Retirement Saving Milestones and Strategies by Age

Summary: It’s never too late to start retirement savings. There are several strategies for those in their 40s, 50s, and 60s to catch up, such as increasing contributions, paying down debt, and considering catch-up contributions. Get to know the importance of estate planning and healthcare planning as retirement approaches.

The earlier you start saving for retirement, the better. But what if you weren’t as forward-thinking as you intended in your younger years? Is it ever too late to save for retirement?

The answer is “no!”

Any amount of savings put into a retirement account at any age will help your future self, but there are some special considerations for those who are working in their 40s, 50s, and beyond to make up for lost time.

Here’s a look at some strategies that will help you make the most of your saving efforts in the decades closest to retirement.

Where Americans stand on retirement

In the U.S., savers are behind on stashing money away for retirement. According to the Federal Reserve’s most recent available data, the Survey of Consumer Finances¹, the average saver between ages 35 and 44 has $141,520 in the bank, and the average worker on the brink of retirement (55 to 64) has $537,560.

Those may seem like somewhat reasonable numbers, but averages can be skewed by particularly high or low numbers, so the median amounts of retirement savings are more revealing. The median saver between ages 35 and 44 has only $45,000 in the bank, and the median worker in the 55-64 age group has $185,000.

While each retiree’s financial needs vary, it’s important to note that retiring with less than $200,000 in savings can be challenging for most people.

In your 40s

Aim for 6x your salary in savings

It’s a good idea to aim to save six times your salary by the time you turn 50. This goal can help you stay on track for a comfortable retirement. While it may seem like a big number, focusing on this target can encourage you to save more consistently and explore different ways to grow your retirement fund. Whether it’s increasing your 401(k) contributions, investing in other assets, or trimming unnecessary expenses, every step you take now can make a big difference down the road.

Pay down your debt

If you’re carrying debt in your 40s, it’s a good idea to prioritize managing it as part of your retirement planning. While having debt in retirement isn’t necessarily a problem, it can become an issue if your income doesn’t cover it. Focusing on paying off high-interest debt, like credit cards, can help reduce financial strain later on. Practicing smart borrowing habits now, such as paying off balances in full each month, can make it easier to manage debt in the future and help maintain a comfortable lifestyle in retirement.

Up your contribution amounts

In your 40s, it’s recommended to increase your contribution amounts. This is the time to boost your retirement savings. Increase your monthly contribution by cutting expenses or adding an extra income stream. As you get closer to retirement, you’ll have less time for those contributions to grow. So, making these adjustments now can help ensure you’re better prepared when the time comes.

Review your asset allocation

How your retirement savings are allocated—specifically, how they’re distributed across various investments—plays a key role in both growth potential and risk. While it’s typically advised to shift to more conservative investments as you approach retirement, it’s important to remember that retirement itself can last for decades. This means you may want to keep a portion of your portfolio invested with a long-term mindset, allowing for some growth potential, while allocating other funds more conservatively for nearer-term needs. Meeting with a financial professional can help you assess your age, time horizon, goals, and risk tolerance to determine the best approach for your portfolio.

Find a financial professional near you.

In your 50s

Aim for 8x your salary in savings

The money milestone suggested by finance professionals is to accumulate eight times your salary by 60. These targets can be useful guideposts for your savings as you move through your 50s.

Max out your contributions to your retirement plans

If possible within your budget, contribute the maximum amount allowed by law to your retirement plans, and be sure to take full advantage of any employer match. By the time you reach your 50s, you’re likely in your prime earning years and may have fewer dependents at home, making this an ideal time to catch up on your retirement savings. Rather than worrying about past contributions, focus on what you can do now to strengthen your financial future. Take advantage of the opportunity to boost your savings and prepare for retirement with confidence.

Make catch-up contributions

If you’re 50 or older, you have the opportunity to make additional contributions to your retirement accounts to help boost your savings. Generally, the IRS allows for extra catch-up contributions to 401(k), 403(b), 457 plans, and IRAs.

For current limits and specific amounts, it’s best to check the IRS website or consult a financial professional to help ensure you’re making the most of these provisions. Catch-up contributions can be a valuable tool to enhance your retirement savings as you approach retirement age.

Plan your estate

Estate planning is setting an intention for what will happen to your assets when you die. This is a good idea at any age, but it is particularly important to close out your 50s with a plan in hand as you look forward to retirement. Work with qualified professionals to make sure you’ve properly covered all the important elements of this end-of-life planning.

In your 60s and beyond

Aim for 10x your salary in savings by 67

The goalpost is to save ten times your salary by the time you reach the typical retirement age of 67. For context, this is the full retirement age (FRA)for people born in 1960 or later. You may be spurred to save more in your 60s by keeping this guidance in mind and plan your retirement age accordingly.

Consider a Roth conversion

When you reach age 72, you must start taking required minimum distributions (RMDs) from your traditional IRA and 401(k). A Roth IRA, on the other hand, does not require RMDs, allowing your money to stay in the account and keep growing. Converting some of your retirement savings to a Roth IRA can help make your money go farther. Whether this makes sense depends on the details of your situation and your particular tax brackets. Consult a tax professional to see if it’s a good option for you.

Plan for Social Security

You can start collecting Social Security benefits as early as age 62, but the longer you wait to begin collecting, the higher your monthly benefit may be. You can delay collecting Social Security benefits until you turn 70 to receive the maximum benefit amount. In your early 60s, plan when to start withdrawing Social Security benefits, which will depend on various factors, including your health and other savings.

Estimate your Social Security retirement income.

Account for healthcare costs

Healthcare costs can significantly impact your retirement income. Even with Medicare, out-of-pocket expenses and other healthcare needs can be substantial. It’s important to realistically assess your future healthcare needs and plan accordingly. Consider setting up a health savings account (HSA) or investing in long-term care insurance.

While you cannot make contributions to an HSA once you enroll in Medicare, you can use the funds for any purpose after age 65 without facing a penalty. However, if the money is used for non-medical expenses, it will be subject to income tax. Planning ahead can help you manage these potential costs effectively.

Start now!

There’s no one-size-fits-all approach to retirement savings, just as there’s no single retirement lifestyle. Whether you plan to keep your family home while traveling extensively or prefer a simpler, low-cost life in a tiny home or RV, your retirement savings need to be able to support your lifestyle. The money you have managed to save and continue to save will determine the retirement lifestyle you can afford.

The key is to start now and ensure you’re taking steps to secure your future. Learn how Mutual of Omaha can help you achieve your retirement goals.

Frequently asked questions

Q1. How much should I have saved by ages 30, 40, 50 and 60?

• By age 30: Aim to have saved the equivalent of your annual salary. If you earn $50,000 per year, try to have $50,000 in your retirement savings.
• By age 40: Strive for about three times your annual salary. For example, if your salary is $70,000, aim to have $210,000 saved.
• By age 50: Your goal should be around six times your annual salary. If you’re making $80,000, you should ideally have $480,000 saved.
• By age 60: Ideally, you should have eight to ten times your annual salary saved. So, if you’re earning $90,000, aim for $720,000 to $900,000 in retirement savings.

Q2. How much can I contribute when I’m over 50?

If you’re over 50, you can take advantage of catch-up contributions to boost your retirement savings in tax-advantaged accounts. Both 401(k) and 403(b) plans, as well as Traditional and Roth IRAs, allow for additional contributions once you reach age 50. These catch-up contributions enable you to save more and accelerate your retirement planning. For the most current limits and rules, it’s best to check with the IRS or your plan administrator.

Footnotes:

1. https://www.federalreserve.gov/econres/scf/dataviz/scf/table/#series:
   Retirement_Accounts;demographic:agecl;population:all;units:mean

Disclosures:

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.

All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.

Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.

Not all Mutual of Omaha agents are registered representatives or financial advisors.