How is saving money going for you? If you’re like most Americans, you’ve hit a few bumps along the road. Emergencies pop up, your kids cost more than you ever dreamed, and your bank account never seems to be quite as large as you hope.
In times like these, it helps to know whether you’re on the right track — or at least how your saving habits compare to your neighbors, co-workers, and the country at large. In some cases, you might be surprised how far along you are compared to the norm. In others, it might be a wake-up call to take another look at your financial habits.
The same is true for retirement savings. We’d all like to retire someday — hopefully while we’re young enough to enjoy our free time. But to do that, we need to start saving as soon as possible. The question is how much do you have saved up already? How does that compare to other Americans? And how much will you actually need to have a comfortable retirement?
While it can be difficult to get a clear picture, several studies offer insight into how the average American is doing in terms of retirement savings. Here’s what they found.
Americans’ average retirement savings
Several organizations have found out how Americans are faring with their retirement savings. One of them is the Transamerica Center for Retirement Studies, part of a nonprofit foundation dedicated to studying retirement trends. Each year, the center puts out a report detailing the savings habits of around 4,000 American families, particularly in regard to retirement savings.
In the center’s most recent report from 2016, we get some hard numbers about how much Americans have saved. The median amount was $69,000 — across individual savings, 401(k)s, and other investments. According to the center, that’s an increase from the median of $63,000 in savings the previous year. And 25% of respondents had saved more than $250,000 for retirement. However, 15% had less than $5,000 stashed away for the future.
Those numbers might seem encouraging for the country as a whole. But another report from the Economic Policy Institute paints a different picture. This survey, which only accounts for working families, shows average retirement savings at much less. The reason? The report accounts for the nearly 50% of Americans who don’t have any retirement savings at all. According to its calculations, the median retirement savings is just $5,000. Among families who have been able to save money for retirement, the median savings is $60,000.
The Economic Policy Institute does estimate the average family’s retirement savings at $95,776. “The large gap between mean retirement savings ($95,776) and median retirement savings ($5,000) indicates inequality — that the large account balances of families with the most savings are driving up the average for all families,” the institute explains.
But is the average even close to enough? How much money do you really need for retirement?
Experts: Is the average enough?
No matter which guidelines you follow, most experts agree those average retirement savings aren’t enough. The most common guidelines say you’ll need 80% of your pre-retirement income in order to sustain your lifestyle after retirement.
According to the Economic Policy Institute, the recession has had very real effects on families’ abilities to save for retirement. And the reality is many people know they’re not financially ready for retirement, even without experts’ two cents. According to the Transamerica report, 54% of people expect to be working past age 65, and 13% say they don’t plan to retire at all.
When it comes to saving, many people know they should be putting away money for their golden years. It just becomes difficult to do so in practice. Around 57% of people in the Transamerica report said saving for retirement was one of their top savings priorities. But a full 44% said they were just getting by, and spending money for basic necessities was a more immediate concern.
Let’s take a closer look at so-called magic retirement numbers and how much you should have according to your age …
Retirement: Is there a magic savings number?
It used to be if you saved $1 million for retirement, you were golden. But now that target is much less defined. A million dollars might be more than enough by one standard but not enough money to cover another retiree. It’s the reason there’s no magic number for retirement. Instead, you should be basing your savings targets off of your personal expenses and goals for retirement.
This could explain why the Transamerica study has seen such varied expectations from its respondents. In 2016, just 36% of people believed they would need $1 million or more to retire comfortably. The median expected amount was around $500,000. That’s a big contrast to the 55% of respondents in 2015 who said they would need $1 million or more in retirement.
To reach those estimates, however, there’s a common trend. Around 47% of people said they simply guessed about how much they would need — a percentage that hasn’t changed much in recent years. Only 23% of people said they based their estimates on their living expenses, which most experts advise.
Of course, estimating your appropriate savings goals varies based on how old you are. Next, we’ve listed out each age group, along with the average savings in each and how much experts advise you save.
Retirement savings in your 20s
According to a separate Transamerica study, around 67% of people in their 20s are already saving for retirement. However, the concerning part is many of those might be in low-risk accounts that don’t yield high returns, ultimately stunting the overall nest egg.
According to Investopedia, the average 20-something has around $16,000 saved for retirement. It’s not much, and it might be even less if you’re working to pay off a significant portion of your student loan debt, which Student Loan Hero estimates is an average $37,000.
According to Fidelity Investments, the nation’s largest retirement-plan provider, workers should aim to have 10 times your final salary saved for retirement. It might seem like a lot, but breaking that down into decade-long chunks can seem more approachable. Plus, it can be motivating to save more than you currently do.
“The Fidelity metric is clear, memorable, and, for most people, still a stretch, so it will get them thinking, ‘Wow, I need to save more,'” Manisha Thakor, director of wealth strategies for women at The BAM Alliance, told CNBC. According to the Fidelity guide, you should aim to save enough in your 20s, so when you turn 30, you have the equivalent of your salary in retirement accounts.
Retirement savings in your 30s
You might start a family in your 30s, buy a house, update your car, and more. But your savings for retirement should also see an uptick. The major hangup for people in this age group, according to the Transamerica report, is they make many of their own financial planning decisions but acknowledge they don’t know as much as they should about financial strategies.
Investopedia reports that 30-somethings have an average of $45,000 saved — which might very well be close to the salary they’re making. But for those who are making more, it might be time to increase contributions. By this point, Investopedia suggests you want to make sure you’re at least contributing enough to your 401(k) to get all of the employer-match benefits.
To follow Fidelity’s guidelines, you should try to save three times the amount of your salary by the time you reach 40.
Retirement savings in your 40s
The average family in their 40s has $63,000 saved for retirement, according to Investopedia’s report. Most of these people were hit by the Great Recession to some degree. And now they are in the midst of providing for families. The Transamerica report shows this group of people are prioritizing paying off credit card or consumer debt, but many of them are still saving for retirement, as well. However, they’re less confident about their savings. About 61% of people in this age group plan to work past age 65 or not retire at all.
The average retirement savings in this group is $63,000. It’s a sizeable chunk of cash, but it won’t go very far without a paycheck. If it’s possible to follow Fidelity’s guidelines, you should be saving during this decade to have six times your salary by the time you turn 50.
Retirement savings in your 50s
You’ve now lived for half of a century and are likely in your peak earning years. Most people from the Transamerica report say saving for retirement is their top financial priority — and rightly so. The average 50-something has $117,000 saved up for their golden years. Around 31% of people who have a 401(k) plan through their employer contribute more than 10% of their salary to the account, and 61% are saving for retirement outside of work.
Fidelity’s benchmarks have also become quite steep. During this decade, people should aim to save around eight times their salary by the time they reach 60 years old.
Retirement savings in your 60s
If you aim for a traditional retirement age, the finish line of your career is in sight. However, the average 60-something has just $172,000 saved for retirement. On the surface, that can seem like a lot of money. However, one explanation from The Motley Fool is a little more concerning. A general rule of thumb says you should be able to withdraw 4% of your retirement savings each year, with cost adjustments built in, to live comfortably through retirement. With just $172,000, that equals a yearly withdrawal of only $6,880.
If you’d like to be saving a bit more, Fidelity suggests getting to a more ambitious goal of 10 times your salary by this point. Of course if that’s not an option, you can look into monetizing assets you already have or downsizing in some way to limit your costs a bit more.
Retirement tips and tools
Everyone will have a personal approach to retirement planning, and these general rules of thumb and formulas can’t always speak to your particular situation. If you’re just getting started with retirement planning, consider starting with an online retirement calculator to help you get a handle on how much you should be saving to reach your goals. Sites, such as Bankrate, provide a number of calculators, depending on the type of retirement accounts you use.
In addition, consider the common sense rule to increase your 401(k) contribution rate whenever possible. Did you get a raise? Increase your retirement savings at the same time you plan your promotion dinner. According to the Transamerica report, 61% of people haven’t increased their contributions in the past year. See whether it’s possible to increase that number, even if it’s just by a percentage point.
If you’re feeling lost about where to start or just want some expert advice, consider talking with a retirement planner to get some input. There is a variety of financial professionals available, so check out the guide from the Financial Industry Regulatory Authority on how to choose the right person to help you.