How Much Have Americans Saved for Retirement by Age 55?

It can be hard to know if you're saving enough to ensure a comfortable retirement. The 2019 Survey of Consumer Finances by the Federal Reserve found that average Americans approaching retirement (ages 55-59) have saved $223,493.56 with similar numbers for ages 60-64 at $221,451.67. 

But some individuals have saved much more and others have no retirement savings at all. According to Transamerica data, 40% of Americans expect to still work past age 65 while 14% expect to never retire.  

With pensions and Social Security providing less financial security than in the past—coupled with an uncertain economic future—the pressure is on for working Americans to save as much as they can for retirement.

How Much Money Will You Need for Retirement?

In order to estimate what you need to put away for retirement, ask yourself the following questions:

• • At what age do you plan to retire? The average American retires between ages 62 and 65, but age isn’t the only factor in determining the right time to retire.
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• • How much debt will you pay off before retirement? What you have left to pay on your mortgage or other areas of debt and how you can reduce your debt in retirement affects how much money you will need.
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• • What is the cost of living where you plan to retire? Are you planning to move once you retire? Is the cost of living in your current city changing?
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• • What kind of lifestyle do you want to lead? For example, is travel a goal? Knowing how much you’ll need in reserves to live the lifestyle you’re seeking in retirement can help you determine a savings goal. Listen to our podcast on how to decide how you want to spend your retirement.
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• • Do you want to leave money to family members? If so, you may either need to save more or live off less during retirement.

How to Plan for Retirement

Many financial advisors recommend saving a minimum of 10% of your annual gross income toward retirement at any age. These savings are in addition to money that you may be setting aside for short-term goals, such as a new car, or unexpected emergencies like medical bills.

It’s never too early to start saving for retirement. There are practical, smart steps you can take toward meeting the recommended retirement savings at any age:

Learn How to Be Financially Smart in Your 20s

Recommended retirement savings: Up to 1x your annual salary

How to save: People in this age group can contribute to their company-provided 401(k), chip away at their student loans and open other retirement plans like IRAs. 

You may have obstacles like student loans, but if you can afford to, put 10-15% of your salary towards retirement. Another saving tactic you could look into is investing your money; when you’re young, you can afford to have a higher risk tolerance as you have plenty of time to earn back any losses that may incur.

Another good strategy is to start an emergency fund. That way, when unforeseen events happen, you don’t need to dip into your retirement savings. An emergency fund is best stored in a high yield savings account.

Begin to Make Savings Progress in Your 30s 

Recommended retirement savings: 1-2x your annual salary

How to save: Even though you may have more expenses than you did in your 20s—from buying a house, having a family or continuing to pay off student loans—don’t forget about saving for retirement.

Hopefully you have a higher salary now that you’re further into your career. Take full advantage of your company’s 401(k) match and contribute on your own, as well. If you haven’t opened one, a traditional IRA or a Roth IRA are also good retirement accounts to have.

If you find you’re not on track to save 1-2x your annual salary for retirement, consider tightening your budget to make up for it. 

Think About Retirement in Your 40s

Recommended retirement savings: 3-4x your annual salary

How to save: Hopefully you’ve paid off your student loans by now and can focus on retirement. Retirement may still seem far away but getting serious about saving for retirement can lay a solid foundation for your nest egg. Increase your contributions to your retirement plans and tighten up on your budget if needed.

The average salary at 40 is $50,000, so someone with that annual income should have $150,000 to $200,000 saved. Take your salary into account to see how much retirement savings you have to make up for.

Focus on Retirement Savings in Your 50s

Recommended retirement savings: 6-8x your annual salary

How to save: In your final decade before retirement, prioritize meeting your retirement savings goals. Talking to a financial advisor may help.

The average retirement savings by 55 may be just over $100,000, but for many people, that’s just not going to be enough. Online retirement calculators, including those that incorporate your expected spending in retirement, can help you determine if you're on track. 

If you need to catch up, in your 50s you can contribute an extra $1,000 to your IRA and $6,500 to a 401(k) or 403(b) as a “catch up” for 2020 and 2021 limits.

Final Stretch: Retirement Savings in Your 60s

Recommended retirement savings: 8-10x your salary

How to save: This close to retirement, you’ve probably thought a lot about how you want to spend your retirement. Take your desired lifestyle into account when you assess the retirement assets you have so far. You’ll probably need to take into account medical costs as part of that lifestyle. 

If you still haven’t hit the 8-10x mark on your retirement fund, look at what assets you can monetize or even consider working for a few more years. Remember you can maximize your Social Security if you delay claiming it until 70 years.

How to Catch Up on Your Retirement Savings 

Are your retirement savings nowhere near what they should be by age 55? Here are some steps you can take to boost your savings before you retire:

• • Increase or max out your monthly contributions to your 401(k), IRA or other retirement plan. Are you making the most of your employer’s match? How much of your annual salary are you putting away?
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• • Look closely at your budget. If saving for retirement is a priority, your budget should reflect this. Retirement savings should be toward the top of your list, along with basics like food, shelter and utilities.
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• • Delay your retirement. How much more could you save by working a few more years? Not only does this maintain your income, but it decreases the number of years you’ll be retired. Another option is finding a part-time job during your retirement.
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• • Set aside found money for retirement. If you receive extra cash from a bonus, gift or tax return, add it to your retirement savings.
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• • Don’t forget about Social Security. The average monthly Social Security income for retired workers in 2020 is $1,503. You can maximize your Social Security income by waiting until full retirement age or longer to collect your benefits.
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• • Pay off your debt. According to MagnifyMoney and University of Michigan Health and Retirement Survey, Americans in their 50s have an average debt of $17,623. Outstanding bills in retirement take away from your effective income. Talk to a financial expert about the best way to lower your debt before you retire.

Wherever you are in meeting your retirement savings goals, talk to your financial advisor about the right financial products needed to ensure you have a comfortable retirement.

Learn how IRAs can help you save for retirement.