The Expert Says: “Robert sounds like most men his age,” says Ellen Derrick, CFP® with LearnVest Financial Planning. “At 35, you may still be paying off college loans, starting a family or trying to buy a home—and these things all take money! Retirement (because it’s so far away) sometimes takes last place in the conversation, even though it should be at the top of your list.”
Derrick explains that a 50-year-old, with only $220,000 saved for retirement, might seem behind, but by contributing the maximum to his 401(k) each year (including catch-up contributions), he could double his planned retirement income by 67.
Mary Fran Blisard, 56, Speech Pathologist
Survey Says: Women between the ages of 45 and 54 admitted to having an average of $219,000 saved in their retirement accounts.
Mary Fran Says: “This number seems low to me. I don’t have that much saved, but I do have a pension, which provides an income to meet my living expenses adequately. I also have money in real estate investments. I’ve essentially retired at this point from my regular job, but I’m still working part-time to supplement my retirement future. Based on my savings, I feel comfortable that I’ll be able to retire with an income that’s relatively close to what I’m accustomed to enjoying.”
“If you’re 45, and live happily on $50,000 a year, you may feel comfortable with having $219,000 saved for retirement.”
The Expert Says: “Having the ‘right’ amount saved up by a certain age is all relative,” explains Derrick. “If you’re 45, and live quite happily on $50,000 a year now, you may feel very comfortable with having $219,000 saved for retirement. Ongoing contributions of just 3% of your gross salary might work out to a retirement income of more than two-thirds of your current paycheck by the time you reach 67.”
However, Derrick cautions that if you’re 54 and currently making $100,000 a year, you may find that $219,000 plus the same 3% contribution rate only gets you about a quarter of your current income in retirement—and that may be less than desirable. “Mary Fran is right to fold her pension into the equation, which is what a financial planner would do when helping you to consider what your target should be,” says Derrick.
So How Much Should You Have Saved Today?
The amount of money that you’ll need for retirement will vary widely based on a number of factors, including your average salary and goals for retirement.
In most cases, an asset-to-salary ratio is used to determine if a person is saving enough for retirement. Using these guidelines, Cathey suggests the following in retirement savings for a person with a $40,000 salary, who expects to retire at 65:
- 30 years old: approximately $56,000
- 40 years old: approximately $112,000
- 50 years: approximately $180,000
“It’s tempting to delay saving for retirement until you have a bigger salary, but the earlier you start, the more money you’ll have due to compounding,” she says.
If, like Carla, you have a workplace retirement plan, such as a 401(k), check to see whether your employer matches the money you contribute. “That match is additional compensation given to you just for socking away money for retirement,” says Cathey. Translation: By not contributing to an account with a company match, you’re passing up free money!
If your employer doesn’t match contributions, you can open an account on your own, such as a Roth or Traditional IRA. For more guidance on how to navigate retirement savings, visit the Knowledge Center.