By the time you're 50, retirement doesn't feel so far away anymore. It might actually feel too close for comfort. You start thinking about how much money you'll need to pay for decades of living expenses, plus the odd emergency, and you might be anxious about whether you have enough.
There are no hard-and-fast rules about how much you should have saved for retirement by age 50, but there are some common benchmarks people use to assess how they're doing. Here's one guide to figure out whether you need to make changes to your retirement savings strategy.
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Aim for six times your salary if possible
Fidelity created a popular strategy for tracking your retirement savings progress that says you should aim for certain multiples of your annual income saved by certain ages. It breaks down like this:
|
Age |
Income Multiple |
|---|---|
|
30 |
1x |
|
35 |
2x |
|
40 |
3x |
|
45 |
4x |
|
50 |
6x |
|
55 |
7x |
|
60 |
8x |
|
67 |
10x |
Source: Fidelity.
Based on this, if you earn $60,000 per year, you should aim to have $360,000 saved for retirement by 50. This includes your investment earnings as well as your contributions. If you receive an employer 401(k) match, you would count these funds as well.
It's worth noting that the above benchmarks are based on assumptions that might not hold true for you, like a 15% savings rate, 1.5% constant real wage growth, a retirement age of 67, and life expectancy of 93. It also assumes you hope to replace 45% of your pre-retirement income, which you'll supplement with Social Security benefits, and that you're not getting money from a pension.
If any of these factors aren't true for you, you'll need to adjust your savings goal up or down. If you have health issues and a shorter life expectancy, you may still be on track even if you don't have six times your income saved at 50 because you'll have fewer years of expenses to cover.
On the other hand, if you hope to retire before 67 or you want to replace more than 45% of your income in retirement, you probably want to aim higher than that multiple of six.
What to do if you're behind on retirement savings
You're not alone if you're worried about coming up short in retirement. Many people try their best, but their regular living expenses leave little money for long-term savings. It's important not to panic if you're in this situation.
There are things you can try to increase your savings or to help the money you have stretch further, including:
- Increase your contributions: If possible, aim to increase your contributions by 1% per year (or more) until you're saving at least 15% of your income. If you're a high earner, you can also take advantage of catch-up contributions.
- Consider a side hustle: Pick up a second job and put all of this income into retirement savings. You may need to open an IRA to do this.
- Delay your retirement: Delaying retirement gives you more time to save, allows your existing savings to grow further, and reduces the cost of your retirement.
- Work part-time in retirement: This could give you more freedom than you have in your current job while offering a steady paycheck you can use to supplement your personal savings and Social Security.
- Delay Social Security: Every month you delay claiming Social Security will increase your monthly checks until you qualify for your maximum benefit at 70. A larger benefit could help you stretch out your personal savings over a longer time.
You may need a combination of these strategies to arrive at a plan that works for you. Just keep trying until you find something that you can sustain.
