How Much You Need Invested at 30, 40 and 50 To Stay on Track for Retirement

Trying to save a specific dollar amount by the time you retire can feel daunting because you’re always playing catch-up.

This is especially true in your younger years, when a nest egg of $1 million or more can seem impossible to reach when you have a mere $25,000 in your bank account. But to help keep yourself on track, it can be helpful to ask where you stand relative to your current age, not your retirement age.

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Comparisons by Age and Annual Income

Large investment firms like Fidelity and T. Rowe Price provide guidelines as to where you should aim to be in terms of your retirement savings based on your income at various ages. While you should modify these guidelines based on your personal financial situation, they offer a good, practical starting point.

Here’s what that might look like in dollar terms. If you earn $60,000 per year, a rough target could be:

• At age 30: $30,000 to $60,000 invested

• At age 40: $90,000 to $180,000 invested

• At age 50: $210,000 to $360,000 invested

If you earn $100,000 per year, the range could look more like:

• At age 30: $50,000 to $100,000 invested

• At age 40: $150,000 to $300,000 invested

• At age 50: $350,000 to $600,000 invested

Viewed in that light, the targets likely seem much more accessible. If you’re just trying to reach $180,000 invested by age 40 instead of $1 million by the time you retire, it can be an easier leap psychologically.

Bear in mind that these figures generally refer to retirement assets, such as 401(k), IRA, Roth IRA and similar investment accounts. They do not necessarily include emergency savings, home equity or money set aside for short-term goals.

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Why the Benchmark May Not Fit Everyone

You should always take generic financial advice you find online with a grain of salt. This is because everyone has their own financial situation.

If you live in Los Angeles or New York, for example, your retirement benchmarks likely look much different from someone living in a lower-cost area, like Oklahoma City. Housing costs, state taxes, insurance premiums, healthcare, gasoline and more can vary considerably from city to city. Just by living in a low-cost area you might need tens of thousands of dollars less every year to live a comfortable life.

Lifestyle matters, too. If you plan to spend your retirement flying first class, traveling the world and owning two homes, you’ll need a much larger retirement nest egg than someone who lives in a paid-off home and has modest spending habits.

Social Security is another important factor. If you earn a lot during your working years, your Social Security benefit could top $4,000 every month. The tradeoff is that you’ve likely grown accustomed to a high-spending lifestyle, meaning that $4,000 per month won’t cover a big percentage of your expenses. Lower earners might not need as much in retirement but they also receive a smaller Social Security benefit.

What To Do If You’re Behind

If you’re still behind on your long-term savings goals, there are some concrete steps you can take to improve your chances.

The first is to increase your savings rate. Many retirement firms, including Vanguard, suggest investing 12% to 15% of your income, including any employer match. If that’s not a realistic number to hit immediately, try boosting your 401(k) or other retirement plan contribution by a lone percentage point every few months. Small increases can be easier to absorb than large ones; depending on your income, you might not even notice the bump. After a few years, you should be able to reach a savings rate of 15% or more.

An important corollary of increasing your contributions is to make sure that you’re capturing your full employer match. Employer matching contributions are the closest thing to free money you can get in the investment world and, over time, they can significantly boost your retirement plan balance. If you don’t put in enough money to get the full retirement match, you’re literally leaving compensation on the table.

For people in their 50s, catch-up contributions can help. IRS rules state that workers 50 and older can contribute an additional $1,100 to IRAs and $8,000 (and in some cases, $11,250) to 401(k) plans, helping them close the savings gap.

The Bottom Line

Being “ready” for retirement means different things to different people. Guidelines can help keep you in the ballpark, but you should make your own modifications based on multiple other factors, such as your location and lifestyle. Even after you retire, you’ll still need to stick to a budget and financial plan that allows for flexibility.

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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.

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