There is no single “safest” amount for a comfortable retirement. The amount depends directly on individual income, lifestyle choices, and personal goals. “Average” savings figures can be misleading for most people.
The most widely used professional guidelines suggest, instead, aiming to save a multiple of income at specific age milestones. Below is a comparison of what many Americans have accumulated and what financial advisors recommend.
Average vs. Median: The Retirement Goal in America
The data broken down by age group shows substantial differences. For people in their 30s, the average retirement savings is $272,850. The median for that same group is significantly lower at $95,661. The career guideline for that age range is to accumulate between 1x and 1.5x your salary. In the 40s, the average jumps to $586,470, while the median is $221,819. The suggested goal is set at 3x your salary.
For people in their 50s, average savings exceed one million dollars. The specific figure is $1,025,486. The median for this decade is less than half that, at $453,413. The professional savings guideline for this group is to reach “6x your salary.” In the 60s, the average is $1,190,078 and the median is $544,439. The final recommendation is to accumulate between 8x and 10x your salary.
The Gap Between Average and Median Retirement Saving
This gap between the average and the median retirement saving demonstrates that high balances in the accounts of high-net-worth individuals inflate the average savings. This statistical phenomenon makes the average figure appear higher than it is representative of the general population.
The median savings, which marks the midpoint where half have more and half have less, offers a more accurate representation of the typical saver. This distinction is essential for correctly interpreting the retirement preparedness landscape.
The 10x Rule: The Ultimate Pre-Retirement Savings Goal
This rule proposes saving 10 times your pre-retirement salary by age 67. The underlying assumption is that this would allow you to maintain a similar lifestyle to your pre-retirement lifestyle. This calculation assumes starting to save at age 25. It also assumes a constant annual savings rate of 15% of income, including any equivalent employer contributions.
Achieving this final multiple is not uniform throughout one’s working life. It follows a stepped progression linked to age. The recommendation by experts is to accumulate the equivalent of one year’s salary between the ages of 30 and 34. For the 35-44 age range, the target is tripled.
Between 45 and 54, the goal is set at six times the salary. From 55 to 64, the recommended multiple is eight. The final target of ten times is set for the age of 67.
How to Boost Your Retirement Savings
An individual’s personalized retirement goal is defined by multiple variables. Professionals use these factors to refine their planning models. The desired retirement lifestyle is one of the variables to have in mind. Those who plan to travel extensively or pursue expensive hobbies may need a goal of around 12 times their current salary. Those who plan to reduce expenses and live more simply might aim for a multiple of 8.
Opting for early retirement, before age 67, requires a larger financial reserve. This requirement stems from two reasons: a shorter accumulation period and a higher number of retirement years to fund. Conversely, delaying retirement beyond the standard age allows for more years of contributions and reduces the payout period.
The existence of other income sources also alters the necessary savings equation. Social Security benefits are a staple for most retirees, while pensions from former employers provide a guaranteed income. Part-time work during the early years of retirement can substantially reduce the need to withdraw funds from savings accounts. Each of these sources reduces the salary multiple that must come from personal savings.
How to Act if You Are Behind the Milestones
For those who fall behind these benchmarks, financial firms recommend corrective steps that must be taken as fast as possible. The most effective step is, of course, to increase the savings rate. The goal is to reach and maintain savings of 15% of gross annual income, including employer contributions.
Analysis shows that even a 1% increase in the savings rate can make a significant difference due to the effect of compound interest over time. Individuals aged 50 and older have a specific regulatory mechanism available: catch-up contributions.
These contributions allow for additional payments to 401(k) plans and traditional and Roth IRAs. These additional limits are designed to allow people in the later stages of their working lives to make up for years of insufficient savings. Using them is a standard retirement planning strategy.
