Know how much you need to save by what age to ensure that you are on track for retirement.
The answer to the question, “How much do I need to save to retire?” varies from person to person and is primarily dependent on your current income and the kind of retirement lifestyle you wish to and can afford.
Although it’s only the first step, figuring out how much you need to save given your current age will help you achieve your retirement objectives. To get the numbers, there are a few easy formulas you can use.
This article will delve into the specific amount a 67-year-old should aim to have saved for retirement, taking into account various factors that influence retirement savings goals.
How Much Money Should You Have Saved by 67?
According to Fidelity Investments, a 67-year-old should aim to have saved 10 times their annual income to retire comfortably. This means if you make $100,000 annually, you should aim to have $1 million saved by age 67.
This figure is based on the assumption that you will live for 30 years after retirement and will spend around 80% of your pre-retirement income. Of course, these are just estimates, and the actual amount you need will vary depending on your individual circumstances.
Factors Influencing Retirement Savings Goals
Several factors can influence how much you need to save for retirement. These include:
- Your desired lifestyle in retirement: If you plan to travel extensively or have other expensive hobbies, you will need to save more than someone who plans to live a more modest lifestyle.
- Your health: If you have health problems, you may need to save more to cover potential medical expenses.
- Your other sources of income: If you have a pension, Social Security benefits, or other sources of income in retirement, you will need to save less.
- Your life expectancy: The longer you expect to live, the more you will need to save.
Strategies to Reach Your Retirement Savings Goals
If you are behind on your retirement savings, there are still steps you can take to catch up. Here are a few tips:
- Increase your savings rate: Aim to save at least 15% of your income each year.
- Contribute to a catch-up IRA or 401(k): If you are 50 or older, you can contribute an additional $1,000 per year to your IRA or 401(k).
- Consider working part-time in retirement: This can help you supplement your income and cover unexpected expenses.
- Downsize your home: This can free up some equity that you can use to fund your retirement.
While the amount you need to save for retirement can seem overwhelming, it is important to start saving as early as possible. By following the tips above, you can increase your chances of having a comfortable and financially secure retirement.
Frequently Asked Questions
How much should I have saved for retirement by age 67?
According to Fidelity Investments, you should aim to have saved 10 times your annual income by age 67.
What factors can influence how much I need to save for retirement?
Several factors can influence how much you need to save for retirement, including your desired lifestyle in retirement, your health, your other sources of income, and your life expectancy.
What can I do if I am behind on my retirement savings?
If you are behind on your retirement savings, you can increase your savings rate, contribute to a catch-up IRA or 401(k), consider working part-time in retirement, or downsize your home.
Additional Resources
- Fidelity Investments: How Much Do I Need to Retire?
- Investopedia: How Much Do I Need to Save to Retire?
Disclaimer
This article is for informational purposes only and should not be considered financial advice. Please consult with a qualified financial advisor to discuss your specific retirement savings goals.
Percentage of Your Salary
It can be helpful to think of saving as a percentage of your salary when calculating how much you need to accumulate at different stages of your life.
According to Fidelity Investments, you should save 15% of your gross salary beginning in your 2020s and continuing for the duration of your working life. If you have access to a 401(k) or other employer-sponsored plan, this should include your savings spread across multiple retirement accounts as well as any employer contributions to those accounts.
An Alternative Formula
Another, more heuristic formula states that you should start saving in your 2020s and set aside 25% of your gross salary annually. The 25% savings figure may sound daunting. But remember that it encompasses other forms of retirement savings in addition to employer-matched contributions and 401(k) holdings.
By the time you reach 30, you should be able to accumulate your entire yearly salary if you adhere to this formula. If the average savings rate is maintained, the following results should be obtained:
- Age 35—two times annual salary
- Age 40—three times annual salary
- Age 45—four times annual salary
- Age 50—five times annual salary
- Age 55—six times annual salary
- Age 60—seven times annual salary
- Age 65—eight times annual salary
Whether or not you attempt to adhere to the 2015 or 2025 savings guidelines, there’s a chance that life events like the job loss many experienced during the COVID-19 pandemic will impact your actual ability to save.