirement income per year, since the rest of your income in retirement will likely come from Social Security.

That means if you earn $50,000 per year right now, plan to save enough by retirement age to cover $22,500 in expenses each year you're retired. Many elements can affect this calculation, including the age you plan to retire and the kind of lifestyle you want after your working years.

It's also often difficult to plan using raw numbers, since your income and standard of living may fluctuate over your lifetime. Fidelity has created savings guidelines that track your income, rather than a total savings goal, so that you can identify retirement readiness decade by decade. Here are Fidelity's recommendations:

  • By age 30: Have the equivalent of your current annual salary saved. If you earn $50,000, you should have $50,000 saved for retirement at this age.
  • By age 40: Have three times your annual salary saved. If you earn $50,000, you should plan to have $150,000 saved for retirement by 40.
  • By age 50: Have six times your annual salary saved.
  • By age 60: Have eight times your annual salary saved.
  • By age 67: Have 10 times your annual salary saved.

What to Consider When Saving for Retirement

Guidelines can be convenient for planning purposes, but the reality of saving for retirement will change substantially from person to person.

For example, if your spouse is 10 years older than you are, you may stop working full time sooner so you can join them in retirement. If your spouse doesn't earn income from work, you may need to save more to ensure a comfortable retirement for both of you. You may be in good health and enjoy working, which could mean you'll retire later than the typical retirement age of 67. Or you may plan to substantially reduce or increase your standard of living in retirement, which affects the amount you should save now.

Many factors, including your health, the strength of the economy and your employment situation, are largely out of your control. That means you can do your best to save and still feel behind compared with where you'd prefer to be. However, it's possible to increase your savings rate if necessary, and to get help from experts if you need it, such as a financial planner or a nonprofit credit counselor.

How to Save for Retirement

Fidelity's saving recommendations assume that an individual has saved 15% of their annual income every year since age 25 and that they invest 50% of their retirement savings in stocks.

Starting to save for retirement as early as possible will allow you to take greater advantage of compounding. Compounding allows you to earn investment returns on not only your contributions but on your previous returns as well. Investing in stocks rather than only in low-risk, low-reward investments like cash and bonds allows for investment returns that, historically, average about 10% per year (about 7% after adjusting for inflation).

The type of investment account you can use to save for retirement often depends on whether you're employed by a company that offers a workplace retirement plan. But anyone can, and should, save for retirement, no matter their employment arrangement. Here are your options:

  • 401(k): This type of plan is sponsored by an employer and allows you to contribute to a retirement account directly from your paycheck. Since contributions are made before they're taxed, traditional 401(k)s require you to pay income tax when you make withdrawals in retirement. With a Roth 401(k), however, you make contributions with money that's already been taxed and can withdraw it tax-free. Many companies offer to match employee contributions to a 401(k) up to a percentage of the employee's annual earnings. Small businesses can offer their own version, called a SIMPLE 401(k) plan, to their employees, and self-employed people can open a Solo 401(k). You can start taking 401(k) withdrawals penalty-free at age 59½, or at age 55 under certain circumstances.
  • Individual retirement account (IRA): If you don't have access to a 401(k), or you want to save extra for retirement, you can open an IRA. These also come in traditional and Roth versions, and the income qualifications and tax treatment differ between the plan types. Like with the different types of 401(k), Roth IRAs are funded with post-tax income and traditional IRAs are taxed upon withdrawal. A Self-Employed Pension (SEP) IRA is available to freelancers, the self-employed and sole proprietors, and a SIMPLE IRA is available to small businesses.
  • Other investment accounts: Once you're working toward saving for retirement with a 401(k) or IRA, you can also invest in a brokerage account—potentially with a robo-advisor or the help of a financial planning firm. Compared with dedicated retirement accounts, investing in a non-retirement brokerage account can let you skip certain restrictions on how much you can contribute and when you can withdraw money for retirement. Your money is still subject tax treatment by the IRS, including capital gains tax.

Planning for Retirement by Age

The most important element of retirement saving is making and executing on your plan as early as possible. Over the years, your needs, priorities and preferences will shift. But setting a solid foundation and sticking closely to experts' guidelines will give you the security of knowing you're on pace for a retirement you can look forward to. As you take action to plan out your retirement, it's also important to keep an eye on your credit. A flush retirement account will open up opportunities for you in retirement, and robust credit can help you attain goals throughout your life.

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