Here's How Much You Should Have Invested for Retirement at Age 67

With people living longer amid the high cost of living due to inflation, there is great debate over how much people should invest and ultimately save by the time they retire. There are many factors that come into play, including when you plan on retiring and how you want to live in retirement -- some people live frugally, and others want additional funds so they can travel or perhaps purchase a vacation property.

When it comes to saving for retirement, there's more than one way to skin a cat. However, there are many financial resources out there that can guide people as they save for retirement so they can monitor their progress. Assuming you want to retire by age 67, here's how much you should have invested for retirement.

What do the experts and numbers say?

According to Fidelity, people should think about their savings based on their starting salary. By the age of 30, Fidelity recommends that people have saved the equivalent of their starting salary. Fidelity then recommends people have 2x saved by 35 and 3x by age 40, etc. Ultimately, by the time people reach age 67, Fidelity recommends saving 10x your starting salary.

This is based on several assumptions, including a 15% savings rate and a 1.5% constant real wage growth, using a life expectancy of 93 for planning purposes. So, if your starting salary was $50,000 per year, you'll want to save $500,000 by age 67, according to Fidelity.

Of course, the actual numbers paint their own picture. The two key retirement savings vehicles in the U.S. are a 401(k) savings account and the individual retirement account (IRA). Both offer tax advantages.

The 401(k) savings are retirement accounts offered by employers to employees. In many cases, the employer will actually contribute to a 401(k) account, putting in a fixed percentage of an employee's contributions.

Based on data from Fidelity at the end of the third quarter of 2024, here is a table showing average 401(k) balances by age:

Data source: Fidelity Investments. Table by author.

As you can see, the average 401(k) savings for someone around the age of 67 is $252,800. Of course, the starting salary six or seven decades ago was much lower than it is now, so this age cohort could have still followed Fidelity's guidance.

There is also available data regarding the average IRA balances by age group:

Data source: Fidelity Investments. Table by author.

Average IRA balances tell a similar tale. It's interesting that IRA averages between 60-78 are higher than average 401(k) balances because these retirees typically get an employer contribution, so one would think this would lead to faster growth.

The key to maximizing savings

The great Warren Buffett attributes much of his investing success to choosing a few winners amid many mistakes and holding those winners for a very long time. People saving for retirement should heed the Oracle of Omaha's advice by starting to save and invest as early as possible.

The power of compounding has a powerful effect. The broader benchmark S&P 500 (^GSPC 0.70%) has delivered average annual returns of 10% since 1957.

Let's say you put an initial $5,000 into your account, invest in the broader market, and invest an additional $3,000 (less than half of the allowable annual contribution) every year. If you did this for 15 years, you would grow your savings to over $116,000. However, if you do this for 30 years, your savings would reach close to $581,000.

Three decades may sound like a long time, and it is. However, if you plan on retiring at age 67, you could implement this strategy at age 37. I would, of course, recommend to start saving as early as possible, but this is a good example of how powerful time and compounding can be for your retirement account.