Your age is an important factor to consider when thinking about your plans for retirement savings. In a nutshell, here is a brief look at the average retirement savings by various age groups, from Americans in their 20’s to 60’s.
Retirement savings in their 20’s
It’s really never too early to start saving for your future. Considering certain factors such as student-loan debt and entry-level salaries, Americans in their twenties probably aren’t immediately thinking about saving for retirement. As a generalization, the average monthly payment for student-loan debt is $350, according to the Federal Reserve. According to the 2016 Survey of Consumer Finances (SCF) – conducted by the Federal Reserve Bank – the average retirement savings for people ages 18-24 is about $2,960. For people ages 25-29, the number is higher: approximately $8,210. If you fall in these two age groups and you aren’t able to put the recommended 10-15% of your pre-tax income towards retirement savings, saving whatever you can is important in the long run. This includes looking into retirement plans like employer-sponsored ones such as a 401(k) or 403(b).
The main idea is that people in their twenties still have a good chunk of time before they retire, so they shouldn’t stress too much. However, every bit counts and saving early for your future can’t do you any harm.
Retirement savings in their 30’s
A lot can change in your thirties. Perhaps you’re married, have kids, and finishing up the last of student-loan debt payments. If you’ve levelled up in your career, then hopefully you’re making a larger salary and bringing more money to the table. However, life can seem more complicated now and saving for retirement probably isn’t the first thing on your to-do list. If you haven’t started saving for retirement by age 30, it is recommended that you start by keeping about 18% of your yearly salary for retirement. Although there may be more things to juggle now, tightening the family budget is a smart move. According to the SCF, retirement savings statistics for Americans ages 30-34 are about $24,250; for people ages 35-39, the number is approximately $44,650. In fact, some financial experts suggest that Americans in their thirties save one to two times their annual salary for retirement. For example, if you’re making $50,000 during this period of your life, you should have up to $100,000 in retirement savings.
It may seem like there is a lot of pressure to save as much as possible at still a pretty young age, but bear in mind that these goals are suggested by business experts. They probably aren’t reflective of the average American in their thirties, but they are aimed to help you thrive in the long run.
Retirement savings in their 40’s
By the time you’re forty, you may be in the prime of your career and hopefully will have a salary that reflects that. The statistic for how much people have saved by the time they’re forty is actually a pretty low number. The estimated median savings amount is only $63,000. The suggested amount for retirement savings for Americans in their forties three to four times their salary. The SCF displays average retirement savings for people ages 40-44 to be $67,960, and for people ages 45-49 it is $119,340.
If your retirement savings are looking low and you are in your forties, you can consider contributing the maximum amount to your 401(k) or other retirement account. As of 2019, the maximum amount you can contribute to a 401{k) plan is $19,000, and $25,000 for those age 50 or older. If you can afford to do this, you may want to consider it as a generous kickstart to your savings.
Retirement savings in their 50’s
By age fifty, you’re getting closer to retirement and you may be paying better attention to the status of your retirement savings. You may also have other payments to tackle, such as rising medical bills, supporting your children through college, and helping with car expenses. During this decade, the suggested retirement savings for Americans is about 6-7 times their annual salary. To help you reach this goal, you can contribute an additional $1,000 a year to your IRA if you’re over 50. Moreover, you can do a catch-up contribution, which is essentially an extra $6,000 a year to your 401(k) or 403(b). The SCF’s statistics for Americans ages 50-54 is $137,710 in retirement savings and $213,745 for those ages 55-59.
As you begin thinking about these important decisions for retirement, you can also contemplate downsizing your home and considering assets like company stock as part of your retirement balance, even if they aren’t directly a part of your retirement account. Meeting with a financial planner can help you organize these decisions and give you some peace of mind with your finances.
Retirement savings in their 60’s
Finally, your sixties is the decade where you can start gathering together years of savings, as well as begin receiving social security benefits. By the time you’re 60, you should have at least eight times your annual salary saved for retirement. The SCF’s statistics for Americans ages 60-64 is $229,100 in retirement savings and $173,530 for those ages 65-69. Yet, the reality is that a lot of people are still short and don’t have as much as they would like saved. In that case, looking into your assets and seeing what can be monetized is a good idea.
Given the fact that your sixties are the years where you can gain aid from social security, these benefits can be a prominent source of monthly income. In 2018, the average monthly benefit for a retired was $1,413 per month.
After going through the recommended amounts for retirement savings, you can see how every decade of your life contributes to helping you immensely by the time you are ready to retire. Using these decades as little benchmarks can help narrow your focus to reaching these financial goals, thus making your journey to retiring a smooth one.