Everybody’s “retirement number” is a little different. Some people will need to save a lot more or less than the average American to retire in comfort.
However, many financial experts say you should save at least six times your annual income by age 50. So if you’re 50 years old and earn $80,000 a year, then ideally you have $480,000 or more in retirement savings.
Let’s go over some of the reasons you may need more or less money than that, as well as what you can do if you’re behind.
Why you might need more
Here are just some of the reasons you may want to save more than six times your salary by age 50.
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You plan to retire early
The guideline of saving six times your salary by age 50 is based on the assumption that you’ll retire at age 67. If you plan to retire earlier than that, you’ll probably need more savings to make sure your money lasts as long as you do.
You expect to spend a lot on healthcare
An average 65-year-old who retired in 2024 can expect to spend about $165,000 on healthcare throughout retirement, according to Fidelity Investments. That’s a huge sum of money. If you have chronic health issues, or if you end up needing long-term care, then you’ll likely spend a lot more than that. Nursing homes and assisted-living facilities often cost more than $100,000 per year.
You expect to live much longer than the average person
Healthcare is expensive — but so is living to age 90. The average 50-year-old is expected to live another 28 to 32 years, according to the Social Security Administration. If you’re in great health and have a lot of relatives who lived well into their 80s and beyond, then you may want to plan for a longer retirement than most.
You want to live it up in retirement
Most people spend less money when they retire, because their lives are less active. However, if you plan to travel the world or enjoy other expensive hobbies, then you should aim to pad your retirement savings.
Want to ramp up your retirement savings by investing in stocks and getting huge tax breaks? Check out our list of the best individual retirement accounts (IRAs) and open a new account today.
Why you might need less
Not everyone needs six times their salary saved by age 50 to retire in comfort. Here are a few potential reasons why.
You have other streams of income
The “six times your salary” rule assumes that all your income is coming from your savings and Social Security. If you’ll also be earning income from a pension, rental property, or any other source, then you can aim lower.
Your expenses will be much lower
There are a lot of reasons why you might spend less money in retirement.
If you’ve paid off your mortgage, or you plan to downsize to a cheaper home, or you plan to live with family, then your housing costs will be lower (or nonexistent).
And if you plan to take it easy in retirement, then you may spend a lot less on gas, vacations, and entertainment.
You plan to work a long time
Some people keep working into their 70s and beyond. It’s best not to plan on this, as many people are forced to retire earlier than expected due to health issues, the job market, or other factors. But putting off retirement for a few years can save you a huge sum of money in the long run.
Your Social Security benefits will also be bigger if you hold off on claiming them for a while. They max out when you reach age 70, so you don’t want to delay claiming benefits past that age.
What to do if you’re behind
First of all, don’t panic. Millions of Americans don’t even save six times their salary by the time they retire. That said, if you want to maintain your standard of living when you retire, it’s time to kick your savings into overdrive.
Aim to save at least 20% of your income, preferably in a tax-advantaged retirement account like a 401(k) or IRA. When you’re 50 or older, these accounts let you deposit more money than younger savers. Take advantage of these “catch-up contributions” and save as much as you possibly can.
If you’ve maxed out your 401(k) and/or IRA contributions for the year, you can open a regular brokerage account and invest through that.
Also make sure your retirement savings aren’t all sitting in low-growth investments like bonds or certificates of deposit. Ideally, at least half your portfolio will be invested in higher-growth assets like stocks. If you’re unsure what to invest in, consider something simple like a broad-market index fund. Then you’ll have both diversification and higher potential returns.
Most 50-year-old workers have at least 10 years to keep saving and to ride out any short-term losses in the stock market. Start saving aggressively now, and even if you fall short of your goal, you’ll be much better off.
