There’s no right amount to save, but the experts have some conventional wisdom.
The average retirement age in the U.S. — ranging from 60 to 62 — has held relatively steady since 2012, according to a study from Gallup and MassMutual. The average retirement age in 2023 was 62.
But people are now working longer than they used to, and it is not at all unusual for them to work well into their 70s.
Contrary to popular belief, there is no right amount to save for retirement. Money is not everything, and plenty of people live very fulfilling lives on a limited budget. But it’s never a bad idea to plan or simply assess your current financial situation and see if you are on a good path when thinking about retirement. Here’s how much money you should have invested for retirement at age 67.
Let’s ask the experts
Fidelity Investments is the largest broker in the country and had 15.3 million individual retirement accounts and nearly 24 million 401(K) participants under its umbrella in the first quarter of 2024, so the company knows a thing or two about saving for retirement.
According to Fidelity, workers should save about 10 times their pre-retirement income if they plan on retiring at 67, meaning if you make $100,000 per year regularly, you should probably have about $1 million saved. Fidelity arrived at this estimate by assuming workers pocket 15% of their income annually starting at age 25.
This includes an employer-match contribution into retirement funds and workers investing half of their savings on average in stocks throughout their lives. Fidelity also lays out savings milestones workers should try to hit if they want to follow the company’s guidance:
Age 30: A year’s salary
Age 40: 3 times your salary
Age 50: 6 times
Age 60: 8 times
Age 67: 10 times
I want to reiterate that this is by no means the only path to follow, and Fidelity acknowledges you can save different amounts based on your lifestyle.
For instance, it recommends saving 10 times your salary if you want to maintain your current lifestyle. But perhaps you plan to move into a more affordable living situation and operate with a tighter budget — you might only need to save eight times your salary. If you want to spend your retirement traveling and purchase a lavish beach house, then you might need to save 12 times your salary or more.
2 tips to max out your retirement
There are many steps people can take to max out their retirement savings, and here are two good ones. First, start investing as soon as possible.
Warren Buffett, arguably the greatest investor ever, modestly attributes a big chunk of his success to the amount of time he has been able to hold stocks. “Our favorite holding period is forever,” the Oracle of Omaha often says.
It’s easy to see why he believes this when you look at the chart below. It shows how much money you would have if you invested an initial amount of $1,000, contributed another $500 annually, and earned a 10% compound annual growth rate, which is in line with returns for the S&P 500.
| Age When You Invest $1,000 Initially and Contribute $500 Annually Thereafter | Value at 67 |
|---|---|
| 20 | $524,185 |
| 30 | $199,023 |
| 40 | $73,660 |
| 50 | $25,327 |
| 60 | $6,692 |
Chart by author.
The moral of the chart’s story is to start investing young and contribute annually — even just $500 a year or roughly $42 per month makes a big difference, and many retirement accounts offer tax advantages. You don’t have to be an expert to invest in the broader market benchmark S&P 500 index and make nice returns over time.
The second tip is on Social Security, which can supplement your retirement savings nicely. In September, retirees on average took home a monthly Social Security check of roughly $1,921.50, or $23,058 annually. The longer you wait to claim benefits, the higher they will be.
So if you are healthy and can wait, you may want to delay benefits to age 70, after which it doesn’t pay to wait longer. This could increase your monthly benefit check to as high as $5,108, or over $61,296 annually. While it’s tough to get this max payout, the longer you wait, the more you will get out of the program.
By investing young and waiting as long as possible to claim Social Security benefits, you can dramatically increase your retirement savings by age 67.
Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
