Average savings by age: Are you saving enough?

Retirement savings by age

In today’s economic climate, saving for retirement is difficult. Many people have immediate needs and don’t have the luxury of thinking 30 years in the future. The reality is, however, that you need to start saving and planning now to retire the way you want. Here is a table of the average people have saved by age group, and what most savings professionals recommend as a goal:

For example, the average person in the U.S. age 35-44 makes about $86,500 a year¹. By around age 40, they should have 3x their annual salary saved, or about $260,000. With the average real savings of only $45,000, they have less than 20% of what they should. As you can see, most Americans are behind on their retirement savings. You might be as well, but that doesn’t mean you can’t catch up. Here’s how you can start saving at least a minimum amount for retirement.

Your retirement plans make a big difference in savings goals

So, how much retirement savings do you actually need? While it’s temptingly easy to just state a nice round number like $1,000,000, that answer lacks nuance. How much you’ll really need in retirement depends on many factors, such as your lifestyle, where you live, and how much you travel. For example, retiring to a couple of acres in a small mountain town will require a much different plan and savings goal than retiring to a condo in New York with a budget to travel the world.

For those reasons, it’s more accurate to base your target savings on your annual income. While your income will likely change over the years, this rough guideline can help ensure you maintain a similar lifestyle in retirement to what you enjoy now without additional income streams. These targets are based on a retirement age of 67. If you plan to change your lifestyle or retire at a different age, you’ll want to adjust accordingly.

To get a better estimate of how much you’ll need, personalized to your situation and savings, try our Retirement Savings Calculator.

The power of compounding interest

One of the biggest factors in your retirement savings growth, and why it’s so vital to get started early, is how compounding interest works. Imagine this: A snowball rolling down a hill gets bigger as it picks up more snow. Once it grows a bit, it can pick up even more snow and grows even faster. That’s how compounding interest works on your retirement savings balance. Saving a little now might not seem like much, but it can make a huge difference over the course of many years. If you save just $100 at age 25, it could be worth more than $1,500 by the time you retire.² Plus, the more you add, the more it works.

Spending in retirement

Another way you can adjust how much you need for retirement is to adapt your retirement spending. There are many rules of thumb for how to manage your spending, like the 4% rule for retirement. While this may mean spending less than you’re used to, it can help ensure your savings last throughout your retirement years.

Social Security in retirement

It’s likely that you’ve worked most of your life and have paid into the Social Security program. While you can rely on some help from your Social Security benefits in retirement, it shouldn’t be your only plan, as it’s unlikely to cover more than your most basic needs. You should start today with a comprehensive plan for Social Security.

How much should I have saved by age 30?

Now that we’ve covered some of the basics and average savings, let’s move on to what your goals should be, and how you can get there. By age 30, you should have roughly the same as your annual income in retirement accounts. For example, if you’re making $40,000 a year, you should have around $40,000 in total retirement savings. While you may still be paying student loans and living paycheck to paycheck, this is the most powerful time to save due to compounding interest.

Tips for saving in your 30s

Saving in your 30s can feel difficult but remember that you have the power of time on your side. Even a little bit here and there can make a big difference over the long term. It might make sense to prioritize an emergency fund if you don’t already have one. If your employer offers a 401(k), you should definitely be contributing to it. There are two main advantages: Money you put into a 401(k) is direct deposit and doesn’t count as taxable income, and your employer likely matches a portion of your contributions. This is basically free money, and you should take advantage of it.

How much should I have saved by age 40?

By age 40, you should have roughly three times your annual income in retirement accounts. For example, if you’re making $75,000 a year, you should have around $225,000 in total retirement savings. It’s important to balance your debt and household expenses with your long-term savings goals.

Tips for saving in your 40s

By your 40s you should be in your prime earning years and saving roughly 15% of your income for retirement. If you’re behind, you may want to increase that number to catch up. Your employer-sponsored 401(k) is a great place to start, but you may also want to explore additional options like a Roth IRA, brokerage account, or deferred annuity to diversify your income potential. 

How much should I have saved by age 50?

By age 50, you should have roughly six times your annual income in retirement accounts. For example, if you’re making $80,000 a year, you should have around $480,000 in total retirement savings. These pre-retirement years are when your savings should really start growing quickly with a high rate of return. As you get closer to retirement, consider reducing risk by transferring some of your investments to a high-yield savings account.

Tips for saving in your 50s

In your 50s, you have quite a few options to “catch up.” You can contribute more to various savings accounts like 401(k)s and IRAs after age 50. The contribution limits change from year to year, so check with your plan administrators and try to take advantage of these higher limits to boost your savings. You may also want to thinking about how to maximize your Social Security benefits, which include delaying them for a few years into retirement. An annuity can also provide a guaranteed income stream for years or even for life.

Savings by age FAQs

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¹“Survey of Consumer Finances (SCF) ,” U.S. Federal Reserve, October 2023

²Based on $100 saved with 7% annually compounding interest for 40 years.