Saving enough money for retirement is a major financial goal for most people. With people living longer than ever, retirement can last 20 years or more. This makes having adequate retirement savings critical. But how much should people have saved by age 65, which is the traditional retirement age? Here is an in-depth look at the average and recommended retirement savings for 65 year olds.
Quick Facts
- The average retirement savings for 65 year olds is around $358,000.
- Experts recommend having between $300,000 and $600,000 saved by age 65.
- 33% of households aged 55 and older have no retirement savings.
- The average household headed by someone aged 55 to 64 has $157,000 in retirement accounts.
Average Retirement Savings at Age 65
According to the 2019 Survey of Consumer Finances from the Federal Reserve, the average retirement savings for families with a head of household aged 65 to 74 is $358,000. This includes savings in defined contribution plans like 401(k)s and IRAs, as well as defined benefit plans like pensions. Here is a breakdown of the average retirement savings by account type for 65 to 74 year olds:
| Account Type | Average Balance |
|---|---|
| Defined contribution plans | $197,000 |
| IRAs | $106,000 |
| Defined benefit plans | $55,000 |
As the table shows, defined contribution plans like 401(k)s make up the biggest share at $197,000 or 55% of the total. IRAs represent another major share at $106,000 or 30%. Defined benefit pensions make up a smaller portion today at $55,000 or 15%.
Retirement Savings by Income Level
Retirement savings vary significantly based on income level. According to the Federal Reserve, here is the average retirement savings for 65 to 74 year old families by income percentile:
| Income Percentile | Average Retirement Savings |
|---|---|
| Bottom 25% | $7,000 |
| 25% to 49% | $62,000 |
| 50% to 74% | $212,000 |
| 75% to 89% | $523,000 |
| Top 10% | $1,167,000 |
As the data shows, lower income households have very little in retirement savings. The top 10% of households by income have over $1 million saved on average. This demonstrates the significant retirement savings gap between income levels.
Recommended Retirement Savings at 65
While the average savings provides a benchmark, many experts recommend higher target retirement savings amounts for 65 year olds. Here are some common guidelines:
- 8x Your Annual Income – A common rule of thumb is to save around 8 times your annual pre-retirement income by age 67. So for someone making $100,000 per year, the target would be approximately $800,000.
- 10x Your Final Salary – Another guideline is to save 10 times your final salary upon retiring. If your ending salary is $80,000, you would want $800,000 saved.
- $1 Million – For middle to higher income earners, having $1 million or more in retirement savings by 65 is a common target.
- $300,000 to $600,000 – Many financial experts recommend having between $300,000 to $600,000 minimum based on your income, planned retirement age and lifestyle.
The wide range accounts for lower vs. higher income levels and desired retirement lifestyles. A frugal retiree can get by on less, while a luxury-seeking retiree will need more. Geographic differences in cost of living also impact target amounts.
Retirement Savings Guidelines by Age
In addition to retirement savings targets for 65 year olds, there are general guidelines for how much you should have saved at different ages. Here are some common benchmarks:
| Age | Recommended Savings |
|---|---|
| 30 | 1x your salary |
| 35 | 2x your salary |
| 40 | 3x your salary |
| 45 | 4x your salary |
| 50 | 5x your salary |
| 55 | 6x your salary |
| 60 | 7x your salary |
| 65 | 8x your salary |
| 67 | 10x your final salary |
These benchmarks provide retirement savings goals for each stage of your career. The multiples are based on your current or final salary depending on your age. Following this guideline provides a steady, gradual path towards a well-funded retirement by 65.
How Many 65 Year Olds Have No Retirement Savings?
While some 65 year olds have robust retirement savings, a concerning number have nothing saved at all. According to the Economic Policy Institute:
- 33% of households aged 55 and older have no retirement account assets.
- The median retirement account balance for households aged 55 to 64 is just $157,000.
- For households aged 55 to 64 in the bottom 50% of incomes, the median retirement account balance is $0.
This data indicates that a significant portion of older households are approaching retirement age with little to no savings. The figures are worse for lower income groups. With Social Security providing only partial income replacement, lack of retirement savings leaves many vulnerable financially in their later years.
Why Do So Many Lack Adequate Savings?
There are several key reasons why so many 55 to 64 year olds have little in retirement savings:
- No access to employer retirement plans – Around 55 million workers lack access to an employer 401(k) or pension plan.
- Lack of contributions to existing plans – When plans are available, many do not contribute enough to reach target savings levels.
- Little personal investing outside work plans – Many do not invest in IRAs or other personal accounts outside employer options.
- Debt obligations – Debt like mortgages, student loans and credit cards eat up income that could go to retirement savings.
- Unexpected costs – Medical bills, job loss or other surprises can deplete retirement funds.
- Cashes out retirement funds – Some cash out 401(k)s and similar plans when changing jobs.
These barriers make it difficult for many to save enough for retirement. Those with lower incomes face an especially challenging path to saving adequately for their senior years.
Steps to Boost Your Retirement Savings
If you are behind on saving for retirement, there are steps you can take to increase your retirement assets:
1. Determine Your Retirement Income Needs
Assess how much yearly retirement income you will need. Factor in living expenses like housing, healthcare, food and desired travel or leisure. This will help set your target retirement savings amount.
2. Increase Your Savings Rate
Contribute more from every paycheck to retirement accounts like your 401(k) and IRA. Automate increases over time. Even small increases make a difference as they compound over many years.
3. Cut Expenses to Free Up More Savings
Review your budget and look for areas to cut back like cable bills, restaurant meals or other discretionary spending. Redirect these savings to retirement funds.
4. Pay Down Debt
Aggressively paying down debts frees up more money to save each month. Pay off credit cards first, then student debt and other loans.
5. Delay Social Security Filing
Waiting until age 70 if possible to claim Social Security results in much higher monthly income. For those who can afford it, delaying claiming grows your lifetime benefit.
6. Consider Retiring Later
Extending your career even by a couple of years means more time to grow your retirement assets while living on earned income.
7. Consult a Financial Advisor
A financial advisor can review your specific situation and create a custom plan to help you save enough for retirement. They can also optimize your investments, taxes and distribution strategy.
Key Takeaways
Here are some key points on average and recommended retirement savings for 65 year olds:
- The average retirement savings for 65 year olds is around $358,000.
- Experts suggest most people have $300,000 to $600,000 or more saved by age 65.
- Retirement savings vary greatly by income, with top earners having over $1 million on average.
- 33% of near-retirees have zero retirement savings, putting them in a precarious position.
- Boosting savings, cutting costs and consulting an advisor can improve your retirement readiness.
Achieving adequate retirement savings by 65 requires diligent saving and investing throughout your working life. But with prudent planning, investing and some sacrifice, the majority of savers can amass sufficient funds to enjoy their retirement years comfortably.
Frequently Asked Questions
How much should I have saved for retirement at age 65?
Most experts recommend having between $300,000 and $600,000 or more saved by age 65 for retirement. The exact target varies based on your income, planned retirement lifestyle and other sources of retirement income like pensions and social security.
What is the average 401k balance at age 65?
The average 401k balance at age 65 is approximately $197,000 according to Federal Reserve data. For higher income households, the average 401k balance is over $350,000.
Can you retire comfortably with $500k at 65?
It is possible to retire comfortably at 65 with $500,000 in retirement savings depending on your annual spending needs in retirement. Withdrawing 4% annually from $500k would generate $20,000 per year. This could cover basic living costs depending on your location and lifestyle.
What percentage of income should you have saved by 65?
A good rule of thumb is to have around 8 times your pre-retirement annual income saved by age 65. So if you earn $100,000 per year before retirement, you would target to have approximately $800,000 saved ($100k x 8).
How do I catch up on retirement savings at 65?
If behind on retirement savings at 65, you can catch up by working longer, boosting monthly contributions, limiting spending, delaying Social Security and earning higher investment returns. Consulting a financial advisor can help craft a plan.
Conclusion
Saving enough for retirement by age 65 is crucial to supporting your standard of living for 20 or 30 more years. While a small minority of Americans retire with over $1 million in the bank, most can achieve financial security in retirement with disciplined saving of $300,000 to $600,000 or more. With a thoughtful approach and starting early, a secure retirement is within reach for the majority of workers.