Saving for Retirement in Your 50s
Workers in their 50s have regularly been putting money into their 401(k) plans. Yet, it seems that many still find themselves not quite reaching the suggested savings goals for retirement. A recent report from Fidelity, which looked at data from over 24 million individuals with 401(k) accounts up to March 31st, sheds some light on this situation.
Here’s what the average account balances look like for those in this age group:
- 50-54 years old: $193,100
- 55-59 years old: $236,200
Experts recommend that by age 50, individuals should ideally have saved about six times their salary, and by age 60, aim for eight times. For context, if the average salary is around $67,000, this means aiming for a savings target between $402,000 and $536,000.
While these benchmarks indicate that many people in their 50s are falling short, it’s crucial to recognize that this might not reflect a lack of dedication. Members of Generation X, who largely make up this demographic, are reportedly saving at an average rate of 15.4%, which is in line with recommended savings rates.
It’s important to remember that a 401(k) balance is just one aspect of a person’s overall financial picture. Fidelity’s guidelines take into account total retirement savings, which could also include individual retirement accounts, stocks, pensions, or inherited funds, meaning actual savings could be higher.
Nonetheless, catching up can be challenging, especially for those who might have started saving late or encountered financial setbacks, particularly as retirement approaches.
Strategies for Retirement Savings in Your 50s
If you find yourself behind in your retirement savings, Melissa Caro, a certified financial planner from New York City, suggests starting with a comprehensive financial assessment. “Compile a list of your savings, income, debts, and actual spending,” she advises. This can help you spot areas to cut back or earn more, enabling you to funnel any extra funds into your retirement accounts.
Caro emphasizes that any saved money from subscriptions, reducing phone plans, or earnings from side jobs should be redirected toward retirement savings, particularly with catch-up contributions taken into account. For those over 50, there’s an opportunity to contribute an extra $7,500 on top of the $23,500 limit for 2025. Additionally, you can add $1,000 to your IRA over the standard $7,000 limit.
A modest increase in contributions can lead to significant growth. For instance, if you contribute $200 monthly starting at age 50, with an average balance of $193,100 and an annual return of 7%, you could end up with roughly $711,000 by age 67.
However, whether these savings will be enough really depends on individual retirement goals. Some may need to reassess their plans. This could involve postponing retirement, managing living costs better to enable higher contributions, or considering part-time work during retirement.
