Retirement Savings Goals at Every Age

It’s only human to underestimate the importance of saving for retirement. After all, there’s scientific evidence that we think of our future selves as other people entirely. To change this perception, try a mental exercise. Imagine what your bank account would look like without one paycheck coming in. Now two in a row. Now three. It probably isn’t pretty, right? Then stretch out that financial scenario by three decades—that could be the length of your retirement. Thirty years. How would you meet your living expenses?

Social Security is a start, but it’s not the end. It’s unlikely that your benefits will provide you with the lifestyle you were accustomed to pre-retirement. For that, you’ll need to save. 

The longer you save, generally speaking, the better off you'll be. But how much should you be stashing into retirement accounts? The Center for Retirement Research at Boston College recommends putting away 15% of your annual income. You can invest that money in several types of tax-advantaged accounts, such as 401(k)s, IRAs and Roth IRAs. And especially as you get older, certificates of deposit and money market accounts are increasingly useful savings tools.

Getting started early (or right now) and making regular contributions to your retirement savings is a healthy financial habit, as is regularly checking on your progress and making necessary adjustments. So read on to find out how much you should have in retirement saving, at every age.

Mid-20s to Mid-30s
Experts recommend that young adults save one year’s salary for retirement by age 30. For 25-year-olds who are likely just starting their careers, the recommendation is a quarter to a half of that figure.

So how are young Americans doing? The average level of savings in 401(k) plans for 25 to 34 year olds, according to 2017 data was a bit under $25,000. Which doesn’t sound too shabby—unless these individuals are making more than $25,000 per year (statistics show many of them are).

The gap may come from the economics affecting this generation. Thirty-somethings who joined the workforce during the 2008 financial crisis may have started their careers with lower earnings (thanks to lower salaries) and high student-loan burdens. While having loans doesn’t seem to affect 401(k) participation, it does affect how much is saved: By age 30, the assets of college graduates with loans outstanding are roughly 50% of the assets of college graduates without debt, according to the Center for Retirement Research.

The good news is that people in their mid-20s to mid-30s appear to be up to the challenge. The job market has improved, and more people are taking part in retirement-savings plans at their companies. If you’re a young adult, remember that through the wonder of compound interest, what you save at this age will make you more money over the coming decades than money you save later.

Mid-30s to Mid-40s
By the time you reach your mid-30s, experts recommend that you aim higher—saving twice your annual salary by the time you hit 35 and three times your annual salary at the age of 40.

The median earnings for people aged 35 to 44 was $51,792 a year in the fourth quarter of 2018, according to the Bureau of Labor Statistics. With that level of income, experts recommend your savings should total about $155,000. But in 2017, the mean retirement account of people in this age bracket held only $68,935.

This age comes with advantages and challenges. You likely earn more than you did 10 years earlier, but you might also have expenses that come with raising children or helping older relatives.

Mid-40s to Mid-50s
Median earnings of people in this group are $52,312 a year, barely budging from that of people 10 years younger, according to the Bureau of Labor Statistics. With some experts calling for savings of six times one’s annual salary at the age of 50, that would total $313,872 for someone with the median income. But the mean retirement accounts of people in this cohort held an average of just $129,051 in 2017.

The good news, in some cases, is the absence of bad news: At this age, student-loan debt will probably be paid off or at least greatly reduced. The 40s may also be your entering your peak earning years. You may, however, have to balance your retirement needs with the costs of your children’s college educations or other family costs.

Recognizing that time is getting tight, the federal government allows you to put additional money away in your retirement-savings vehicles after you turn 50. These are known as "catch-up” contributions.

Mid-50s to Mid-60s
Experts recommend that you have eight times annual earnings saved by the age of 60, and 10 times that amount by 67. That would equal savings of $431,392 and $539,240, respectively. But in 2017, the average retirement account balance for people aged 55 to 64 was just $190,505.

When it comes to investing, your portfolio at this point should have a more conservative investment mix as you inch closer to retirement. While that will probably limit gains, it also minimizes losses. And capital preservation becomes more important closer to retirement, when there is much less time to recover from market downturns.

Overall, remember your future retirement will only be comfortable and secure if you do the saving. Keep your long-term goals in mind throughout the challenges (and reasons not to save) that happen at every life phase. Your future self will be grateful.

Andy Sobel is a freelance writer and editor. He has held senior editing positions in The Wall Street Journal’s New York and Brussels newsrooms and was managing editor of American Banker. A graduate of the University of Missouri and Union College, he now lives in Nashville, TN.

See the median retirement savings by age in the U.S.