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Average Retirement Savings by Age and Income

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It can be incredibly helpful to have visual benchmarks when you’re saving for retirement. How many zeroes should be on your retirement account when you’re 20 years old? How about 30? 50? All great questions.

Furthermore, are you curious to know how you compare among other retirement savers? We’ve taken the guessing game out of the picture. We’ve grouped retirement savers by age so you can see how your retirement savings fits in with your peer age group. 

Average Retirement Savings by Age

Most Americans hope to retire by age 67, and more than half have a plan to do so, according to TD Ameritrade’s Road to Retirement Survey. Americans in their 40s and 50s hope to retire earlier but are less certain they can achieve their desired timeline, according to the study. 

How do you feel about your own personal savings? Totally secure? Not secure at all? Check out 2 tables we’ve compiled — retirement savings by age and retirement savings by income as a litmus test for how you’re doing. The table below summarizes the average amount of money saved by each particular age group. It represents 401(k) accounts — not IRAs or other types of retirement and savings accounts. 

Age GroupAverage Retirement Savings
20 – 29About $12,000
30 – 39About $45,000
40 – 49About $100,000
50 – 59About $180,000
60 – 69About $200,000

Average Retirement Savings by Income

Many experts agree that a great rule of thumb is to save 10% of your income or more for retirement savings. At the very least, save enough to get your company match. In other words, if your employer offers to match your retirement savings by pitching in, contribute as much as you need to get the match. (Otherwise, that’s like throwing money in the trash can!) The average employer 401(k) match reached 4.7% this year, according to Fidelity.

Here’s how much the average household has saved for retirement based on income. The top numbers show how much people who make 20% or less of the average income in America have saved and the bottom group shows what the top 1% have saved.

Income GroupAverage Retirement Savings per Household
>20%About $23,000
20% – 39.9%About $45,000
40% – 59.9%About $80,000
60% – 79.9%About $150,000
90% – 100%About $990,000
99% – 100%About $2,500,000

What if You Have Less than the Average in Retirement Savings?

You may be beating yourself up — “I started too late!” or “I haven’t started at all!” — if you find yourself falling behind the averages displayed above. If this is you, don’t panic. You’re not alone and there are steps you can take to ensure that you have enough money to live comfortably when you retire. 

Let’s say you have a 401(k) with a 7% rate of return. This means the money you have in the account will grow by 7% every year. Putting away $17,000 each year starting at 40 years old means you could potentially have a 401(k) worth $1 million by age 64. 

Think the idea of setting aside $17,000 each year — or another high figure — just isn’t financially feasible? Here are three more ways to ensure you’re on the right track:

  • Speak to a financial advisor: financial advisors are professionals who can help you navigate the ins and outs of retirement savings. SmartAsset has a free tool to match you with a financial advisor in your area.
  • Pay off debt. Another good idea if you’re late or behind on retirement savings is to pay off debt. The faster you pay off credit card debt, the faster you can start putting the money you’d be using for those payments into a retirement fund. 
  • Make sure you have great insurance. Tragedies and unexpected events are 2 of the biggest reasons people go bankrupt or have to dip into their retirement savings. You could be completely ahead of the curve but an unexpected event could set you back your retirement nest egg. Being prepared for these events might mean paying more to insurance companies, but you’ll thank yourself later if the unexpected happens.

Best Ways to Save for Retirement

How do most people save for retirement? There are a wide variety of investment accounts available to most retirement savers and there are a few tactics to make it work in your favor, too. 

Save Often and Early 

It’s important to save for retirement as early as possible. A healthy mantra can be, “Early and often!” But it’s easy to put it off, especially if you have no idea how to get started. Maybe you pushed it off for so long that suddenly, you’re not exactly 25 years old anymore. That’s okay — it’s not too late to start saving for retirement. 

Here’s some great news if you’re getting started a little later: Many retirement accounts have catch-up contributions if you meet certain age requirements. For example, you can throw an extra $6,500 into your 401(k) if you’re over 50 and want to save more than the $19,500 limit for younger savers. You’ll also be able to add catch-up contribution amounts for individual retirement accounts (IRAs). You can save an additional $1,000 if you’re 50 or older.

A 401(k) or an IRA are two of the most common types of retirement accounts.

401(k)

Employees and employers both contribute to a 401(k), a retirement account where taxes are deferred until withdrawal. There are several types of 401(k) plans available — traditional 401(k) plans, safe harbor 401(k) plans and SIMPLE 401(k) plans. (You may work for a nonprofit, and in that case, your version of a 401(k) is a 403(b). Each has different rules, according to the IRS

You can usually select your investments and can choose how much you want taken out of your paycheck. The maximum amount you can contribute to a 401(k) in 2020 is $19,500 — it’s $500 more than the 401(k) limit for 2019. 

Individual Retirement Account (IRA)

What’s an individual retirement account (IRA)? There are 3 main types of IRA:

  • Traditional IRA: A traditional IRA is an account you make contributions to with money you may be able to deduct on your tax return. Earnings can potentially grow tax-deferred until you withdraw them in retirement. You may find yourself in a lower tax bracket in retirement, so this means your IRA money may be taxed at a lower rate.
  • Roth IRA: A Roth IRA is an account that allows you to save after-tax money. Your money may potentially grow tax-free, with tax-free withdrawals in retirement. 
  • Rollover IRA: Have you ever moved jobs? Did you move your 401(k) to an IRA? Rollovers mean that you moved eligible assets from an employer-sponsored plan, such as a 401(k) or 403(b), into an IRA.

The IRA contribution limit is $6,000 in 2020. The IRS also says that many of the rules for traditional IRAs are the same for the following plans:

  • SEP
  • SIMPLE IRA plan
  • SARSEP

Your investment options for 401(k)s are quite limited — you get a bigger selection with an IRA. But you can contribute a much larger amount to a 401(k), which is a great way to catch up on savings — especially if you’re behind. The catch-up provision offers an even better way to save a lot of cash. You might be able to save more than an IRA but your options for investment are limited to what your employer offers.

When Should I Save for Retirement? 

You’re never too young — or too old! — to save for retirement. When you’re 20, retirement can seem like it’s a million years away, but the truth is that compound interest is your friend when you’re younger.

Compound interest is the interest you earn on your interest. Let’s use basic math to understand this magical concept. Let’s say you start with $1,000 in current principal. Let’s say you add $1,000 every year to that amount for 20 years at an 8% annual interest rate. You’d have a whopping $54,083.88 in 20 years.

How to Save for Retirement with a Low Income 

Saving for retirement may seem like an extreme challenge when you live on a low income. Luckily, there are several ways you can still set aside cash every month — no matter your salary. 

  • Turn to a budget. The more conscious you are of how you spend your money, the easier it will be to justify putting a slice of your paychecks away in a retirement account every month. Minimize debt and other monthly payments you might be making in order to create more room for retirement account payments. 
  • Quit a bad habit. Quitting a bad habit like smoking or drinking soda can be a great way to chuck some extra money toward your retirement savings. Once you free up some extra cash, the sky’s the limit!
  • Watch your latte factor. Do you have a daily coffee habit? A raging going-out-to-eat everyday factor? Kind of like quitting a bad habit, consider making your lunch or making your own coffee daily. Save the extra cash you’d normally spend and tuck it into your retirement account.
  • Avoid using your retirement account as an emergency fund. Let’s say did manage to tuck some cash away into a retirement fund. Don’t rob your retirement for things like a car accident or an unexpected hospital visit. Separating the 2 prevents you from potentially losing all of your retirement money when the unexpected happens. Getting your account back up to a healthy amount is even more difficult on a lower income. 

Get in the Habit: Save for Retirement

Whether you’re 23 and make $30,000 a year or 50 and make $100,000 a year, saving for retirement should be a lifelong habit. Aim to save as much as you can — and consider increasing your retirement savings a little bit every year. A minimal increase like 1% won’t take a big bite out of your paycheck but could pay dividends down the road. (Ha! Pun intended!)  

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