From MarketWatch Picks: Here's what the average retirement savings looks like at every age. Are you on track?
Americans’ 401s and IRAs are looking a little better this year, but they’re still far from where they should be, pros say. Indeed, in the first quarter of 2023, IRA balances were up up 5% from the prior quarter, while 401 balances were up 4%, according to Fidelity Investments’ Retirement Savings Assessment released in May 2023, which looked at balances for more than 44.5 million IRA, 401 and 403 retirement accounts.
And while the Fidelity report did not include median retirement balances, those may be less: A 2022 Vanguard report found that while average balances for retirement were $141,542, median balances where only about $35,345. You can also compare Federal Reserve data on median and mean retirement balances from 2019 here.
Up your savings each year. “Once saving is a habit, make a goal to increase a little bit each year. If you start out saving 5% of your paycheck, aim for 6% next year,” says Thomas. The annual IRA contribution limit for 2023 is $6,500, but for those 50 and older, the limit is $7,500. When it comes to a 401, the contribution limit is $22,500, or $30,000 for anyone 50 and older.
Look to the future for inspiration. If saving for retirement has fallen by the wayside, run a projection to see how your current savings compares to your future retirement goals. “Write down all your income and expenses and include retirement savings as a line item,” says certified financial planner Andrea Clark at The Table Financial Planning. Will your current savings meet your future goals?Make goals. Thomas says a good goal is to save about 15% of your income for retirement.
“What are your carry costs when you retire and how much spending will you need to do? Take that monthly figure and add about 10%, then multiply it by 12. Take that sum and divide by 4% which will give you a quick back of the napkin calculation,” says Halpern. This means that if your monthly expenses are $8,000 per month, your yearly expenses are $96,000. Adding 10% to that brings you to $105,600, and divided by 4%, you’ll see that you need to save $2.
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