Please consider your own circumstances before making an investment decision. So to answer the question, we believe having one to one-and-a-half times your income saved for retirement by age 35 is a reasonable target. By age 50, you would be considered on track if you have three to six times your preretirement gross income saved. And by age 60, you should have 5.5 to 11 times your salary saved in order to be considered on track for retirement. Retirement planning can be intimidating at any age—even more so early in your career.
As you’ll most likely be entering the last of your full-time working years, you’ll want to keep saving as aggressively as you can. Offer pros and cons are determined by our editorial team, based on independent research.
If you are lucky enough to have a pension, your target savings rate may be lower. Plus, HSAs can act as an additional retirement account because once you reach age 65, the money can be withdrawn for any reason, you’ll just have to pay taxes on withdrawals for non-medical purposes. With a traditional IRA, you may be eligible for a tax deduction in the year you make a contribution, but you will pay taxes when you start making withdrawals during retirement. Withdrawals prior to age 59 ½ will come with taxes and a potential 10 percent penalty. An employer may offer to match 100 percent of your contributions up to 3 percent of your salary, and 50 percent of your contributions on an additional 2 percent. For example, if you contributed 5 percent of your salary to the retirement plan, your employer would contribute another 4 percent of your salary through its match.
An advisor can also help you decide which type of investments are most appropriate for you based on your age, the number of years until you retire, your goals and your risk tolerance. The exact amount you need to live comfortably during retirement depends on several factors. One of those factors is how long you expect to live after you retire. The average person spends about 18 to 20 years in retirement, but some live for much longer. The longer you live after retiring, the more you’ll need to have in savings. The availability of tax advantages or other benefits may be contingent on meeting other requirements. Please consult your financial, tax, or other advisors to learn more about how state-based benefits and limitations would apply to your specific circumstance.
Increase your earning potential
A 2023 Fidelity analysis of more than 3,500 savers found that roughly half of those surveyed weren’t on target to meet their retirement needs. The typical saver—across all age groups—is only prepared to have 78% of the income they need to cover expenses in retirement. Your tax-deferred accounts such as a traditional IRA or traditional 401(k) will be most efficient when your income tax rate is lower. In contrast, a tax-free account like a Roth IRA or Roth 401(k) will be more beneficial during periods when your income rises, and you can dip into those coffers without increasing your taxes. Some hefty medical bills can quickly eat up a lifetime of savings. A couple in their mid-60s will need $315,000 to cover health care costs in retirement, according to a 2023 Fidelity estimate.
Read more about 403b vs 401k here. Check with the Social Security Administration to understand how your retirement start date impacts your benefits. The later you start drawing benefits prior to age 70, the larger your monthly benefit will be. Keep this information in mind as you update your budget and implement your retirement savings strategies. Even if you feel like you’re behind with your savings, there are always ways to catch up and save a bit more.
We know looking at account balances can be stressful in a time like this. But we’re here to help you make a plan to—in the long run—retire with confidence. The Social Security administration has a benefit estimate calculator, which estimates your earnings based on self-provided information. Receive updates from our blog, retirement plan industry events & news, media appearances, and the latest on Fort Pitt events. You can look at the typical costs of some of the most common chronic conditions, such as diabetes or heart disease, to get a better idea of what your expenses might be.
Taking on more leisure activities or traveling more in retirement than you do now affects your living expenses. One spending area that often increases as people get older is medical spending. Another factor influencing how much money you’ll need after retiring is your current income and spending needs. Many retirees find that they need anywhere from 70%-90% of their income to keep up their living standards after they stop working. Divide by the number of months remaining to see how much you should save. Having savings milestones for each decade of your life can help motivate you to save, knowing that the end goal means retirement at the age of 67.
What’s important is to have a plan and a general guideline for spending—and then monitor and adjust, based on your circumstances, as necessary. The goal, after all, isn’t to worry about complicated calculations about spending. Again, these spending rates assume that you will follow that spending rule throughout the rest of your retirement and not make future changes in your spending plan. In reality, we suggest you review your spending rate at least annually. We think aiming for a 75% to 90% confidence level is appropriate for most people, and sets a more comfortable spending limit, if you’re able to remain flexible and adjust if needed. Targeting a 90% confidence level means you will be spending less in retirement, with the trade-off that you are less likely to run out of money.
NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.