If you didn't make saving for retirement a priority early in life, it's not too late to catch up. At age 50, you can start making extra contributions to your tax-sheltered retirement accounts (called catch-up contributions). Younger workers can only contribute $23,000 to their 401(k)s and $7,000 to their IRAs in 2024.
It is never too late to start saving money you will use in retirement. However, the older you get, the more constraints, like wanting to retire, or required minimum distributions (RMDs), will limit your options. The good news is, many people have much more time than they think.
Suggested savings: The general guidelines recommend having eight times your annual salary saved by 60. The median income for a 55-year-old is about $63,000, which means having $506,600 saved for retirement. The average savings for those 55-65 is $256,244.
Retiring at 55 is something of a lofty goal but it's achievable with the right financial plan in place. When considering early retirement, remember that it can affect how much you need to save and where you'll need to keep those savings. Also, consider what types of investment vehicles or planning tools you could use.
Some experts suggest planning to live on a minimum of 65 to 75% of your current income in retirement. According to these parameters, you may need 10 to 12 times your current annual salary saved by the time you retire. Experts say to have at least seven times your salary saved at age 55.
As we have established, retiring on $500k is entirely feasible. With the addition of Social Security benefits, the possibility of retiring with $500k becomes even more possible. In retirement, Social Security benefits can provide an additional $1,800 per month, on average.
63% of Americans retire between the ages of 61-69. In a quest to live a better-than-average life, it's logical to conclude the ideal retirement age should at least be below 61-65, the majority age range of when Americans retire.
The rule of 55 allows penalty-free withdrawals from a 401(k) and 403(b) if you leave a job during or after the calendar year you turn age 55. This is an exception to the IRS rule that levies a 10% penalty on withdrawals from employer-sponsored retirement plans before age 59½.
By age 50, you would be considered on track if you have three to six times your preretirement gross income saved. And by age 60, you should have 5.5 to 11 times your salary saved in order to be considered on track for retirement.
The average retirement savings for all families is $333,940 according to the 2022 Survey of Consumer Finances. Taken on their own, those numbers aren't incredibly helpful. There are a variety of decent retirement savings benchmarks out there, but how much money other people have isn't one of them.
One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.
If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
If you're an average earner, Social Security will only replace about 40% of your former income. So if you retire without any savings, you might end up effectively taking a 60% pay cut. At the start of 2023, the average Social Security benefit was $1,827 a month. That's an annual income of a little less than $22,000.
When we looked at just the unhealthy retirees in the sample—who accounted for 1,022 of the 2,956 participants—we still found that retiring one year later was associated with a 9% lower mortality risk.
You can get Social Security retirement benefits and work at the same time before your full retirement age. However your benefits will be reduced if you earn more than the yearly earnings limits.
Pros of retiring early include health benefits, opportunities to travel, or starting a new career or business venture. Cons of retiring early include the strain on savings, due to increased expenses and smaller Social Security benefits, and a depressing effect on mental health.
Human longevity doesn't stop rising at 60. An American who retires at 65 can expect to live to 85, according to Social Security projections.
Most of us seem to know that the average American lives between 70 and 80 years: 73.5 years for men, and 79.3 for women, to be exact. Fewer of us understand that life expectancy rises with age. An American man who turns 70 today will live to 85, on average. A woman of 70 will live to 87.
Retiring at 62 with little money could be workable if you plan to relocate to an area with a lower cost-of-living, and cut your expenses. It also helps if you have additional money from Social Security, a pension, or an annuity that you can count on.
This brings us to the question -- can a retired person live on $4,000 a month? The answer is yes, almost 1 in 3 retirees today are spending between $2,000 and $3,999 per month, implying that $4,000 is a good monthly income for a retiree.
If you have more than $1 million saved in retirement accounts, you are in the top 3% of retirees. According to EBRI estimates based on the latest Federal Reserve Survey of Consumer Finances, 3.2% of retirees have over $1 million in their retirement accounts, while just 0.1% have $5 million or more.
$300,000 can last for roughly 26 years if your average monthly spend is around $1,600. Social Security benefits help bolster your retirement income and make retiring on $300k even more accessible. It's often recommended to have 10-12 times your current income in savings by the time you retire.