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How much should you have saved in investment accounts by the time you're 50? Like most personal finance questions, there isn't a one-size-fits-all answer. Different 50-year-olds have different income levels, family situations, and future lifestyle expectations. Plus, other variables figure into the calculation.
However, we can use some common guidelines to help you determine where you stand and if you need to start saving more aggressively.
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The short answer
According to Fidelity, it's a good idea to have at least six times your annual income saved for retirement. So, if you earn $70,000 per year, you should have $420,000 in your investment accounts (of course, even more is better).
To be clear, this includes:
- Employer-sponsored retirement accounts like 401(k)s and 403(b)s.
- Traditional or Roth IRAs and other tax-advantaged retirement accounts you contribute to on your own.
- Non-retirement (taxable) brokerage accounts that contain long-term investments. In other words, if you use an account to day trade, don't include it, but a diversified stock portfolio can count toward this.
- You can also include any savings accounts, certificates of deposit (CDs), or money market accounts if the funds in them are specifically intended to save until you retire.
If you're curious, Fidelity's guidelines state that you should aim to grow this further to eight times your annual income by age 60 and 10 times your annual income when you're actually retirement-ready.
Every 50-year-old is different
It's also important to note that general guidelines are exactly that -- general. They don't take your unique circumstances into account, and therefore your optimal savings level at 50 could be significantly higher or lower.
This is especially true of your retirement savings. The most important thing isn't the dollar amount you've saved or invested, but the amount ofincome you can produce after you retire.
Here's why this is important when it comes to savings targets. Let's say you determine you'll need $5,000 per month after retirement in order to live comfortably, and you expect to get $1,800 per month from Social Security. If you also expect a $2,500 monthly pension from your job once you retire, your savings need is significantly less than someone who doesn't have a pension.
Also, the "six times your income at 50" figure assumes you'll retire at 67. So it might not be the best guideline if you plan to retire significantly earlier or later.
Having said all of that, the goal of having five to six times your annual income saved for retirement by the age of 50 is a solid estimate that can help you determine whether you're on track for a comfortable retirement or if you need to start saving more aggressively.
What if you're not where you need to be?
If you're a little short of where your long-term savings should be, the simple answer is that you should start saving as aggressively as possible to catch up.
Be sure to take advantage of the tax benefits of saving in retirement accounts. For 2024, you can save as much as $23,000 in a 401(k), plus an additional $7,500 catch-up contribution if you're 50 or older. The contribution limit for a traditional IRA or Roth IRA for someone 50 or older is $8,000, and in many cases (depending on your income), you can contribute to an IRA in addition to a 401(k).
It could also be a smart idea to seek professional guidance from a Certified Financial Planner® or another financial professional if you're worried about the best way to get caught up.
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