“Retirement Savings Goals: What You Need to Know by Age”

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What Is the Average Retirement Savings by Age?

The average retirement savings you should have varies based on your age and income. According to investment firm Fidelity, you should aim to save the equivalent of your current salary by age 30 and 10 times your final salary by age 67, with several milestones in between.

While you can’t predict your exact earnings at each stage, these benchmarks provide a way to gauge your retirement readiness. Here’s how to set your own retirement savings goals and strategically save money along the way.

Average Retirement Savings by Age

In 2019, average retirement savings ranged from $30,170 for those under 35 to $426,070 for 65- to 74-year-olds, according to the Federal Reserve. However, the median savings is often a more practical measure, as it reduces the influence of those with unusually large savings. Below are the average and median retirement savings by age:

• Under 35: Average $30,170, Median $13,000
• 35–44: Average $131,950, Median $60,000
• 45–54: Average $254,720, Median $100,000
• 55–64: Average $408,420, Median $134,000
• 65–74: Average $426,070, Median $164,000
• 75 or older: Average $357,920, Median $83,000

Retirement Savings by Age Guidelines

Fidelity’s guidelines suggest saving based on your income rather than a fixed number:

• By age 30: Save the equivalent of your annual salary.
• By age 40: Save three times your annual salary.
• By age 45: Save four times your annual salary.
• By age 50: Save six times your annual salary.
• By age 55: Save seven times your annual salary.
• By age 60: Save eight times your annual salary.
• By age 67: Save ten times your annual salary.

These recommendations are based on the idea that you should save enough to cover 45% of your gross preretirement income per year, with the rest coming from Social Security. Your retirement age and desired lifestyle can affect this goal.

How to Save for Retirement

Fidelity’s guidelines assume saving 15% of your annual income from age 25 and investing over 50% in stocks. Starting early helps take advantage of compounding interest. Here are some account options for saving and investing for retirement:

401(k) or 403(b)

A 401(k) is an employer-sponsored retirement account allowing contributions directly from your paycheck. Nonprofits and public schools offer 403(b) plans. Contributions are pre-tax, and withdrawals are taxed in retirement. Roth 401(k)s use post-tax income, allowing tax-free withdrawals.

Traditional IRA

If you don’t have a 401(k) or want to save extra, consider an individual retirement account (IRA). Traditional IRAs are taxed upon withdrawal. SEP IRAs are available for freelancers and the self-employed, while SIMPLE IRAs are for small businesses.

Roth IRA

Roth IRAs are funded with post-tax income, allowing tax-free withdrawals. You might diversify your savings by having both a traditional 401(k) and a Roth IRA. Consult an accountant to determine the best option for you.

Brokerage Account

After setting up a 401(k) or IRA, consider a brokerage account for additional investments. These accounts offer more flexibility in contributions and withdrawals but are subject to IRS tax treatment, including capital gains tax.

Social Security

While not enough for a lavish lifestyle, Social Security can significantly contribute to your retirement income. Use the Social Security Administration’s Quick Calculator to estimate your benefits based on your projected retirement date.

The Bottom Line

The key to successful retirement saving is starting early and following a plan. Your needs and priorities will change over time, but a solid foundation and adherence to expert guidelines will help ensure a secure retirement.

As you plan for your future, remember that strong savings and good credit can open up opportunities throughout your life. For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you achieve your financial goals.

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