Do you know if you’re on track for your retirement savings? Even if you don’t know exactly how much money you’ll need in retirement, you’re likely not saving as much as you should. Whether that’s because your money is tied up in other financial obligations or because you’re just unaware of how much you should be saving, now’s the time to get informed on how much you should have saved for retirement.
Of course, there are many things to consider when it comes to retirement savings, but age is one of the leading factors. How much you have saved at certain milestones in your life will determine when you can retire and how comfortably you can retire. Let’s take a look at how much the average American has in retirement savings by age:
Median Retirement Savings By Age
According to a study conducted by Transamerica Center for Retirement Studies, median retirement savings for people in America by age are as follows:
- 20’s – $16,000
- 30’s – $45,000
- 40’s – $63,000
- 50’s – $117,000
- 60’s – $172,000
It’s important to know that these numbers represent total household savings. So, the numbers for individuals could be even lower.
Given these numbers, it’s safe to say that Americans have a retirement savings problem. Experts recommend having at least $1,000,000 saved for retirement by the age of 60. However, Americans, on average, come up more than two-thirds short.
In your twenties, you likely have student loans that you’re paying off. So saving for retirement may not be a priority since it’s so far away and debt is more immediate. That could explain the first low number.
Part of the problem with the next sets of savings by age is that Americans have missed out on the benefits of compound interest since they were not saving as much in their twenties. Compound interest works when your financial returns grow each year based not only on your initial investment but on the gains that investment has realized over the years as well.
In short, the earlier you start saving for retirement, the more compound interest your money will experience. The later you wait, the more you have to save to reach the same savings goal.