Home » Average Retirement Savings By Age
Business

Average Retirement Savings By Age

10 months ago

Are you attempting to calculate your retirement savings amount? When figuring out how much money to save for retirement, there are other factors to take into account besides the average retirement savings by age, which can serve as a useful benchmark to see how you stack up against the rest of the population. Your lifestyle and income, in addition to your age, are important considerations when figuring out how much you should save for your golden years.

The typical retirement savings by age, the amount you should save for retirement by age, and other things to think about when estimating how much money you would need to retire are all broken down here.

Age-Specific Average Retirement Savings

Based on the most recent data available from the Federal Reserve Survey of Consumer Finances (SCF), the average retirement savings in the United States by age are as follows:

Federal Reserve SCF Data

Age RangeAverage Retirement Savings
Under age 35$30,170
Ages 35-44$131,950
Ages 45-54$254,720
Ages 55-64$408,420
Ages 65-74$426,070
Ages 75+$357,920

The “How America Saves 2023” study from Vanguard states that the average retirement savings in the United States, broken down by age, are as follows:

Vanguard: “How America Saves 2023” Data

Age RangeAverage Retirement Savings
Under age 25$5,236
Ages 25-34$30,017
Ages 35-44$76,354
Ages 45-54$142,069
Ages 55-64$207,874
Ages 65+$232,710

Once more, these age-related average savings figures should be viewed in the context of various other factors. The length of employment at a company and salary levels are two more elements that impact retirement savings. It’s also critical to consider the longer-term benefit, namely your post-retirement financial objectives in light of market fluctuations.


Additionally, there are hints that Americans might be saving less: In response to inflation, 54% of Americans have stopped saving for retirement or have cut back, according to Allianz Life’s 2022 Q3 Quarterly Market Perceptions Study. In addition, the Federal Reserve discovered that the most frequent financial issue Americans faced in 2022 was inflation in its Survey of the Economic Well-Being of U.S. Households.
Age-Specific Median Retirement Savings


The Federal Reserve’s most recent SCF data indicates that the median retirement savings in the United States, broken down by age, are as follows:

Federal Reserve SCF Data

Age RangeMedian Retirement Savings
Under age 35$13,000
Ages 35-44$60,000
Ages 45-54$100,000
Ages 55-64$134,000
Ages 65-74$164,000
Ages 75+$83,000

The study from Vanguard also provides the median retirement savings broken down by age:

Vanguard: “How America Saves 2023” Data

Age RangeMedian Retirement Savings
Under age 25$1,948
Ages 25-34$11,357
Ages 35-44$28,318
Ages 45-54$48,301
Ages 55-64$71,168
Ages 65+$70,620

Try not to get too worked up over the targets, even if these figures can differ from person to person. Instead, concentrate on variables that you have control over, such your spending, investment choices, and savings rates. One of the steps in the process is to pace yourself.
There may probably be circumstances that occasionally impact your savings goals given changes in the economy and other external causes. You may stay on track with your retirement savings even in the face of a difficult economy that may include falling stock prices and rising inflation by selecting the best course for you.

Which Age Groups Are Suggested for Retirement Savings?

You can use your age as a general guideline when figuring out how much you should save for retirement. For example, you may refer to the “10x income rule:” According to Fidelity, in order to sustain your present standard of living in retirement, you should save ten times your income by the time you are 67 years old. The following are recommendations on the amount of money to save aside at significant points in your life:

AgeRecommended Retirement Savings
Age 301x annual salary
Age 352x annual salary
Age 403x annual salary
Age 454x annual salary
Age 506x annual salary
Age 557x annual salary
Age 608x annual salary
Age 6710x annual salary

Accordingly, a thirty-five-year-old who makes $45,000 year ought to have up to $90,000 (twice their salary) saved in retirement accounts; this amount is more than the median amount saved by most Americans.

Some advise saving half of your income by the time you’re 25, a year’s worth by the time you’re 30, three to five years’ worth by the time you’re 40, and roughly five years’ worth by the time you’re 50.

Average Age-Based Savings

Additionally, the average personal savings differs by generation. The average transaction account balance (comprising savings and checking) for all households in 2019 was $41,600, per the most recent SCF statistics. However, age was a factor in the mean transaction account balances:

Age RangeAccount Balance
Under age 35$11,250
Ages 35-44$27,910
Ages 45-54$48,200
Ages 55-64$57,670
Ages 65-74$60,410
Ages 75+$55,320

But there are intricate intergenerational dynamics at work. Contributing to retirement savings is more difficult for Millennials (those born between 1981 and 1996) than for Boomers (those born between 1946 and 1964), for example, because Millennials tend to spend more on housing. On the other hand, Gen Xers—those born between 1965 and 1980—usually spend the most money overall.

All three generations combined often save less than what experts advise. Gen Z, the newest generation (those born between 1997 and 2012), has a tendency to handle money differently; many of them are concerned about accruing debt from student loans in order to attend college. Due in large part to automatic 401(k) enrolment, they are also saving far more for retirement than previous generations did at their age.

How Much Cash Is Necessary for Retirement?

Although it can be helpful to compare, looking at the national average and median retirement savings by age doesn’t really tell you where you are in your savings path. In the end, there’s no magic number that works for every person’s financial situation, and there are various approaches to figuring out how much money to set aside for retirement. Take into account the following elements to determine how much you need to retire:

How Much of Your Income Is Safe for Savings?

Starting in your 20s, a lot of financial consultants advise saving between 10% and 15% of your gross income. That’s on top of the funds reserved for immediate needs like a new car or unexpected expenses.

But this percentage depends on your budget and existing revenue. What is the monthly amount that you can easily put down for your retirement? A debt-free 40-something with a high income could save more actively, investing up to 25% of their wage, whereas a 20-something recent graduate just starting their job and paying off school loans might only be able to invest 3% to 5% of their gross income.

Which Date Do You Hope To Retire?

The nearest year you intend to retire is your target date of retirement, which is often around age 65 for most people. Your retirement investing plan and the amount you need to save for retirement can change depending on the year you hope to retire. For example, compared to someone who expects to retire at age 65, someone who plans to retire at age 55 or younger will need to save more actively when they are younger.

You must multiply your planned retirement year by your birth year in order to determine your desired retirement date. For instance, your target retirement year would be 2042 if you were born in 1977 and wanted to retire at age 65. You can determine how much you should be saving each month for retirement by knowing when you hope to retire.

What Is Your Retirement Spending Budget?

Are you going to see the world or stay at home and be quiet? Will you be able to pay off your mortgage or will you always be renters? Are you going to live in a pricey city or are you more comfortable living simply in the country? How much you save for retirement will mostly depend on your future cost of living.

Determine how much money you’ll need to keep up your current quality of living first. A few suggested guidelines from experts for doing this are as follows:

  • The 80% rule: According to the “80 percent rule” of retirement planning, you should aim to live on 80% of your pre-retirement income in order to retain a similar standard of living. This is something that certain experts have mentioned. Therefore, you should aim for a retirement income of about $80,000 per year if your annual income is $100,000. The rationale is that your expenses will decrease after you enter retirement. Your mortgage will ideally be eliminated, your college loans will be paid off, and you probably won’t be commuting.
  • The 25x spending rule: This recommendation from certain experts states that you should save 25 times your annual investment portfolio withdrawal amount. Therefore, if you want to take out $60,000 a year, your retirement portfolio should be worth $1,500,000.

Additionally, consider the kind of retirement lifestyle you wish to lead. Your needs may change in terms of financial planning depending on your particular goals, which may include early retirement, acquiring a second property, leaving a nest egg for your heirs, or addressing health issues. A retiree who intends to travel extensively and in luxury for several years, for instance, could require more savings than someone who wants to remain nearby.

Retirement expenses are also contingent on your longevity, medical bills, and other uncertain economic factors like inflation.

Calculator for Retirement Age

Still have inquiries? To help you quickly and simply determine how much money you need to save each month to reach your retirement objectives, we built a retirement age calculator. The calculator tells you if you’re on track with just five inputs: your age, the amount saved, the predicted yearly return, the monthly costs in retirement, and the planned retirement age. It will help you determine how much you should save if you need to raise your monthly savings rate.

Average Age of Retirement

A 2022 Gallup poll found that the average retirement age is 61, up from 57 in 1991. But the retirement age differs depending on the socioeconomic class. For instance, according to the Boston College Center for Retirement Research, those with high school diplomas typically retire earlier than those with college degrees.

Remember that you must wait to get your full Social Security benefits until you reach the retirement age, which is typically 66 years old, for the year you were born. Medicare benefits also don’t start until age 65, unless you meet the requirements for a qualifying disability.

Advice to Assist with Retirement Savings at Any Age

Whether you’re in your 20s or 60s, the first step in creating a suitable retirement plan is analyzing your income and spending and figuring out how to increase your savings. Even while keeping track of your spending and handling your money can feel overwhelming, there are lots of resources available to help you prepare for retirement and make the process less stressful.

20-Year-Olds Saving for Retirement

Many twentysomething Americans start their careers on entry-level wages. Retirement may seem far off, especially if you’re still paying off college loans.
However, making contributions to a retirement account, such as a 401(k) offered by your employer, is a good method to begin saving for retirement in your twenties.

This will be a crucial component of retirement because nearly half of employees anticipate that the majority of their income will come from self-funded savings like a 401(k), while 25% anticipate relying on Social Security. A matching contribution from your employer may be made up to a predetermined proportion. Take advantage of this opportunity, but don’t worry, you still have 40 years or more to save for retirement.

In addition to funding your employer’s 401(k), experts advise opening an emergency fund. By setting away cash for unforeseen costs like home and auto maintenance, you can avoid using your retirement funds as a fallback source of income. According to Transamerica data, only a median of $5,000 has been saved by workers for emergencies; 34 percent of workers have less than $5,000 saved. Establishing an emergency fund is crucial in case of unforeseen costs like auto repairs or unanticipated bills.

You might be able to avoid having to take money out of your retirement savings if you have a respectable emergency fund that covers three to six months’ worth of living expenses. Withdrawing funds from an IRA before the age of 59½ is not recommended, according to the IRS. The amount you withdrew is subject to a 10% penalty tax and is deemed to be a portion of your gross income. Therefore, it is preferable to set aside money in a pot for unanticipated events.

It’s also the ideal time to invest aggressively. You can afford to take on more risk when you’re in your 20s because you usually have more time to make up for any losses you suffer.

Advice for Twenty-Somethings Saving for Retirement

  • Make maximum contributions to the 401(k) plan offered by your employer.
  • Establish an emergency reserve equal to three to six months’ worth of living costs.
  • To give your money more time to grow, start investing early.

Early Retirement Savings in Your Thirties

For Americans in their 30s, starting a family and purchasing a home are regular life events. In addition to being costly, these milestones have the potential to divert attention from retirement savings. Furthermore, a lot of Americans in their 30s are still making college debt payments.
However, compared to those in their 20s, those in their 30s typically have more established careers and greater salaries. So, how can you manage your present spending while making plans for the future?

First, make financial adjustments. While it may be tempting to prioritize short-term spending over long-term objectives like retirement, don’t do that. Savings for your children’s college education is another option. You might be able to reduce the amount of effort required in the future to reach your retirement savings targets by closely monitoring where your money is being spent today. Make saving a family activity and instill sound financial practices in your children.

Second, make an effort to contribute to a retirement account (s) by setting aside at least 15% of your salary. You might want to think about making larger contributions to catch up on contributions if you are in your 30s and have only recently begun saving for retirement. Utilize the full benefit of your employer’s 401(k) match, if you haven’t already. The amount you should contribute on your own is calculated by deducting the 15% match from the 401(k) percentage that your employer offers.

Once more, you’re still young enough to absorb more risk and recover from any losses you could experience.

Advice for 30-Year-Olds Saving for Retirement

  • Establish a rigorous spending plan, particularly if you plan to establish a family or buy a home.
  • Fund your retirement account with a minimum of 15% of your take-home pay.
  • Commence saving for future expenses, such as your child’s college tuition.

Retirement Savings in Your 40s

Many Americans in their 40s find it unrealistic to save up to three times their yearly pay for retirement plans, despite this being the suggested amount. According to the Bureau of Labor Statistics, the median weekly salary for those in their 40s is little over $1,200, or over $63,500 annually. Check to determine if your balance matches the recommendation that you should have saved three times your yearly wage by now.

How can you go about achieving this objective? Attempt to allocate any windfalls—like unanticipated funds from an inheritance or wage increase—to retirement savings accounts. With a bachelor’s degree, student loan repayment takes an average of 19.7 years, so by now you should have paid off your debt and be able to concentrate entirely on retirement savings.

You have time to make up for any gaps in your retirement savings that you may have. Budget for retirement as the next most important expense, after housing, utilities, and food.

Advice for 40-Year-Olds Saving for Retirement

  • Concentrate on your retirement savings and settle the remaining balances on your college loans.
  • You should think about contributing any bonuses or pay increases to your retirement account.
  • Prioritize saving for retirement.

In your 50s, start saving for retirement

Retirement is closer than you may believe at age 50, so if you haven’t already, it’s time to start saving seriously. Saving up to seven times your yearly wage may seem like a lofty goal, but achieving it could help you succeed.

You should have at least $350,000 saved if your salary is $50,000 or more. Look at your budget and see what adjustments you can do to get back on track if you’re not even close to that. You can discuss making changes to your IRA with a financial counselor as well.

As a “catchup” for 2023 restrictions, individuals 50 years of age or older can contribute an additional $1,000 to their IRA and $7,500 to a 401(k) or 403(b). You can take money out of your IRA by the time you’re 59½, but if you can wait, your savings account will grow over time.

Advice for 50-Year-Olds Saving for Retirement

  • Keep adding funds to your retirement accounts.
  • Speak with a financial counselor about modifying your individual retirement account.

Retirement Funding in Your Sixties

With the finish line in sight, think about your retirement plans and objectives. Remember that these funds contribute to your ongoing standard of living. In retirement, they also pay for medical expenses, which can total up to $315,000 for a pair. Your retirement plans should take such aspirations into account, whether they be beachfront property or global travel.

Complete your savings strategy or make any required adjustments. If you’re still a long way from reaching the 8–10 times annual salary savings target, consider what assets you can turn a profit on. Consider staying in the workforce for a few more years as well. This shortens the amount of time you’ll need to use your retirement funds in addition to increasing income.

You will also be qualified to receive Social Security benefits in your 60s. If you discover that your funds are insufficient, Social Security may be a substantial complement. Again, though, you should wait to start receiving benefits until you are 70 years old, at which point the benefit rise ends, if you can afford to do so.

Advice for 60-Year-Olds Saving for Retirement

  • Examine your retirement savings targets to ensure they accurately represent your present way of living.
  • If necessary, think about working a few more years.
  • Consider making any assets monetizable.

Reasons Not to Depend on Social Security

Social Security isn’t meant to be your primary source of income when you retire, even though many Americans rely on it. As of December 2022, the average monthly salary for a retired worker is $1,680, which is just above the minimum wage.

Social Security won’t be sufficient if you wish to travel or if you have a lot of debt that you can’t pay off before you retire. Because of this, it’s critical to establish a retirement plan and rely on income sources other than Social Security. It’s also important to remember that your Social Security benefits are unaffected by the amount of money you invest in an IRA or 401(k).

Your Retirement Savings and IRAs

You might want to think about creating or funding an individual retirement account (IRA) in order to reach the age-appropriate retirement savings requirements.

In addition to offering tax benefits, this kind of retirement plan enables you to set aside money independently of your normal savings or emergency reserves. Traditional and Roth IRAs are the two primary varieties of IRAs:

  • Traditional IRA: You may be able to deduct your contributions from your taxes. Be aware that taking money out of a traditional IRA before the age of 59½ could result in penalties and taxes. The SECURE Act eliminated the age limit for traditional IRA contributions starting of 2020, enabling older employees to contribute a portion of their earned income. The required minimum distribution (RMD) laws are still in effect, nevertheless.
  • Roth IRA: Because contributions to a Roth IRA are made after taxes and can be made at any age, people opt to open one. If the money has been in the Roth IRA for five years or more and you are at least 59½, you can remove your earnings from the account without incurring taxes or penalties.

Your IRA contributions for 2023 are limited to $6,500 for those under 50, $7,500 for those over 50, or your taxable income for the year, if any, if your pay is less than this amount.

For illustration, suppose you are 54 years old and earn $58,000 year. In 2023, your contribution cap is $7,500. You can donate up to $4,000 if you are 29 years old and earn $4,000 from a part-time job.

Where Can an IRA Be Opened?

The time to begin retirement savings is always now. As soon as you reach the age of majority, which is typically 18, you can start your own regular or Roth IRA. Before this age, some guardians or parents decide to open an IRA for their child. Usually, the goal of this is to start saving early and develop sound financial habits. As long as the child has a source of income, they can make contributions to the IRA, which is opened in their name.

Before starting or making contributions to an IRA, make sure to speak with your tax or financial expert as Synchrony Bank does not offer financial advice.

In summary, start working on creating your nest egg!

Contributing to an IRA or your employer’s 401(k) plan can transform your savings into a dependable source of retirement income, regardless of your age or stage of life. In addition to lowering your taxable income, many retirement savings plans allow you to keep more of your current earnings.

Read More: What Is a High Yield Savings Account?

Sources:

Add Comment

Click here to post a comment