It’s difficult to know if you’re saving enough for retirement.
You can use a retirement calculator to project, but who knows what life events are going to come along and throw your savings off track? And how do you know the market will be so reliable?
Experts often suggest you have a nest egg of $1 million to $1.5 million saved when you retire. Can that possibly be right? Is everyone else sitting on six figures?
It goes without saying that the amount of savings you’ll need to retire depends on your individual situation. But let’s face it: We all want to know what the neighbors are saving. And we all want to know if we’re saving enough ourselves.
So here’s a breakdown of median retirement savings by age and suggested savings for each decade of your working life — as well as tips to get your savings in order if you’re behind.
Median savings figures are taken from the Federal Reserve’s 2016 Survey of Consumer Finances, which analyzes retirement account balances of Americans who have them. Recommended retirement savings by age are provided by Fidelity.
Saving for Retirement in Your 20s
The recommendation: You should have the equivalent of one year’s salary saved by the time you reach 30.
The reality: The median retirement savings in households headed by someone younger than 35 is $12,300. (Note: The Federal Reserve report doesn’t have data specific to households headed by people in their 20s.)
More than three-quarters of adults are falling short on recommended retirement savings, and younger people are no exception. Just 27.5% of people ages 21 to 34 have a retirement account.
If you’re in your 20s, you have plenty of time to catch up on your savings. But every year you don’t start saving can cost you significantly.
If you save $100 each month starting at age 25, and your retirement account grows by 5% each year, you will have nearly $172,000 by the time you are 67.
If you waited until age 35 to start saving that $100 each month, your balance would be just under $95,000.
Compound growth needs time to work. Your 20s should be all about letting it get started.
Saving for Retirement in Your 30s
The recommendation: You should have three years’ worth of your salary saved by the time you turn 40.
The reality: The median retirement savings in households headed by someone ages 35 to 44 is $37,000.
Some big expenses often find their way into life in your 30s. Maybe you bought your first home. You might have gotten married. Kids may even been in the picture now.
On the bright side, you’re probably making more money now that you’re in your 30s. You’ve hopefully put in some years in your field and even gotten a few promotions.
All told (you’re going to start noticing a pattern here), most Americans in this age bracket are behind.
Just as it was in your 20s, getting started is key if you haven’t already.
Fidelity recommends that those who begin saving at age 25 save 15% of their income. If you begin at age 30, the recommendation is 18% instead.
But by 35, that number goes to 23%.
If you did get started in your 20s, make sure you’re adjusting your contributions as your income goes up. With so many years left ahead, you’d be surprised at the impact an extra $50 or $100 can have.
Saving for Retirement in Your 40s
The recommendation: You should have six years’ worth of your salary saved by the time you reach 50.
The reality: The median retirement savings in households headed by someone ages 45 to 54 is $82,600.
By now if you have kids, you’re probably spinning two plates of financial stress: retirement and college. If you’ve struggled with student loan debt yourself, it can be tempting to sacrifice your own financial future for your child’s.
But keep in mind that they’ll have a whole lifetime to pay back student loans. Your retirement is less than three decades away.
If you have an employer-sponsored account, such as a 401(k) plan, that isn’t on track, the first obvious option is to increase your contributions. But it might also be time to consider an additional investment vehicle.
An individual retirement account, or IRA, may be a good option. There are two main types of IRAs: traditional IRAs and Roth IRAs.
A Roth IRA is especially appealing because you invest after-tax money. Because you’ve already paid taxes, you can withdraw your contributions tax-free at any time. You only pay a penalty if you withdraw from the account’s earnings before you’re 59 1/2. Once you reach age 59 ½, it’s all yours — tax-free.
In 2019, the maximum annual IRA contribution is $6,000 for people under 50; it’s $7,000 for people 50 and up.
If you start contributing $6,000 a year at 40 and your account grows by 5% annually, you will have $334,000 by the time you’re 67.
Saving for Retirement in Your 50s
The recommendation: You should have eight years’ worth of your salary saved by the time you reach 60.
The reality: The median retirement savings in households headed by someone 55 to 64 is $120,000.
If you own a home, hopefully the principal on your mortgage is starting to look more reasonable. The kids may be out of the house and independent, so your living expenses might be starting to contract.
You’re also coming off one of the highest-earning decades your career will see. So if you find yourself behind, it may be easier than you think to catch up.
Even if you don’t open an IRA until the age of 50, your balance could reach $183,000 if you max out your contributions and see 5% growth.
You’ll also want to double down on any debt you have yet to clear out. How quickly can you pay off the rest of your mortgage? Do you have any car loans or credit card debt to tackle?
Retired life is much easier to finance when you’re debt-free.
Saving for Retirement in Your 60s
The recommendation: You should have 10 years’ worth of your salary saved by the time you reach 67.
The reality: The median retirement savings in households headed by someone ages 65 to 74 is $126,000.
Yes, even at this stage, most people are still behind on their retirement savings.
According to the Hamilton Project, women and men who turned 65 in 2015 have a 34% and 22% chance of living to 90, respectively. That means some people can expect to spend more years in retirement than they spent saving for retirement.
But it’s still not too late to improve your situation.
While you can begin taking Social Security at 62, waiting to receive your benefits can significantly increase the money you receive.
A 62-year-old who made an average of $50,000 during their career and began receiving benefits this year would get about $1,075 each month, for example.
If they were to wait until “full retirement” at age 67, they would instead receive $1,475 each month in 2019 dollars.
And if they could hold out until age 70 — the age at which benefits max out — they would receive just under $1,900 in 2019 dollars each month.
If waiting to receive benefits isn’t an option, maybe you can sell your house and invest the profit. Or perhaps you’re comfortable keeping a good portion of your retirement account investments in stocks to increase your potential earnings, despite the risk.
But Wait! Don’t Forget About Your Emergency Fund
It can be tempting to throw every extra dollar toward investments — especially if you expect your retirement savings to come down to the wire. But you never know when a major expense or job change will come your way.
You should also have at least three to six months’ worth of living expenses saved in an emergency fund. The money should be easily accessible in a financial emergency.
One good option can be a high-yield savings account. These accounts can get you 2% interest or more — that’s over 20 times the average savings account interest rate.
The point is, no matter where you are in the journey or how behind you may feel, there are actions you can take to save for retirement at any age.
Just focus your efforts on saving as much as possible. Once you can do that, it’s time to speak with a financial adviser to make sure you get the most out of those savings.
Jake Bateman is a writer and editor in Florida. He wishes he could trade his retirement account balance with his student loan balance.