The average American thinks they’ll need about $1.8 million to retire comfortably, according to a recent Schwab survey. Obviously, you don’t have to save all that on your own, but most people will still need to set aside a six-figure sum. It’s a tall order, especially for those with a lot of debt or a low salary.
Even adults nearing retirement age — those between 55 and 64 — often fall short. Below, we’ll look at what the average 401(k) balance for this age group is, and what you can do if you’re worried about not saving enough.
Image source: Getty Images.
How much does the average 55- to 64-year-old have saved for retirement?
A recent Vanguard survey found that the average worker between the ages of 55 and 64 has $207,874 in their 401(k). And the median 401(k) balance is even lower — just $71,168. Now, this only looks at 401(k) balances and doesn’t include other accounts, like IRAs, that these workers might be using to save. But it’s still not a stretch to say that many workers are in danger of coming up short.
One retirement savings rule says you should save one times your salary by age 30, three times your salary by 40, six times your salary by 50, and eight times your salary by 60. The median weekly salary for adults in the 55- to 64-year-old age range is $1,244, according to the Bureau of Labor Statistics. That amounts to an annual salary of $64,688 per year.
Six times this salary is $388,128, and eight times this salary is $517,504. Going by these numbers, many workers have less than half of what they should by this age. But remember, this is only an estimate. If your salary is lower or you plan to reduce your spending significantly in retirement, you’ll probably be able to get by with less savings. You may also need less if you plan to work into your 70s or 80s.
What should you do if you’re coming up short?
It’s natural to be worried if your retirement savings are well behind where you’d like them to be, especially if you’re in your 50s or 60s already. But there may still be some steps you can take to reach a comfortable retirement.
First, if you’re able to set aside larger sums for retirement, you may want to think about making catch-up contributions. These allow adults age 50 and older to contribute larger sums to their retirement accounts than adults under 50. In 2024, adults 50 and older can contribute $30,000 and $8,000 to a 401(k) and IRA, respectively, compared to just $23,000 and $7,000 for adults under 50.
These contributions are a great way to get your savings back on track if you weren’t able to set aside as much as you would’ve liked when you were younger. But they require a lot of extra cash. If they’re not feasible, just do your best to save what you can each year.
You may also want to rethink your retirement timeline. Delaying retirement by a few months or years can give you additional time to save while also reducing the cost of your retirement. You could also consider phased retirement, where you gradually reduce your hours over time before exiting the workforce completely.
Don’t forget, you’ll likely have Social Security benefits to help cover some of your retirement costs. You may qualify for other benefits, like supplemental security income (SSI), as well. But you should still save as much as possible on your own. Just take things day by day and adjust your strategy as you go.
