Average Retirement Savings by Age: Do You Have Enough?

Having enough retirement savings means the difference between living comfortably and scraping by on Social Security in your golden years. The trick is knowing how much you need. Experts recommend having about 10 times your pre-retirement salary saved by age 65. Breaking down that goal by age will help you evaluate your progress.

Read: The Simple, Effective Way To Fortify Your Retirement Mix

What Are Retirement Savings?

Retirement savings are funds you put aside to live on after you stop working. While any investment or bank account might be considered retirement savings if you earmark the money for that purpose and leave it untouched, retirement savings typically include dedicated retirement accounts such individual retirement accounts, 401(k) and 401(b) accounts, Keoghs, pensions, annuities and thrift savings plans.

How Much Does the Average Person Have in Retirement Savings?

U.S. retirement accounts have an average balance of $87,000, according to most recent Federal Reserve Survey of Consumer Finances. However, retirement savings vary considerably by age.

As you might expect, Americans ages 65 to 74 have the highest average balance, followed by the 55-to 64 age group. Individuals over at 74 have lower balances, possibly because they’ve already spent down some of their savings.

How Much Do I Need To Retire?

How much you’ll need once you retire is wholly dependent on how much you’ll spend — and that could be more than you think.

In GOBankingRates’ recent Retirement at Every Budget Survey, more than half of respondents said they expect to spend $2,000 per month or less in retirement. Over 40% of respondents ages 18 to 24 and at least 25% of respondents in all other age groups expect to spend less than $1,500 per month. Fewer than 11% of every age group expect to spend over $4,000.

These expectations suggest that American’s might have unrealistic views of what their actual expenses will be once they retire.

The 2022 Consumer Expenditure Survey from the U.S. Bureau of Labor Statistics found that individuals ages 65 to 74 spend $60,844 per year — $5,070 per month. Spending drops with age, but people 75 and older still spend $4,457 month, on average.

While there’s no magic number that can tell you exactly how much you’ll need, there are guidelines that can give you a good idea.

Your Salary at Retirement?

One is based on your salary at the time you retire. This “salary multiplier” method of estimating post-retirement needs recommends having 10 times your salary by age 65. That amount is a starting point you adjust for factors like when you plan to retire, what kind of lifestyle you hope to enjoy, anticipated medical expenses and life expectancy.

What Is the 4% Rule in Retirement?

Another guideline, called the 4% Rule, says that for a 30-year retirement, you can withdraw 4% of your portfolio in the first year, and then withdraw 4%, adjusted for inflation, in subsequent years.

To use this method, you’ll have to anticipate your annual expenses and inflation rates — the average from 1960 to 2022 was 3.7%, according to WorldData.info. If you forecast your expenses to be 4,000 per month, for example, you’ll need $48,000 in the first year. Under the 4% rule, you’ll need a $1.2 million ($48,000/0.04) balance to start.

Social Security Benefits

Remember that Social Security benefits offset your living expenses. Monthly Social Security retirement benefits averaged $1,362 in September. You can find how how much you’re scheduled to receive by reviewing your statement on the My Social Security website, located here.

How Much Should I Have Saved for Retirement at Every Age?

Investment brokerages like Merrill, Fidelity and T. Rowe Price use salary multipliers to set savings benchmarks. While each approaches this method slightly differently, their benchmarks are quite similar. The following chart combines all three brokerages’ recommendations.

Non-Retirement Savings and Investments

Retirement accounts are the ideal way to save for retirement because they provide tax incentives that can save you tens or hundreds of thousands of dollars over a lifetime. However, they’re not the only way to save, and regardless of age group, retirement savings aren’t even consumers’ first priority, according to GOBankingRates’ National Savings Day 2023 survey. Overall, emergency fund was the top reason respondents are saving (43.59%), followed by retirement (19.19%), a house (13.31%) vacation (7.91%) and a car (67.35%). Additional priorities include education (2.99%), a wedding (1.64%) and “other large purchase” (5.01%).

Here are the top three reasons respondents are saving, broken down by age:

Ages 18-24

• House: 25%

• Emergency fund: 22.30%

• Retirement: 11.49%

Ages 25-34

• Emergency fund: 44.40%

• House: 18.10%

• Retirement: 13.36%

Ages 35-44

• Emergency fund: 42.97%

• Retirement: 18.88%

• House: 14.86%

Ages 45-54

• Emergency fund: 55.70%

• Retirement: 20.25%

• House: 7.59%

Ages 55-64

• Emergency fund: 46.09%

• Retirement: 34.38%

• Vacation: 7.81%

65 and Older

• Emergency fund: 82%

• Retirement: 22.95%

• Vacation: 9.94%

The survey results suggest that to get a complete perspective of consumer savings health, it’s important to look not only at retirement accounts, but non-retirement account balances and total financial assets as well.

The data compiled for the tables below are from the Federal Reserve’s most recent survey of consumer finances. The statistics take into account the following:

1. The median savings balance: This number represents the middle value when comparing all savings in a given age group. It is a more accurate account of savings than the mean balance because outliers don’t strongly affect this value. Just as many accounts have less than the median balance as accounts with a greater balance.

2. The mean savings balance: This balance represents the average amount of money people have saved. It is calculated by adding up all savings and dividing the amount by the number of accounts. Outliers can skew the mean much more than they can affect the median.

Here’s a breakdown of average savings by age in each respective category.

Transaction Accounts

Transaction accounts refer to general spending accounts and those used to transfer money, such as checking and savings accounts. Here’s a breakdown of how much each age group has between these accounts.

Financial Assets

Financial assets are a total measure of all liquid assets held by consumers, such as cash, stocks, bonds and deposit accounts, like certificates of deposit. Here’s the baseline for reference and the average amount consumers have in dollar value.

How Much Should You Be Saving?

According to the Bureau of Economic Analysis, the current savings rate is 3.4% of disposable income as of September. That means contributing an amount greater than this figure into a savings account after every payday means saving more than the average American.

Using the 50/30/20 Rule as a Savings Guide

Those who want to stay on top of their personal finances should consider following the 50/30/20 rule — 50% of income spent on expenses, 30% on discretionary items and 20% toward savings.

Here’s a breakdown of median U.S. salaries in October 2023 from the U.S. Bureau of Labor Statistics and how much should be saved based on the 50/30/20 rule:

While it’s helpful to have a benchmark to gauge your personal savings against, GOBankingRates’ National Savings Day Survey revealed significant variation in the amounts people hope to save in the next year, both within age groups and across age groups. For example, significant percentages of the oldest age groups plan to save $100 or less in the coming year, and over one third of youngest age group plans to save more than $10,000.

Here are the 12-month savings goals for each age group, according to GOBankingRates’ proprietary data:

How To Save More Money If You’re Not Saving Enough

If you’re falling short of meeting your savings goals, you’re not alone. The overwhelming majority of GOBankingRates’ National Savings Day Survey respondents reported having roadblocks or challenges to saving, the most significant being not making enough money (38.09%). Bills being too expensive also poses a challenge (22.37%). But no matter what your current situation, you have options for getting your savings on track.

If the reason you’re not saving enough is that you just don’t have the money, a good first step is to create a budget so you can what’s coming in and out. You can also see expenses that can be cut to free up money for saving. You can work on paper or in a spreadsheet, listing all of your expenditures and all of your income. Or use one of the many budgeting apps available.

Once you’ve cut back as much spending as you can, consider taking a second job or a side hustle if your income still doesn’t allow you to save.

How To Maximize Your Retirement Savings

Experts recommend trying to put aside 15% of your pre-tax income for retirement. One or more tax-advantaged accounts can help get you there faster.

401(k)

That 15% savings recommendation includes matching funds you get from your 401(k) or other employer-sponsored retirement plan. If your employer offers such a plan and matches employee contributions, contributing up to the match limit is the best way to maximize your savings.

Health Savings Account

Employees who have a qualified high-deductible health insurance plan can open a health-savings account and contribute up to $3,850 in 2023 ($7,750 for a family plan) and $4,150 in 2024 ($8,300 for a family plan) — plus a $1,000 catch-up contribution if you’re age 55 or older. Although you can designate all the money for medical expenses, you also have the option of investing some or all of the funds for use later.

You fund the account with pre-tax money. The money grows tax-free, and you can withdraw it tax-free to use toward qualified medical expenses. Once you turn 65, you can use it to offset Medicare premiums and other health-related costs. Or you can withdraw it for any reason you want, although in that case, you’ll pay income tax on the withdrawal.

Individual Retirement Account

You have until Tax Day in April 2024 to contribute up to $6,500 to an individual retirement account for 2023–plus $1,000 if you’re age 50 or older. Traditional IRAs are funded with pre-tax income and grow tax free — you’ll pay income tax on the money when you withdraw it in retirement. Roth IRAs are funded with after-tax income and grow tax-free. You withdraw the funds tax-free in retirement.

How To Maximize Your Personal Savings

Whether you’re building an emergency fund — which should always be your first priority — or saving for a home, car or other major expense, it’s important to put your extra cash to work. Some of the popular methods include using:

• FDIC-insured high-yield savings accounts

• Certificates of deposit

• Treasury bonds

High-Yield Savings Accounts

As the Federal Reserve raises interest rates, many banks have increased the yields for online savings accounts. Consumers now have the chance to earn far more from their money that sits idle than in the last several years.

Certificates of Deposit

CDs are an attractive option for individuals who are happy to lock away a lump sum for a defined period. Banks and credit unions often have CD specials offering their most competitive rates — but keep in mind that withdrawing cash early often comes with hefty penalty fees.

Treasury Bonds

Government bonds such as Series I bonds are a great way to combat inflation with negligible risk to your money. Interest on I bonds is payable every six months at a current annual rate of 5.27%.

Final Take

How much people save differs based age, income, education and financial objectives. The primary financial goal should be building up an emergency fund. Once you’ve made some headway with that, you can concentrate on saving for retirement and other large-ticket purchases, such as a home or car.

FAQ

Here are some other common questions people ask about savings by age.

• How many people have $1 million in retirement savings?

  • The number of people with at least $1 million in a 401(k) is 299,00, according to Fidelity Investments.

• What net worth is considered rich in retirement?

  • The figure is purely subjective. A survey from Charles Schwab revealed that Americans believe you need $2.2 million to be rich. However, the average net worth of those who said they felt wealthy was significantly lower -- $560,000.

• How much should the average 25-year-old have saved for retirement?

  • That depends on your income. At this age, your first priority should be to build an emergency fund of three to six months' living expenses. After that, try to save 15% of your salary for retirement.

• How much should a 30-year-old have in retirement savings?

  • The average 30-year-old should have .05x-1.6x their salary saved for retirement.

• How much does the average 40-year-old have in the bank?

  • A 40-year-old in the U.S. has an average of $41,540 between checking and savings accounts. The median amount is $7,500.

David Granahan contributed to the reporting for this article.

Information is accurate as of Nov. 7, 2023.

This article originally appeared on GOBankingRates.com: Average Retirement Savings by Age: Do You Have Enough?