This Is How Much You Should Have in Savings by 50. How Do You Compare?

You should have five to six times your annual income saved by age 50, according to most financial planners. So, if you earn $75,000 per year, this means you should ideally have $375,000 to $450,000 set aside in savings accounts, retirement accounts, brokerage accounts, and other liquid assets.

Of course, like most topics in personal finance, there's not a perfect rule for everyone. However, this is a good starting point to help you determine whether you're on track for a financially secure retirement or not. Let's take a look at why you might need more or less than this guideline, and what you can do if you've fallen behind.

This isn't a perfect rule for everyone

As I mentioned, the "five to six times your income" rule isn't perfect for every 50-year-old. You might need more or less in savings than the average American for numerous reasons.

One major factor is your retirement goals. If you want to retire at age 55, you should probably have more than five times your salary saved before you're 50, especially if you have ambitious plans to travel after you retire.

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Other streams of income can also play a big role. For example, if your job has a pension plan, and you'll get monthly payments equal to a substantial portion of your income after you retire, your savings needs will naturally be lower than someone planning to rely exclusively on retirement savings.

If you own many assets other than a savings account, it can also play a role. As a personal example, I own investment properties and have substantial equity in them, so this is a factor when determining how much I'll need to retire comfortably.

What should you do if you haven't saved enough?

The good news is that most people who are turning 50 are still 10-20 years away from retiring, so there's time to have a big impact.

The obvious answer is that if you don't have enough in savings at 50, it's time to start prioritizing retirement savings. The best places to set aside money are tax-advantaged retirement accounts such as IRAs, or employer-sponsored retirement plans like 401(k)s, where your money is free to grow and compound on a tax-deferred basis. All retirement accounts have special rules (known as catch-up contributions) that allow account owners 50 and older to set aside more money each year than younger savers.

If you're having a tough time finding enough money to contribute to your savings, it might be a smart idea to take a closer look at your budget and try to identify opportunities to cut expenses. One of my favorite exercises is going through the last couple of bank and credit card statements and highlighting any purchase you didn't need to make. 

The point isn't to shame you for spending money you didn't need to spend, or even to get you to stop all unnecessary spending, but you might be surprised where you could cut back. As a personal example, a few years ago I did this and couldn't believe how much my family spent on dining out. I even identified a couple of costly subscriptions I wasn't using.

The bottom line is that you still have time to get back on track by making budgeting, saving, and investing priorities. Seemingly small amounts of additional savings now could make a big difference in your quality of life after you retire.