How Much Money Should You Have Saved by 50?

How Much Money Should I Have Saved by 50?

Having six times your annual salary saved toward retirement may be less of a goal than it is a gauge. Fidelity looked at how much you might expect to have saved at 30, 40, 50, 60 and beyond if you saved and invested 15% of your income annually starting at age 25 and expected to retire at age 67 with 10 times your salary in savings.

Fidelity's model assumes that you need to replace 45% of your preretirement income from savings once you retire. It also projects that you'll live a good long life to the age of 93 without running out of money.

In reality, however, there is no magic number that guarantees a comfortable retirement. Like life itself, retirement may be full of surprises: late career job loss, unexpected inheritance, major medical expenses, an encore career, super stock market gains (or losses) and so on. Saving six times your salary by age 50 doesn't mean your finances are bulletproof, only that you're generally on track. Similarly, falling short of this milestone doesn't mean your retirement finances are cooked; you may just want to adjust your plan.

Factors to Consider When Saving for Retirement

What will your retirement income look like if you retire at 67 with 10 times your salary saved? If your salary is $80,000, your numbers might look something like this:

To get a general picture of what your actual retirement finances might look like, answer these basic questions:

What Are Your Expected Sources of Retirement Income?

Many people rely on multiple sources for retirement income. Here are some common income sources you may want to factor in:

• Social Security retirement benefits: How much you receive depends on your eligibility, earnings over the years and your age when you begin drawing benefits. You can get a personalized estimate of your projected benefits on the Social Security Administration's website.
• Pensions and retirement savings: Take inventory of your retirement accounts: 401(k)s, IRAs, Roth IRAs as well as any pensions you may be eligible to collect.
• Savings and investments: Consider taxable brokerage accounts, high-yield savings, health savings accounts and any other savings you have in reserve.
• Earned income: If you're willing and able to work part-time after formally retiring, you can add your earnings to your monthly income.
• Passive income: Add in any sources of passive income, such as rental income, and consider developing passive income if you don't have any yet.

What Are Your Baseline Monthly Expenses?

Review your current budget (or create one), then think about which expenses are likely to continue in retirement and which ones you can eliminate. Don't forget to include the cost of any dependent children who may require support or college tuition into your retirement years.

What Is Your Plan for Housing?

Your housing choices will affect your monthly expenses, for better or worse. Consider whether you'll have rent or mortgage payments (and for how long). You may want to move to a new home or downsize to save money—or cash in your equity. If you want to stay put and your home is paid off, you may be eligible for a reverse mortgage.

Is Health a Concern?

Consider the ongoing cost of maintaining your physical and mental health, including everything from long-term care insurance to medical care, a gym membership or prescription medications. Also, honestly assess whether chronic health conditions might be a factor in how long you work and whether you're likely to require prolonged medical care.

Learn more: Retirement Savings Mistakes to Avoid

How to Save More Money

What if your projected retirement savings won't be enough? Here are eight tips for maximizing your retirement savings, starting now:

• Don't wait. Compound interest or investment growth will make the value of every dollar you put away now significantly larger by the time you retire.
• Take full advantage of employer-matched 401(k) contributions. With a 401(k) match, you'll double your contribution on day one, which is a return that's hard to beat.
• Use tax-advantaged accounts. The money you save on tax-deductible retirement or health savings contributions, tax-deferred or tax-free growth, and tax-free withdrawals from Roth accounts makes it easier to save more.
• Look into Roth IRAs. Although you can't deduct Roth IRA contributions from your taxes now, your future withdrawals will be tax-free. This means your Roth IRA funds go further in retirement.
• Automate your retirement savings. Having contributions automatically deducted from your account takes away some of the temptation to spend it instead.
• Eliminate as much debt as possible. The interest you're paying now may slow down your rate of savings. And the less debt you have in retirement, the less income you'll need to service it.
• Create extra income to help fund your retirement. Even a little money from a side job or freelance gig can help you beef up your savings without cutting into your regular income.
• Look for ways to spend less and save more. Make a budget and stick to it, adjusting as needed.
• Talk to a financial advisor. Preparing for retirement can be a long, complex process. A financial advisor can help you make sense of your options.

Learn more: Tips for Spending Money Wisely

Frequently Asked Questions

The Bottom Line

Measuring your savings against milestones like Fidelity's guidelines is helpful, but it's only one gauge to consider. Work through your likely income sources, projected expenses and the lifestyle you hope to live, then consider how your expectations match up against resources. At 50, if you feel that you don't have enough retirement savings, there are still steps you can take to get there.

As you're thinking about your future finances, don't overlook the value of credit. Good credit can open doors for you and help you keep your options open if you want to resize or refinance your home down the road. Monitoring your credit starting now will help keep you on the right path all the way to retirement.