By Synchrony Staff
- UPDATED April 22
- |
- 10 MINUTE READ
Thinking about early retirement? If so, it’s important to review your retirement account balances early and think through how you’ll maintain your lifestyle. Retirement at any age takes planning, there are even average retirement savings range targets to aspire towards throughout your career. If you’re thinking about retiring at 55, you’ll want to ensure you have enough saved live off comfortably.
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?
Some experts suggest planning to live on a minimum of 65 to 75% of your current income in retirement, but ideally you should plan to live off of 80% of your current income. According to these parameters, you may need 10 to 12 times your current annual salary saved by the time you retire. Experts say to have at least seven times your salary saved at age 55. That means if you make $55,000 a year, you should have at least $385,000 saved for retirement.
Keep in mind that life is unpredictable–economic factors, medical care, and how long you live will also impact your retirement expenses. So, it’s advisable to give yourself a cushion and exceed the average retirement savings.
In order to better estimate what you need to put away for retirement, ask yourself the following five questions:
1
How much debt will you pay off before retirement? The amount of debt you owe and how you plan to reduce it in retirement affects how much money you will need.
2
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? (Check out our guides on awesome places to retire on monthly budgets of $2,000, $3,000, $4,000, $5,000, $6,000, and $10,000)
3
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.
4
What age do you plan to retire? The average American retires between ages 62 and 65, but some American’s may plan to retire early or later than this. However, age isn’t the only factor in determining the right time to retire.
5
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 expenses and 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 annual salary in this age range is between $58,000 - $59,000, 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 (or maybe you’re planning to retire early), prioritize meeting your retirement savings goals. Talking to a financial advisor may help.
The average retirement savings by 55 may be just over $220,000, 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 2022 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 six steps you can take to boost your savings before you retire:
1. 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?
2. 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.
3. 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.
4. Set aside found money for retirement. If you receive extra cash from a bonus, gift or tax return, add it to your retirement savings.
5. 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.
6. 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.
If you’re thinking about diversifying your retirement portfolio, consider adding an IRA product to your existing employer-sponsored 401K or 403B retirement plan. Consider the expert advice in this article to learn more about your options today.
- EXPERT ADVICE
- IRAS
- RETIREMENT
- SIGN IN
- OPEN ACCOUNT
Company
- Synchrony
- Account Agreement
- Online Privacy Policy
- Account Privacy Policy
- Online Terms
- Sitemap
Help & Tools
- Bank Forms
- ATM Finder
- Mobile App
- Frequently Asked Questions
- Accessibility
*ANNUAL PERCENTAGE YIELD (APY): All APYs are accurate as of .
APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. A penalty may be imposed for early withdrawals on a CD. After maturity, if you choose to roll over your CD, you will earn the base rate of interest in effect at that time. The maximum APY shown for CDs and IRA CDs is for a 60-month CD with a balance of at least $25,000. See all CD rates and terms offered.
1 Bankrate Safe & Sound® 5-Star Rating earned for 2014 through 2018. NerdWallet: © 2016, 2017, 2018 and TM, NerdWallet, Inc. All Rights Reserved.
Important Disclosures
NATIONAL AVERAGE: National Average APYs are based on specific product types of top 50 U.S. banks (ranked by total deposits) provided by Informa Research Services, Inc. as of 10/03/2022. CD Rates: Average APYs are based on certificate of deposit accounts of $25,000. High Yield Savings Rates: Average APYs are based on High Yield Savings Accounts of $10,000. Money Market Account Rates: Average APYs are based on Money Market Accounts of $10,000. Although the information provided by Informa Research Services, Inc. has been obtained from the various institutions, accuracy cannot be guaranteed.
© 2023 Synchrony Bank. All Rights Reserved.