How Much Do You Need To Have Saved For Retirement? (At Age 30, 40, 50, 60, And Even 65)

American workers today lack confidence in their ability to retire, due in part to a misunderstanding about how much it will take to fund a successful retirement.

A recent report by the Employee Benefits Research Institute found that fewer than half of American workers today are either “very confident” or “confident” in their ability to retire.

Why are so many workers so worried?

Part of the problem may be that so many are overestimating the percentage of their salary they need to be saving. A full 44 percent of those surveyed think they need to save somewhere between 20 and 30 percent of their salaries.

Related: How much should you contribute to your 401(k)?

Holy moly. No wonder so many people are terrified to get started. The good news is that, for most of us, the percentage we need to save is substantially lower than what many of us think. The even better news is that the earlier you start, the less you’ll have to save over time.

JPMorgan Asset Management puts together an annual Guide to Retirement for financial planners to use with customers (er, clients). The 2016 edition was released in March and, thanks to the internet, is available for anyone with an internet browser.

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Even though I personally try to minimize pricey investment fees, the big investment houses have access to big data that’s helpful to all of us—whether we do it ourselves or hire a planner to help set our course.

This report assumes that those at lower income levels will have a higher percentage of their retirement income supplemented by Social Security benefits. If you’re not confident about the future of the entitlement program, you’ll want to add a boost to the numbers below.

These numbers are based off the following assumptions:

The investor will earn an annual return of 6.5 percent until retirement and then 5 percent per year after (to account for a more secure post-retirement portfolio). In the following examples, retirement begins at age 65 and will last 30 years. Inflation will average 2.25 percent and the investor will contribute at a rate of 5 percent per year.

That said, here’s how much the Big Boys recommend we have put aside at different age milestones.

How Much Should You Save By Age 30

These numbers assume that lower income earners will have a higher percentage of social security money as part of their annual retirement income. You can see that the grid recommends the lowest income earners identified within this research (those making around $50k per year) have only 40 percent of their annual salary saved by age 30.

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The percentage increases to 110 percent for those at the $75,000 threshold, 130 percent for those making $100,000 and a whopping 180 percent for those making $150,000 per year.

Why? According to J.P. Morgan, higher income earners will need to replace a greater percentage of their current income during retirement. Don’t just take their word for it, though. Use these numbers as a guide but do your own analysis to determine how much you expect to spend during retirement.

For a different perspective, last year Money Under 30 wrote about how much a 30-year-old should have saved so far for retirement. According to founder David Weliver’s analysis, a good guideline, assuming you’ve been working since age 22 or 23, is to have the equivalent of one year’s salary put away in a retirement vehicle like a 401(k) or IRA. You can read more about that recommendation here.

Related: Where to Invest: 401(k), IRA, or both?

Related: What rate of return to use for retirement planning

How Much Should You Save By Age 40

By age 40, the checkpoints indicate an expectation that you’ve been saving for a while. (And if you’re reading this website, that’s probably true!) At all income levels except the lowest, these guidelines suggest having at least 100 percent of current salary put away. I agree. By age 40, you’re less able to rely on the power of compound interest, which is the most powerful investment tool a young person has at his or her disposal.

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The only exception here is the lowest income level, $30,000, which is expected to have 50 percent of one year’s salary put away. At age 30, there was no expectation that someone making $30,000 would have anything saved at all.

For another perspective, a recent Forbes article suggests all 40-somethings should be saving at least 20 percent of salary for “financial priorities,” which include debt payments, savings, and retirement contributions.

I’ll go ahead and unpack this a little further: the less you’re required to allocate toward debt at this point in your life, the more you’ll have to save for retirement—and the greater the chances that your account will sustain you throughout those golden years.

How Much Should You Save By Age 50

By this point, the checkpoints indicate you should have several times your salary saved, unless you’re in the lowest income bracket, at which case, you’re fine if you’ve got 1.5 times your salary socked away. The expected multiple increases with income, but the point remains: By the time you reach age 50, you should have been saving for quite some time.

If you’re 50 and you haven’t saved as much as you’d like, there is some good news. There are several catch-up provisions written into the retirement tax code for those aged 50 and above. If you can, now is the time to take advantage of them.

For 2023, you can contribute an additional $7,500 to your 401(k), 403(b), SARSEP, or 457 retirement plan. These plans are employer-sponsored. If you don’t know which, if any, your employer offers, check in with your HR department.

SIMPLE IRA or SIMPLE 401(k) plan participants aged 50 and above can contribute an extra $3,500 in 2023 up to an annual limit of $19,000.

IRA and Roth IRA owners aged 50 and above can contribute an additional $1,000 per year. These are individual accounts that can be directly opened by you, if you don’t already own one. We recommend using a robo-advisor, like Wealthfront, which does all the work for you.

How Much Should You Save By Age 60

For most people, age 60 is where the rubber meets the road. Retirement is just a few short years away. This is the time to funnel as much extra income as you can toward your retirement accounts, before your income-earning years come to a close.

If you need an extra reason to save, consider the rising cost of healthcare. According to a recent report released by Fidelity and reported by AARP, the average retiree can expect to spend around $240,000 for healthcare-related costs. This number doesn’t include the cost of long-term care or the costs associated with early retirement, for those who need to close the gap between when they leave their job and age 65, when Medicare kicks in.

If you’re struggling to find ways to boost your savings, Emily Guy Birken, author of “The 5 Years Before You Retire: Retirement Planning When You Need It the Most,” suggests, “Now is the time to downsize. Not only can you beef up your retirement savings with any money you are able to generate from the sale of your home (and capital gains taxes do not kick in on a home sale until you are making more than $250,000 from the sale as a single filer, or $500,000 as a married couple), but moving to a smaller space while you are still working can help ease the psychological transition to retirement.”

How Much Should You Save By Age 65

According to the checkpoints, here are the final tallies for retirees at age 65. If you want to have a more lavish retirement than what’s represented in the examples above, start increasing your 401(k) (or other retirement plan) contributions now, so you can reap the greatest compounding benefits.

Check out the entire Retirement Savings Checkpoints grid below. Or, view the entire JPMorgan Asset Management 2016 Guide to Retirement.

And, for those of you who like what’s found within the fine print (like me!):

The model these numbers used were based on the following assumptions about how much preretirement income you need to replace based on your income.

What percentage of your income will you need to replace in retirement?

Happy saving!

(Personal Capital is now Empower)
Empower Personal Wealth, LLC (“EPW”) compensates Webpals Systems S. C LTD for new leads. Webpals Systems S. C LTD is not an investment client of Personal Capital Advisors Corporation or Empower Advisory Group, LLC.

Read more:

• The Beginner’s Guide to Saving for Retirement
• Why You Will Need $2 Million to Retire
• 23 Things Beginners Absolutely Must Know About Saving for Retirement
• Investing Strategy for 20- and 30- Somethings
• Should You Ever Cash Out Your Old 401(k)?