Retirement Savings By Age: Max Out Your Potential

Key takeaways

• How much each person should save for retirement varies based on your income, lifestyle, goals and savings potential
• However, benchmarks that highlight retirement savings by age can serve as a great baseline for your own strategy
• Saving about 15% of your gross (pre-tax) income annually is often used as an average savings goal

Retirement planning sounds simple enough: just determine how much you need to save – and where – to afford your dream lifestyle when you exit the workforce.

But actually achieving that goal requires personal insight, patience and resolve. It requires saving a hefty chunk of your paycheck each month for decades.

And it involves knowing that the earlier you save, the more time your investments have to benefit from equity appreciation, dividend reinvestments and interest payments. (In other words, compound interest.)

And if you’re not sure how much to save, these benchmark retirement savings goals by age serve as a solid baseline.

How much should you save for retirement?

Approximations. Benchmarks. Rules of thumb.

Whatever you call them, these targets can help you make key financial decisions. While they can’t replace personalized planning, baselines outline where you “should” be.

Retirement spending goals

A common spending benchmark is being able to spend 80% of your pre-retirement income after leaving the workforce. So, if you earn $100,000 annually at 64, your investments and Social Security should cover $80,000 in annual expenditures at 65.

But that’s just a rule of thumb. Individuals with expensive spending habits, more medical expenses or larger debts may need to spend more in retirement.

The 4% rule

Another easy-to-use formula that provides a little more personalization is the 4% rule. The 4% rule merely states that you can determine how much to save by dividing your ideal annual retirement income by 4%. From there, a retirement calculator can help you determine your annual savings targets by age.

For example, if you hope to spend $50,000 per year in retirement, you’d need to save at least $1.25 million ($50,000 / 0.04) by 65. For an income of $100,000, your retirement target jumps to $2.5 million ($100,000 / 0.04).

But this strategy comes with some baked-in assumptions. The first is that you’ll rely on your nest egg for 30 years in retirement with no outsize medical or other emergency expenses. It also presumes a return on investment of 5% after taxes and inflation.

In your favor, it also excludes additional retirement income, such as Social Security – meaning relying on the 4% rule could help you overshoot your goals.

The 10-20% guideline

Another simple guideline advisors often recommend is tucking 10-20% of your gross income away each month. (15% is commonly used as the middle ground.)

In theory, if you start saving 15% each month by 25, you can comfortably retire at 62. If you start saving by 35, you can retire between 65 and 70.

However, this rule of thumb carries its own flaws.

To start, it presumes that you earn enough money that saving 15% of your paycheck could grow enough to fund a comfortable lifestyle down the road. But with over 60% of Americans living paycheck to paycheck, saving even 10% can be a tall order.

To combat this problem, some experts suggest starting where you can, even if you just save 5-7% each month. Then, every year, you can add 1-2% to your savings.

While this strategy may leave you feeling behind, something is better than nothing. And over time, your earnings will hopefully grow, allowing you to supercharge your contributions later.

Retirement savings averages by age

For many people, seeing how everyone else is faring on their journeys provides insight into their own strategies.

If you’re curious how you stack up, the Federal Reserve’s 2019 Survey of Consumer Finances found the following retirement savings averages by age:

• Under 35: $30,170
• 35-444: $131,950
• 45 to 54: $254,720
• 55 to 64: $408,420
• 65 to 74: $426,070
• 75 and older: $357,920

Bear in mind that gauging your success by how everyone else is doing is like comparing your high school GPA against your peers. Informative to a degree – and takes no account of your personal choices and long-term goals.

In other words, don’t feel bad if you don’t meet these criteria yet. How much everyone else saves ultimately doesn’t matter; how much you save does.

Retirement savings by age: ideal goals

Two of the biggest factors that determine how much you need saved by retirement are your income and lifestyle. Since higher earners get less income from Social Security, they generally require larger retirement balances relative to their income. Lavish spenders typically find themselves in the same boat.

Because earning, saving and spending differences are so variable, the value of your retirement assets should be based on your personal circumstances. A general estimate is that you should save roughly 7x to 13.5x your pre-retirement gross income by age 65.

For more concrete goals, Fidelity advises the following guidelines:

• Age 30: 1x your current annual income
• Age 35: 2x your current annual income
• Age 40: 3x your current annual income
• Age 50: 6x your current annual income
• Age 55: 7x your current annual income
• Age 60: 8x your current annual income
• Age 65: 10x your current annual income

Before you panic about falling short, remember that these benchmarks represent your total savings. In other words, compound interest “contributions” count.

Another key consideration is that the reason these numbers are tied to your annual salary, rather than a set number, is because your income is expected to increase over time. When you get a raise, your savings should increase, too.

Tips to achieve your ideal retirement savings by age group

Setting savings goals by age can help you focus on your future goals when life gets rough. But having goals isn’t enough; you have to take action to meet them.

A few simple (albeit not always easy) steps to elevate your savings potential at any age include:

• Stair-stepping up to the 15-20% savings threshold over time
• Signing up for automatic contributions through your payroll, investment or banking service
• Contributing enough to your workplace retirement plan, like a 401(k), to earn the full company match (if applicable)
• Using employer-sponsored financial wellness programs
• Relying on a budgeting app to keep your finances in check

Aside from these goals, we’ve also compiled a few age-specific tips to meet your retirement savings goals head-on.

Your 20s

It’s unlikely you have a huge income in your 20s, but that shouldn’t keep you from saving.

Start with an emergency fund. Over the next decade, stash at least 3-6 months’ worth of living expenses in a high-yield cash account.

Beyond that, consider enrolling in your employer-sponsored plan and/or an individual retirement account (IRA). If possible, contribute at least enough to earn your full company match. Elsewise, use your IRA to maximize your tax-advantaged savings.

(Alternatively, investing in an AI-directed account, like those offered by Q.ai, might offer even more advanced potential due to our data-backed strategies and ultra-low costs. Just saying.)

Your 30s

Once you hit 30, you’re hopefully moving into higher-paying positions and earning enough to pay down any student loans or credit card mistakes incurred in your 20s.

As you focus on these goals, don’t neglect your retirement savings. (Remember: your contributions should grow with your income.) You should review your contributions annually to maintain your employer match.

By this point, you should also have at least 6 months’ worth of living expenses stashed in a cash account. After you’ve met this goal, you might open a regular brokerage account to accelerate your home or car savings.

Your 40s

Your 40s can be a period of exciting change, or the moment when you truly settle into your career. Either way, keep chugging along toward your savings goals – and don’t tap your retirement savings if you decide it’s time to make a big purchase.

During this period, you might consider increasing your emergency fund to 9 months’ worth of expenses. Your taxable brokerage account makes a great place to invest above and beyond your contribution limits. (Speaking of: don’t forget to review your regular contributions regularly.)

Your 50s

Your 50s come with a financial blessing: namely, the ability to make “catch-up contributions” to your retirement account. Take this chance to increase your savings where possible. You might also consult with a financial advisor on when and how to move your investments to lower-risk assets to protect your earnings thus far.

After maxing out your contributions, consider topping up your emergency fund until you have a full years’ worth of expenses set aside. If you have any “extra” leftover, throw it into paying off any remaining debts, such as your mortgage or credit cards.

Your 60s and beyond

As you age into your golden years, it’s time to seriously evaluate your portfolio. Finish reallocating your assets to preserve your existing savings and accelerate your income where possible. If possible, waiting until age 70 can substantially increase the size of your Social Security checks.

Retirement savings by age: a savings account isn’t enough

In all of these, we’ve repeatedly mentioned using retirement and brokerage accounts to accelerate your potential. The reason is simple: regular checking and savings accounts – even high-yield accounts – just can’t match investment returns over time.

The power of equity appreciation, dividend payouts and interest earnings (i.e., compound interest) is what makes investment accounts so valuable.

But even then, any ol’ retirement or brokerage account won’t do. It’s essential to find one that aligns with your goals while offering plenty of long-term growth potential.

And we believe that’s exactly what Q.ai brings to the table. With a variety of AI-backed Investment Kits at hand, you can capitalize on current market movements and long-term strategies alike. From guarding against inflation, diversifying with large-cap stocks, or investing for the future, there’s something for everybody.

And for extra peace of mind, you can always toggle on Portfolio Protection to help preserve your capital against market volatility.

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