Resignation may be right in front of you, but there is still time to make up for the shortfall.
Are you approaching 65? Or maybe you’ve just hit that milestone? If that’s the case, retirement is likely creeping into your thoughts, even if it’s not imminent.
This brings up a critical question for those in this age group: how much should you actually save to retire comfortably, especially if you’re still working at this stage?
There’s really no one-size-fits-all answer; everyone’s financial situation is different. Still, there are some broad guidelines that might help you gauge whether you’re on the right track with your savings.
There are no universal numbers…
Interestingly, a commonly cited figure is $1.26 million, which comes from a recent survey by Northwestern Mutual asking U.S. investors how much they think they need to retire comfortably. That’s a bit lower than the 2024 estimate of $1.46 million.
But take this number with caution; it’s influenced by a wide range of factors. Some folks might feel secure with half that total, while others are understandably more anxious.
What’s perhaps more telling are figures based on your current income, aiming for a certain standard of living. Generally, financial advisors suggest having about ten times your annual salary saved by the time you retire. So, if you earn $100,000, ideally, you’d want $1 million saved to maintain your lifestyle.
However, it’s important to note that this is not a hard and fast rule. T. Rowe Price, the firm that put forth this guideline, acknowledges that healthy savings might also fall within a range of 7.5 to 13.5 times your income.
This aligns well with suggestions from other financial institutions like Charles Schwab and Merrill Lynch.
Be prepared to make tough decisions
Now, if you’re finding yourself far from that lower end of the spectrum, don’t freak out. Many people are in the same boat. Research from Vanguard revealed that as of last year, the average retirement savings account for 65-year-olds and older was just shy of $300,000, with a median below $100,000. Even when you factor in non-work-related retirement savings, many still don’t meet the targets set by advisors.
If you’re in this position, try not to panic. Luckily, there are strategies available—especially if you’re still employed.
The primary option is to consider working a bit longer. This can really boost your retirement savings. By delaying retirement, you can contribute more to tax-advantaged accounts that grow without immediate tax implications. Even conservative investments now return around 4%. Plus, as life’s major expenses—like mortgages and education—start to decline, you might find you have a sizable income to funnel into your retirement fund.
Another advantage of staying in the workforce a bit longer is the ability to postpone your Social Security benefits. Waiting just a couple of extra years until you reach your full retirement age of 67 can increase your monthly Social Security payments by approximately 12%. If you can hold off until 70, the boost is closer to 25%.
Setting your target is a great start
Keep in mind, these figures are just rough estimates. Many people live well on less, while others might exhaust their savings even after saving more than the average. How you manage your finances in retirement—especially early on—can be pivotal.
That said, many financial planners agree, the closer you can get to your savings target, the better prepared you’ll be for retirement.
Most retirees with the $23,760 Social Security Bonus are completely overlooked
If you’re like many Americans, you might find yourself lagging on your retirement savings. But it’s not widely recognized that there are ways, such as maximizing Social Security benefits, that could significantly boost your retirement income.
By learning the ins and outs of Social Security, you could potentially add an extra $23,760 to your annual income—making retirement much less daunting.
