Savings for Retirement Progressing? Amount You Ought to Achieve at Age 50 and 55
At the age of 55, financial planning for retirement becomes increasingly important. This critical juncture in life requires careful consideration of savings, debt management, and goal setting.
According to a recent survey, 20% of Americans aged 50 and above have no retirement savings at all. This retirement shortfall could force individuals to work longer, downsize, or drastically change their lifestyle.
For those earning an income of $100,000, delaying retirement can positively impact Social Security benefits. Delaying retirement by a year can lead to bigger Social Security benefits, with a potential 30% boost if delaying for six months, nine months, or a year.
However, high-interest debt should be paid off before retirement. This is a crucial step to ensure financial stability during retirement years.
Age 55 is also a significant milestone for retirement planning. It's important to start thinking about retirement in your early 50s and positioning yourself for retirement includes saving, paying down debt, and planning.
J.P. Morgan Asset Management suggests taking advantage of catch-up contributions, getting the employer match, and increasing savings rates for those with a low savings rate. For 50 to 55-year-olds with an income of $200,000, JPMorgan's figures suggest having $745,000 saved for retirement. For those earning $100,000, $565,000 is recommended.
Savings take years to build due to potential spending of 20 or more years without a paycheck. Saving 10-15% of gross income annually, especially starting before 50, is often encouraged. Those starting late (50+) need to save more aggressively and use catch-up contributions (e.g., $7,500 extra per year for 401(k) catch-up).
The average retirement savings for the 45-54 age group is about $313,000, and for 55-64 it jumps to roughly $538,000. Median amounts are lower, reflecting wide income disparity—around $115,000 for 45-54 and $185,000 for 55-64. Median figures may be more representative for typical savers.
Having 6-7 times your annual income saved by 50-55 is a common target for staying on track for retirement. People with less saved than this should increase savings as much as possible, ideally beyond 10% of income annually.
Long-term care needs should also be considered. Health care cost for a 65-year-old is estimated to be $165,000, not accounting for accidents or long-term care.
Retirement calculators can help determine how much you need to save. Retiring at 60 might require answering specific questions, such as Want To Retire at 60? See if You Can Answer These Five Questions.
In conclusion, retirement planning at 55 requires careful consideration of savings, debt management, and goal setting. Having 6-7 times your annual income saved by 50-55 is a common target, but many Americans are behind. Using catch-up contributions and controlling debt and expenses can improve retirement readiness. It's essential to start thinking about retirement in your early 50s and increase savings as much as possible if on track.
Sources: [1] Kiplinger (n.d.) How Much Money Do I Need to Retire? Retrieved from https://www.kiplinger.com/retirement/planning/602001/how-much-money-do-i-need-to-retire [2] Employee Benefit Research Institute (2020) 2020 Retirement Confidence Survey. Retrieved from https://www.ebri.org/docs/default-source/rcs/rcs-2020/2020-rcs-report.pdf [3] J.P. Morgan Asset Management (2021) How much do I need to retire? Retrieved from https://www.jpmorgan.com/personal/en/investments/retirement/how-much-do-i-need-to-retire. [4] AARP (2021) How much money do I need to retire? Retrieved from https://www.aarp.org/retirement/planning-and-social-security/info-2019/how-much-money-do-i-need-to-retire.html [5] Fidelity Investments (2021) How much money do I need to retire? Retrieved from https://www.fidelity.com/viewpoints/retirement/how-much-money-do-i-need-to-retire
Beginning personal-finance planning in one's early 50s is essential for retirement, with a goal to save 6-7 times one's annual income for financial stability. To improve retirement readiness, debt management and control over expenses should be addressed alongside savings. As the age of 55 approaches, using catch-up contributions and working towards saving beyond 10% of income annually can help individuals meet their personal-finance goals for retirement.
