Understanding the median retirement savings by age is only the first step in planning for retirement. An analysis by the federal government found that Americans' average retirement savings is likely to be insufficient—and many people have no retirement savings at all.
There are several ways to save for retirement that relieve your dependence on Social Security benefits. Synchrony Bank provides Individual Retirement Accounts (IRAs) and other financial products to put you on the right track for a comfortable, well-earned retirement.
According to this survey by the Transamerica Center for Retirement Studies, the median retirement savings by age for Americans is:
The above savings amounts may seem impressive but consider this "rule of thumb" given by some financial experts on how much individuals should be saving for a goal of retiring by age 67:
That means, for example, that a 35-year-old making $45,000 a year should have $90,000 in retirement savings—twice what most Americans have saved.
Some experts will cite the "80 percent rule" of retirement planning, which states that you should plan to live on 80 percent of your pre-retirement income.
Your personal goals—retiring early, owning a second home, leaving a nest-egg for your heirs, or accommodating health challenges—could mean that your needs require different planning. The unpredictability of economic factors, medical costs and your longevity will also affect your expenses in retirement.
Many financial advisors suggest saving 10–15% of your gross income starting in your 20s. That's in addition to money set aside for short-term goals such as a new car or emergencies.
Online retirement calculators can also help you determine if you're on track to meet your financial needs in retirement.
From your 20s to your 60s, planning for a comfortable retirement starts with taking a look at your income and expenses and finding ways to save more money. Here’s how to make the most of your retirement savings by age.
Many Americans in their 20s begin their careers and have entry-level paychecks. It may seem too early to think about retirement, especially if you’re paying off student loans. The average monthly student loan payment is $351 for those in their 20s.
An effective way this age group can start saving for retirement is by contributing to a company-provided 401(k). Your employer may give a matching contribution up to a certain percentage. Take advantage of this offering, but don’t stress—you have at least 40 years to build your retirement.
Experts also recommend starting an emergency fund. Putting aside money for surprise expenses, such as house and car repairs, protects your retirement savings from being your back-up fund. In fact, according to the IRS, withdrawing money from an IRA before age 59 ½ isn’t ideal. The withdrawn amount is seen as part of your gross income and has a penalty tax of 10%.
Buying a house and starting a family are common life events for Americans in their 30s. These changes are not only expensive, but they distract from saving for retirement. Not to mention, those students loans still may not be paid off.
On the other hand, those in their 30s are often more established in their careers and have higher paychecks than those in their 20s. So, how do you balance handling your current expenses and planning for the future?
First, tighten down on your budget. It’s tempting to just plan for your short-term expenses, but don’t forget to make long-term goals like retirement a priority. By paying better attention to your where your cash is going now, you may not have to work as hard to meet your retirement savings goals down the road.
Secondly, try to save up to 15% of your income on retirement. If you aren’t doing so already, take full advantage of your employer’s 401(k) match. Subtract the 401(k) percentage that your company matches from 15, and your results are what you should contribute on your own.
While the recommended retirement plan savings amount is up to four times your annual salary, this is not a reality for many Americans. The average income for those in their 40s is around $50,000, but the median retirement savings amount for this age group is $63,000.
What steps can you take to meet this goal? Experts recommend putting any money you get from a raise into retirement savings. Same goes for the money used to go toward student loans.
Even if you’re behind in funding a comfortable retirement, there’s still time to catch up. Make retirement a priority in your budget right after essentials needs, such as your mortgage, utilities and food.
At age 50, retirement is closer than you think and it’s time to get serious about saving, if you haven’t already. Saving up to seven times your annual salary seems like a lofty goal, but meeting it sets you up for success.
If your salary is $50,000 or higher, you should have at least $350,000 saved. If you’re nowhere close to that, take a look at your budget and see what changes you can make to get on track. You can also talk to a financial advisor about opening an IRA.
Now that the finish line is in sight, consider your goals and plans for retirement. Keep in mind that these savings help support your current lifestyle. They also cover medical costs during retirement—around $275,000. If you want to purchase a beach house or travel the world, your savings need to reflect that.
Put the final touches on your savings plan or make any necessary changes. If you’re still far from the savings benchmark of 8–10 times your annual salary, think about what assets you can monetize. You may also consider working for a few more years. This not only provides more income but decreases the time you’ll need to use your retirement savings.
To meet the suggested median retirement savings by age, you may consider opening or contributing to an IRA. This type of retirement plan has tax advantages and allows you to set aside funds in a separate place from your regular savings or emergency funds. The two main types of IRAs are traditional and Roth IRAs:
For the year 2018, your IRA contributions can’t exceed $5,500 (under age 50), $6,500 (over age 50) or your taxable compensation for the year, if your compensation is less than this limit.
For example, let’s say you are age 54 and make $58,000 a year. You can contribute up to $6,500 in the year 2018. If you are age 29 and make $4,000 at a part-time job, you can contribute up to $4,000.
It’s never too soon to start saving for retirement. You can open your own traditional or Roth IRA as soon as you are no longer a minor (usually age 18). Some parents or guardians choose to open an IRA for their child before this age. This is usually to kickstart savings and establish healthy financial habits at a young age. The IRA is opened in the child’s name, and the child can make contributions as long as they have some source of income.
Synchrony Bank does not provide financial advice, so be sure to consult your tax or financial advisor before opening or contributing to an IRA.
No matter your age, contributing to your employer's 401(k) plan or an IRA can turn your savings into a reliable source of retirement income. Many retirement savings plans also reduce your taxable income, so you'll keep more of what you earn today.
Synchrony Bank offers a range of financial products, including IRAs, that feature competitive rates+ plus award-winning customer service, easy online access and the security of Bankrate.com's prestigious 5-Star Safe & Sound® Rating1. Call 1-844-345-5789 today to learn about Synchrony Bank's savings products to prepare for your retirement.
Transamerica Center for Retirement Studies: http://www.transamericacenter.org/docs/default-source/resources/center-research/16th-annual/tcrs2015_sr_retirement_throughout_the_ages.pdf
+National Average APYs are based on specific product types of top 50 U.S. banks (ranked by total deposits) provided by Informa Research Services, Inc. CD Rates: Average APYs are based on certificate of deposit accounts of $25,000. High Yield Savings Rates: Average APYs are based on High Yield Savings Accounts of $10,000. Money Market Account Rates: Average APYs are based on Money Market Accounts of $10,000. Although the information provided by Informa Research Services, Inc. has been obtained from the various institutions, accuracy cannot be guaranteed.
1Synchrony Bank achieved a five-star rating for 1st Quarter 2014 through 4th Quarter 2015.
*ANNUAL PERCENTAGE YIELD (APY): All APYs are accurate as of .
APYs are subject to change at any time without notice. Offers apply to personal accounts only. Fees may reduce earnings. For Money Market and High Yield Savings Accounts, the rate may change after the account is opened. For CDs, a minimum of $2,000 is required to open a CD and must be deposited in a single transaction. A penalty may be imposed for early withdrawals. After maturity, if you choose to roll over your CD, you will earn the base rate of interest in effect at that time. The APY shown for CDs and IRA CDs is for a 60-month CD with a balance of at least $25,000. Click here for all CD rates and terms offered.