As retirement approaches, it’s natural to wonder whether your savings are on track to provide the comfortable future you envision.
While there is no one-size-fits-all answer, there are general guidelines that can help you assess whether you’re saving enough. By ages 55 and 60, your retirement savings should be growing steadily, but how much should you actually have saved by these milestones?
What to Aim for by Age 55
By the time you reach age 55, you should be in the final stretch of your working years, which means it’s critical to have a substantial portion of your retirement savings in place. According to financial experts, a common recommendation is to have at least 5 to 6 times your annual salary saved for retirement by the age of 55.
For example, if you earn $75,000 per year, you should aim for a savings balance of about $375,000 to $450,000 by age 55. This figure can vary depending on factors such as your retirement goals, lifestyle expectations, and the age at which you plan to retire.
If you’re behind on your savings, don’t panic. It’s never too late to start boosting your contributions. You can take steps such as maximizing contributions to retirement accounts like 401(k)s or IRAs, and seeking ways to increase your income or reduce your expenses to redirect more toward retirement.
What to Aim for by Age 60
By age 60, retirement is just a few short years away for many people. At this stage, it’s important to have a more defined target for your retirement savings. Financial planners often recommend having at least 7 to 8 times your annual salary saved by age 60. This ensures that you’ll have the funds necessary to support you through retirement without running out of money too soon.
Using the same example as before, if you make $75,000 per year, your goal should be $525,000 to $600,000 saved by age 60. This amount might seem daunting, but keep in mind that the earlier you start saving, the easier it is to reach these milestones. Plus, your savings may benefit from compound interest, which means your investments can grow significantly over time.
Key Factors That Affect Your Retirement Savings Needs
While these guidelines are helpful, the actual amount you should have saved will depend on several factors unique to your situation. Here are a few things to consider when determining how much you should have saved by age 55 and 60:
- Retirement Age: If you plan to retire earlier than the typical age of 65, you’ll need to save more. Retiring at 60, for example, would mean having fewer years to save and more years to draw from your retirement fund.
- Lifestyle Goals: The lifestyle you plan to live in retirement plays a major role in how much you need to save. If you want to travel extensively or maintain a high standard of living, you may need a larger nest egg.
- Healthcare Costs: Healthcare expenses tend to rise as we age, and even if you have insurance, out-of-pocket expenses can add up. Be sure to factor in medical costs when planning for retirement.
- Social Security and Pensions: While Social Security can help provide some income during retirement, it is unlikely to cover all of your living expenses. If you have access to a pension or other sources of income, take that into account when setting your savings goals.
How to Catch Up If You’re Behind
If you’re not on track to meet these savings goals, there are ways to catch up:
- Increase Contributions: Take advantage of catch-up contributions once you reach age 50. For example, you can contribute up to $26,000 per year to a 401(k) in 2023, rather than the standard $19,500. You can also contribute an additional $1,000 to an IRA, bringing the total to $7,500 annually.
- Delay Retirement: Working for an additional 1–2 years can provide a significant boost to your retirement savings, giving you more time to save and less time to rely on your savings once you retire.
- Cut Costs: Reevaluate your budget and look for areas to cut back on expenses. Reducing discretionary spending can free up more money to allocate toward retirement savings.
- Maximize Investments: If you haven’t already, consider speaking with a financial advisor about diversifying your investments. A well-balanced portfolio of stocks, bonds, and other assets can help your savings grow more effectively over time.
Your retirement savings by age 55 and 60 can serve as a helpful indicator of whether you’re on the right path. While these numbers might seem intimidating, they’re not unreachable with smart planning and consistent saving.
The earlier you start, the better, but it’s never too late to boost your savings and make up for lost time. The key is to set clear goals, make the most of retirement accounts, and regularly review your financial plan to ensure you’re on track for the future you desire.
