Retirement Savings by Age: Where Do You Stand?

If you're like the majority of people, you probably need to step up your retirement savings efforts. The Federal Reserve's 2019 Survey of Consumer Finances, found that the median value of Americans' retirement accounts was only $65,000. And only 50% of American families actually had retirement accounts in 2019.

Not surprisingly, retirement nest egg sizes vary by generation. As of late 2021, Baby Boomers saved the highest, with an average retirement savings of about $162,000. Compare that with Generation X's average of $87,000, Millennials, who saved an average of $50,000, and Generation Z, who saved a median of $33,000 for retirement, according to a Transamerica Center survey of workers from October 2022.

The survey also noted that the proportion of workers who have saved $250,000 or more increases with age: 13% of Generation Z, 20% of Millennials, 30% of Generation X, and 42% of Baby Boomers. In contrast, the proportion of workers who saved less than $25,000 decreases with age: 34% of Generation Z, 31% of Millennials, 25% of Generation X, and 17% of Baby Boomers.

Let's look at what people in various age groups have saved for retirement and how it stacks up to what the experts recommend.

Twentysomethings

If you're in your 20s and just starting your career, your paycheck probably reflects that fact. You're also likely to be carrying a fair amount of student loan debt. According to the Report on the Economic Well-Being of U.S. Households, most borrowers owe less than $25,000 on their student loans. Still, this generation is saving a median of $33,000 for retirement.

On the bright side, those in their 20s have around 40 years before they retire, which is a lot of time to make up a shortfall. The single most important thing to do is to contribute to your employer-sponsored retirement plans, such as a 401(k) plan or 403(b) plan. You can contribute up to $22,500 in 2023 ($20,500 in 2022).

Investment management firm Fidelity recommends that you put aside at least 15% of your pre-tax income a year for retirement. If you can't save 15% of your salary, save as much as you can, and at least save enough to get the full benefit of your company's matching contribution if one is offered. Don't turn away free money.

_{Source: Survey of Consumer Finances (SCF)}

Thirtysomethings

If you're in your 30s, you've likely gotten out of those entry-level pay grades. But life may be more complicated now. You might be married, have children, maybe a home, and you're probably still paying off your student loans. With everything from the mortgage to soccer cleats to an unexpected car repair taking a bite out of your paycheck, saving for retirement may fall by the wayside.

Data from Transamerica shows thirtysomethings have a median of $50,000 saved. Depending on your age and salary, you might be okay. Fidelity suggests having the equivalent of your annual salary saved as a nest egg at age 30, twice your salary at age 35, and three times your salary by the time you exit your 30s. To reach these goals, consider tightening up your budget and increasing the percentage you're saving annually.

If you haven't started saving yet, you will need to save a higher percentage of your annual income. For instance, if you don't start saving until you are 30, Fidelity recommends you put aside 18% of your salary a year. Someone starting at age 35 should try for 23% a year. Putting aside nearly a quarter of your income for retirement is a tall order for anyone with monthly bills and debt, and this underscores the importance of saving early.

Don't be too conservative with your investing choices. You're still young enough to weather big market downswings—even the kind that occurred in the wake of the COVID-19 pandemic. That's because your portfolio has time to recover.

Fortysomethings

You're probably in the prime of your career when you're in your 40s. You've paid your dues and hopefully, you have a salary that reflects that. With any luck, you'll come to the end of those student loan payments sometime in this decade, freeing up more money. But the house is bigger. The kids are older and may need help buying a car or paying for school. And if you're honest, you might be blowing money on things you could do without.

The estimated median total household retirement savings was $67,000 among all workers. Remember that Fidelity recommends that you have three times your annual salary saved by the time you reach 40. So, if you're making $55,000, you should have a balance of $165,000 already banked. At age 45, it is recommended you have four times your annual salary saved and six times that level by the time you reach 50.

If you are behind (and even if you're not), you should try to max out your 401(k) contributions. If you don't already have an Individual Retirement Account (IRA), start one and try to max that out as well. You can contribute up to $6,500 for 2023 ($6,000 for 2022).

To reach these goals, consider putting any raises you get toward retirement savings. And if you no longer have student loan payments, commit those sums to your nest egg as well.

Fiftysomethings

If you're in your 50s, you're nearing retirement age. But that doesn't mean you've lost hope. In fact, you still have time to save. But you also might be paying your children's college tuition and helping them with car payments, gasoline, and other expenses. The house may be getting older and need fixing up, and your medical bills are almost certainly rising.

The estimated median savings of fiftysomethings is about $87,000, which is a far cry from the desirable six to eight times annual income that Fidelity recommends.

If you are 50 or older, you can make a catch-up contribution, which is an extra $1,000 a year to your IRA and an extra $6,500 a year to your 401(k) or 403(b) in 2022. The numbers stay the same in 2023 for an IRA catch-up contribution. For 401(k) accounts it increases to $7,500. 

Besides taking advantage of catch-up contributions, consider downsizing by selling your home and collecting any appreciated value. If you have company stock options or other assets, don't forget to consider those as part of your retirement balance, even if they don't sit in a retirement account. Consider meeting with a financial planner, especially one who specializes in retirement, to get things in order.

_{Source: Board of Governors of the Federal Reserve System}

Sixtysomethings

This can be the decade when you begin to reap the rewards of decades of saving. By the time you reach 60, you should have eight times your annual salary saved, according to Fidelity, while those who are 67 should have 10 times your salary saved.

Transamerica reports the estimated median savings for sixtysomethings is $162,000. At this point, it’s harder to save enough to make up for any shortfall. If you are behind on your savings, take a hard look at your assets and see what can be monetized at some point to help sustain you.

This is also the decade you can start receiving Social Security benefits. Most seniors find this to be a significant source of monthly income. For instance, the average monthly benefit for a retired worker as of February 2023 was $1,781 per month.

Tips on Saving for Retirement

So how do you start saving for retirement? One of the easiest ways is to enroll in an employer-sponsored program like a 401(k) if your company has one. Payroll deposits take out all the guesswork of saving because your employer deducts pre-tax income so you don't have to do it yourself. And if your company offers matching contributions, you get even more (free!) money saved for you. One benefit to 401(k)s and similar accounts are that they lower your taxable income, which means you may owe less at the end of the year.

Another option you may want to consider is setting up an emergency fund. This can be a highly liquid account, such as a savings account. You can set up automatic transfers from your checking account to your emergency savings fund every time you get paid. Like payroll deductions, you don't have to do anything.

Regardless of what age you begin saving, note down your goals and how much money you'll need for retirement. This means adding up the income you expect to have. Then deduct all of your expenses, including housing, food, clothing, transportation, healthcare, and bills. Don't forget to include things like entertainment and travel. This will give you a general idea of how much you'll need so you can be realistic in determining how much you'll need to save.

As with anything else, make sure you talk to a financial professional, such as an investment advisor or a retirement specialist. These individuals are experienced and can help you work through all the ins and outs of saving for retirement

The Bottom Line

The amount needed for retirement is different for everyone. Nevertheless, there are benchmarks you can try to hit at every decade of your life. It's never too early in your career to put a plan together, but it's never too late to start, either.