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- Starting early is crucial for building a strong retirement fund through compound interest.
- In your 20s, aim to have saved the equivalent of your annual salary by age 30.
- By age 30, aim to have around $45,000 saved for retirement, or one year’s salary.
- In your 40s, aim for three times your salary saved by age 40, which is roughly $100,000 on average.
- By age 50, experts recommend having six times your salary saved, with an average of $200,000.
- By age 60, aim to have saved eight to ten times your salary, with the average around $300,000.
- Maximize retirement savings by contributing to employer-sponsored plans and IRA accounts.
- Take advantage of catch-up contributions once you reach age 50 to accelerate savings.
- Regularly review your retirement goals and savings strategy to stay on track for a secure future.
What is Average Retirement Savings by Age?
Retirement planning is a critical aspect of financial well-being, but knowing how much to save can often feel overwhelming. One question that comes up frequently is, “What is average retirement savings by age?” The answer to this question depends on a variety of factors such as income, expenses, lifestyle, and goals.
However, understanding general benchmarks for retirement savings can provide insight into whether you are on track or need to adjust your savings strategy.
In this blog post, we will break down the average retirement savings by age, the factors that influence these averages, and practical steps you can take to improve your retirement planning. By the end, you’ll have a better understanding of how much you should be saving at different stages of life and how to make adjustments if needed.
Why is Retirement Savings Important?
Before diving into the details of average retirement savings by age, it’s important to understand why retirement savings matter. For most people, retirement means a period where they no longer have a steady paycheck from work.
Without sufficient savings, you risk relying on social security benefits, which may not be enough to maintain your current lifestyle. Having a solid retirement fund allows you to live comfortably and without financial stress once you stop working.
The earlier you begin saving, the more time your money has to grow, thanks to compound interest. Compound interest works by earning interest on both your initial savings and the interest already earned. This makes it crucial to start saving as early as possible to maximize your retirement fund’s potential.
What is Average Retirement Savings by Age?
Understanding what the average retirement savings is by age can help provide clarity as to whether you are saving enough. The following sections break down retirement savings based on various age groups.
In Your 20s: Building the Foundation
In your 20s, retirement might feel like a distant concern. However, this is the ideal time to start saving because your money has the most time to grow.
According to a study by Fidelity, individuals in their 20s should aim to have saved the equivalent of their annual salary by the time they reach 30. While the average retirement savings for people in their 20s is often lower, starting early provides a significant advantage.
What is Average Retirement Savings by Age 20?
The average retirement savings for those in their 20s typically falls below $10,000. However, some people in their 20s may not have saved anything at all. It’s important to note that savings rates can vary widely depending on income, job stability, and life circumstances.
Regardless, starting to save in your 20s—even if it’s a small amount—sets the foundation for future wealth.
How to Save in Your 20s?
If you’re in your 20s and have just begun your career, your income may be limited. However, there are still ways to start building your retirement fund:
- Automate savings: Set up automatic contributions to a retirement account like a 401(k) or IRA. Even a small percentage of your paycheck adds up over time.
- Take advantage of employer contributions: If your employer offers a 401(k) match, try to contribute at least enough to take full advantage of it.
- Live below your means: It might be tempting to spend on lifestyle upgrades in your 20s, but living frugally can help you prioritize saving.
In Your 30s: Stepping Up Your Savings
By the time you hit your 30s, retirement may feel more tangible. Many people are advancing in their careers and might be making more money, but they are also dealing with increased expenses such as mortgages, childcare, and higher living costs.
What is Average Retirement Savings by Age 30?
The average retirement savings by age 30 is typically around $45,000. Ideally, by age 30, you should aim to have saved the equivalent of one year’s salary, especially if you’re planning to retire comfortably at the traditional age of 65.
How to Save in Your 30s?
During this decade, it’s important to increase your savings rate and focus on building wealth. Here are some steps you can take:
- Maximize retirement account contributions: If you have access to a 401(k) or IRA, contribute as much as possible, especially if your employer offers a match.
- Invest in other assets: Besides your retirement accounts, consider investing in stocks, bonds, or real estate to further build your wealth.
- Focus on debt reduction: Pay off high-interest debt, such as credit cards, which can drain your resources and slow your progress towards retirement.
In Your 40s: Saving for the Future
As you enter your 40s, retirement is becoming more real, and there are only a couple of decades left until you’re expected to stop working. At this stage, you should be saving aggressively to ensure a comfortable retirement.
What is Average Retirement Savings by Age 40?
The average retirement savings by age 40 is approximately $100,000. However, financial experts recommend having three times your annual salary saved by this point. If you’re making $75,000 per year, you should aim for $225,000 in retirement savings by age 40.
How to Save in Your 40s?
To catch up if you haven’t saved enough, it’s crucial to increase your contributions significantly in your 40s. Here are some tips:
- Increase savings rate: Try to save 15% or more of your income towards retirement.
- Focus on investment growth: Take advantage of higher returns by investing in a diversified portfolio that aligns with your risk tolerance.
- Consider catch-up contributions: If you are 50 or older, you can contribute extra funds to your 401(k) or IRA through catch-up contributions, which help accelerate your savings.
In Your 50s: Preparing for Retirement
In your 50s, retirement may be just around the corner. This is the time to focus on ensuring that you have enough saved up to live comfortably once you stop working. Your financial goals may shift towards preservation of wealth rather than aggressive growth.
What is Average Retirement Savings by Age 50?
By age 50, the average retirement savings is approximately $200,000. However, experts recommend having six times your salary saved by this age. If you’re earning $100,000 annually, your goal should be $600,000 by the time you turn 50.
How to Save in Your 50s?
As you get closer to retirement, you’ll want to start focusing on minimizing risk and ensuring that your savings last. Here are some tips:
- Revisit your investment strategy: As you approach retirement, you may want to shift to a more conservative investment strategy that prioritizes preserving capital.
- Evaluate retirement spending needs: Start to plan for how much income you’ll need in retirement and adjust your savings accordingly.
- Plan for healthcare costs: Healthcare can be one of the biggest expenses in retirement, so it’s important to save for these costs as well.
In Your 60s: Final Preparations for Retirement
As you enter your 60s, it’s time to finalize your retirement plans and prepare for the transition. By now, you should have a clear picture of your retirement needs and how much you’ve saved.
What is Average Retirement Savings by Age 60?
The average retirement savings by age 60 is approximately $300,000. However, many financial planners recommend having eight to ten times your salary saved by the time you reach 60. This would amount to $800,000 to $1,000,000 for someone earning $100,000 annually.
How to Save in Your 60s?
By your 60s, your primary goal is to ensure that your savings are enough to support you for the rest of your life. Here are a few tips:
- Consider delaying Social Security benefits: If possible, delaying Social Security can result in higher monthly benefits.
- Reevaluate your spending: In retirement, your spending will likely decrease, so reassess your lifestyle and ensure you’re not overspending in your final years of work.
- Consult a financial advisor: If you haven’t already, now is the time to seek professional advice to ensure you’re on track for a smooth transition into retirement.
Frequently Asked Questions
Here are some of the related questions people also ask:
What is the recommended retirement savings by age 30?
By age 30, it is recommended to have saved the equivalent of one year’s salary for retirement. On average, individuals in their 30s have saved around $45,000.
How much should I have saved by age 40?
By age 40, financial experts suggest having at least three times your annual salary saved for retirement. The average retirement savings by age 40 is typically $100,000.
What is the average retirement savings by age 50?
The average retirement savings by age 50 is approximately $200,000. Experts recommend having six times your salary saved by this point.
How much should I save for retirement in my 20s?
In your 20s, it’s important to start saving early. Although the average savings in this age group is around $10,000, aiming to save at least 10-15% of your income is a good starting point.
What should I be doing in my 30s to prepare for retirement?
In your 30s, focus on increasing your retirement savings by maximizing 401(k) contributions and other retirement accounts. Aim to save more aggressively as your income rises.
How much should I have saved by age 60 for retirement?
By age 60, you should ideally have saved eight to ten times your annual salary. The average retirement savings by age 60 is around $300,000, but your goal should depend on your specific income and retirement needs.
What is the average retirement savings by age 60 for someone earning $100,000?
If you earn $100,000 annually, you should aim for $800,000 to $1,000,000 in retirement savings by age 60, based on the recommendation of saving eight to ten times your salary.
How can I catch up on retirement savings in my 40s and 50s?
To catch up on retirement savings in your 40s and 50s, increase your contribution rates, take advantage of catch-up contributions, and focus on paying down debt to free up more money for retirement.
What should I do in my 60s to ensure I’m ready for retirement?
In your 60s, it’s essential to evaluate your retirement plan, reduce risk in investments, and plan for healthcare expenses. You should also consider delaying Social Security for higher benefits.
The Bottom Line: What is Average Retirement Savings by Age?
Understanding what average retirement savings by age look like is an important part of planning for your financial future. By knowing where you stand in relation to these averages, you can take proactive steps to improve your retirement savings.
It’s never too early—or too late—to start saving for retirement. If you’re in your 20s, 30s, 40s, 50s, or 60s, there are steps you can take to boost your savings and work towards a comfortable retirement.
The key is to start now, make saving a priority, and regularly assess your financial situation. With thoughtful planning and consistent effort, you can achieve the retirement you desire.