Saving money—and potentially investing—is key to having a comfortable retirement, and most finance experts agree that the earlier you start, the better. Still, many Americans struggle with this. Recent data from the Federal Reserve shows the average retirement savings for Americans is $87,000, which is almost $900,000 less than what's needed to retire comfortably in most U.S. states, according to CNBC.
On the bright side, it's never too late—or too soon—to develop a savings plan and build up your money. Below, we'll break down the average savings by age group and share some tips on how to set and reach your retirement goals.
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Average retirement savings by age in the U.S.
Saving for retirement is extremely important. Even if you see yourself working for decades to come, like the 11 million senior Americans who are still in the workforce, you'll still need a nest egg for when you decide it's time to slow down—and to cover for emergencies, too.
We put together the median retirement savings by age data from the Federal Reserve to give you a snapshot of the average American's finances. We also talked to Richard Morgan, a seasoned financial research analyst and the CEO and Head of Research at Catalyst Fund, about what the ideal savings amount should be for each age group and how to achieve it.
“Having retirement savings benchmarks for each decade can guide you towards a financially secure future,” Morgan says. It's worth noting that there's no exact number goal, only an estimation, because everyone's financial situation is different.
Average retirement savings by age 25
The Federal Reserve doesn't provide data specifically for people in their 20s. Instead, it looks at Americans under 35. According to a 2022 research, the median retirement savings for this age group is $18,880.
“By age 20, build a small emergency fund of $1,000 to $5,000 and start contributing to retirement accounts,” Morgan says. To maximize your savings, take advantage of employer-matched retirement savings accounts like a traditional 401(k) if your employer offers matching contributions. (Here's a full breakdown of how much money you should have saved by 25.)
Average retirement savings by age 35
For Americans aged 35 to 44, the median retirement savings is $45,000. This is typically when people start moving up in their careers and getting a better salary, which helps them save more too.
By the time you hit your 30s, it's a good idea to have a budget, enough emergency savings (around six month's worth of your total monthly expenses) kept in an emergency fund separated from your checking account, and a plan for paying off any debt you might have.
As for retirement savings, Morgan says, “aim to save an amount equal to your annual salary, focusing on consistent saving habits.”
Average retirement savings by age 45
According to the Federal Reserve, Americans aged 45 to 54 have a median retirement savings of $115,000. “At 40, target two to three times your annual salary in savings,” Morgan advises. So, for someone earning $55,000 a year, $115,000 is a good target.
During this period of life, saving can become easier since many people are established in their careers. If you manage to get rid of credit card or student loan debt by your 40s and stick to healthy spending habits, this could also be the time to plan for major financial milestones like buying a house.
Average retirement savings by age 55
The median retirement savings by age 55 to 64 in America is $185,000. “By 50, strive for four to six times your annual income,” Morgan says. Let's say you earn the average income for this age group, around $82,150 a year. Ideally, you should aim to have saved at least $328,600 by now.
At this stage, saving is more important than ever. If you haven't already, it's time to start your retirement planning. As you get closer to officially becoming a senior citizen, focus on building a solid foundation for your golden years, planning your legacy, and preparing for potential medical expenses.
Average retirement savings by age 65
The median retirement saving of Americans aged 65 to 74 is $200,000. “As you approach 65, having eight to 10 times your annual salary saved can ensure a comfortable retirement,” Morgan says. The longer you stay in the workforce, the more time you'll have to boost your retirement savings.
If you plan to enjoy 30 or more years of retirement, you should start planning early. Consider factors like cost of living—which varies by state—and the lifestyle you want during your golden years. Working with a personal finance advisor can help you set savings goals and create a sustainable long-term plan based on your financial situation.
How to save money faster
Creating a budget is the first step to saving money faster. Whether you use the 50/30/20 rule or the zero-sum budget, there are different budgeting methods to fit your financial situation. Apart from that, Morgan suggests:
- Tracking expenses
- Automating savings transfers
- Reducing major expenses (i.e housing and transportation)
- Increasing income through side gigs
- Adopting frugal habits (i.e reducing discretionary spending)
“Cut back on unnecessary spending, negotiate bills, downsize living arrangements, cook at home, avoid impulse buys, and seek discounts,” Morgan says. “Small changes in spending and earning habits can significantly boost savings over time.”
You can also take advantage of found money, which is money you weren't expecting, like tax refunds, rebates, and cash back. “Combining these strategies allows you to maximize your savings rate and reach your financial goals sooner,” he says.
How to catch up when you've started saving later in life
If you've begun saving later in life, you can still achieve your savings goals and build a comfortable nest egg for the future. “Maximize retirement account contributions, especially utilizing catch-up contributions for those over 50,” Morgan says.
He also recommends cutting down on housing and discretionary spending if possible, and increasing your income through part-time or freelance work. Use the extra money to save and invest.
“Consider a slightly more aggressive yet balanced investment approach after consulting a financial advisor to potentially grow savings faster while managing risk appropriately,” Morgan says. “With discipline and the right plan, it's possible to make significant progress on retirement savings, even with a late start.”
Create a debt repayment plan
Having debt can really slow down your saving process. So, it's important to create a plan to pay it off as soon as you can.
“Prioritize high-interest debt like credit cards, then personal and/or car loans. This minimizes interest paid over time,” Morgan says. “Student loans with lower rates can take lower priority unless causing financial strain. Mortgages with low rates are long-term, so aggressive repayment may not be urgent compared to high-interest debt.”
Keep saving while paying debts, even if it's a small amount each month. “Create a plan balancing debt repayment with building savings gradually,” he says. “The key is addressing costlier debts first while still allocating funds towards an emergency cushion, maximizing progress on both fronts strategically.”
Where should you keep your savings
When saving money, avoid allocating all your assets in one account. “A balanced approach involves regular savings accounts for an emergency fund, covering three to six months expenses, and maximizing tax-advantaged retirement accounts like 401(k)s and IRAs,” Morgan says.
After you've set up your emergency fund, he suggests focusing on retirement contributions to take advantage of tax benefits and any employer matches until your retirement savings are adequate for your age. Then, consider a brokerage account for additional investments.
“This approach prepares for immediate needs through the emergency fund while securing your long-term financial future through retirement accounts and strategic investments, providing balance and flexibility in savings distribution.”
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