Saving enough for retirement is crucial, but can also be challenging. By age 50, most financial experts recommend trying to have at least 2-3 times your annual salary saved for retirement. However, the amount you need specifically will depend on several factors.
General retirement savings guidelines
As a general guideline, here are some common retirement savings targets for different age groups:
- By age 30: 1x your annual salary
- By age 40: 3x your annual salary
- By age 50: 6x your annual salary
- By age 60: 8x your annual salary
- By age 67: 10x your annual salary (for retirement)
So based on this, most experts recommend trying to have at least 6 times your annual salary saved by age 50. For example, if you earn $100,000 per year, you would want to have $600,000 saved by age 50.
Factors that influence retirement savings needs
However, the amount you need saved for retirement by 50 can vary significantly depending on your unique situation and goals. Here are some key factors to consider:
- Current age and life expectancy – The younger you are, the more time your savings has to grow.
- Income – Higher earners often need larger retirement savings to maintain their standard of living.
- Lifestyle and expenses – Your spending, desired retirement lifestyle, and cost of living affects how much you need.
- Other retirement income sources – Pensions or Social Security benefits can offset the amount you need from personal savings.
- Retirement age – The longer you plan to be retired, the more savings you’ll need.
- Healthcare costs – Healthcare is a major expense for many retirees that requires more savings.
- Inflation – Higher inflation reduces the buying power of savings over time.
How to calculate your retirement number
To figure out your target retirement savings, financial advisors often recommend taking these steps:
- Estimate your expected annual expenses in retirement
- Factor in estimated healthcare costs like insurance premiums or out-of-pocket expenses
- Adjust expenses for inflation over a 30+ year retirement
- Identify any sources of guaranteed income in retirement like pensions or Social Security
- Multiply the remaining annual expense gap by 25-30x to get your total nest egg target
Online retirement calculators can also help customize your target based on details you provide.
Ways to save for retirement
To reach a healthy retirement savings target by age 50, consistently contributing to accounts like 401(k)s and IRAs starting early is key. Here are some of the best ways to save and invest for retirement:
- 401(k) or 403(b) – Contribute at least enough to get any employer match offered.
- IRA – Max out contributions to Traditional or Roth IRAs.
- Health Savings Account (HSA) – HSAs offer triple tax benefits for healthcare costs.
- Brokerage account – Open a taxable account once 401(k)s and IRAs are maxed out.
- Real estate – Investment property can supplement retirement income.
- Small business – Building business equity can boost retirement assets.
How much is enough for retirement?
Determining if you have “enough” saved for retirement is tricky. At a minimum, strive to save at or above general target guidelines. But your complete retirement plan, desired lifestyle, and risk tolerance also impact how much is considered enough.
It’s smart to overestimate expenses, use conservative return assumptions, and have some extra savings as a cushion. Working a few years longer, downsizing your home, or relocating to a lower cost area can also help reduce the amount you need to retire comfortably.
Discussing your specific situation with a financial advisor can provide more clarity on defining your “number” and strategy to achieve it. With diligent saving throughout your career and thoughtful retirement planning, reaching an adequate nest egg by 50 is certainly achievable.
Conclusion
Striving to save at least 6 times your annual salary by age 50 can help ensure you’re on track for retirement based on general guidelines. However, your specific target should be based on an analysis of your expected retirement expenses, income sources, and personal financial situation. Consistently contributing to retirement accounts, maximizing employer matches, and speaking with an advisor can help you save enough to have a comfortable nest egg by your 50th birthday.