Turning 50 is a major financial milestone, for both personal and financial reasons. Financially, clients often see it as turning a corner where they see retirement on the horizon.
You want to know: “How much should I actually have saved by now?”
If you are searching for this online late at night, you are not alone. It’s common to have this question right around your age!
The answer is definitely “one size fits none,” but there are practical benchmarks and realistic ways to assess where you stand.
Rule of Thumb
Common guidelines suggest you should have 5–7 times your annual salary saved by age 50. So if you make a nice round $150,000, either as a couple or an individual, that’s $750,000 to just over $1 million.
Do not stop reading if you aren’t close to that amount!
Most people are below the ideal range.
Your personal situation, such as your income, debt, spending habits, and unique challenges determine everything.
So take the “should haves” and “averages” and toss them out the window.
If you’re in your 50s, hopefully you have decreasing debt and increasing savings. From where you are right now, I want your trajectory to be toward success.
Keep reading for an example of a common scenario.
Taking action: The example of Tiffany and Stewart
Here is a hypoethical example you might be able to identify with.
Tiffany and Stewart just turned 50 and are balancing many of the financial pressures typical for this stage of life. They have two children—one currently in college and another finishing high school. They’re still helping with tuition and living costs.
The couple also carries a mortgage balance of about $180,000 and around $15,000 in car loans, though they’ve avoided high-interest credit card debt. They have $25,000 in an emergency fund.
With $300,000 saved for retirement and a combined income of $150,000, they’re a bit behind the common guideline of having 5–7 times their salary saved, though they’re in a much stronger position than many.
Let’s assume they plan to retire at 67 and want about $90,000 per year in retirement income. With roughly $40,000 coming from Social Security, they’ll need their savings to generate about $50,000 annually. This requires a target of around $1.25 million dedicated to retirement.
If they simply let their current $300,000 grow at an average annual return of 7%, it could reach roughly $950,000 by retirement. That gets them pretty close to their goal.
The real opportunity comes as their financial obligations begin to ease. Once their children are financially independent, they can redirect those funds into retirement savings. Ideally, Tiffany and Stewart could direct $30,000 to retirement savings, which is 20 percent of their income.
I realize that $30,000 a year is a big number. And saving 20 percent of your income is a “big ask.” However, it’s not much more than the oft-cited 15 percent that most planners recommend. And let’s remember that Tiffany and Stewart are “behind” in funding the lifestyle they want.
Naturally, the couple improves their likelihood of a strong financial position in retirement by saving more. Other levers they can pull include paying off their home and any other debts before retirement to lower living expenses, or even delaying retirement by a year or two to boost both savings and Social Security income.
What can you do to help improve your financial outcomes?
Previously, I’ve written that there’s probably at least “one big thing” you can do to improve your retirement readiness. In this example, a couple with a decent income is only 50 years old, and they’re a bit behind on savings. They’re best off investing more, though boosting their emergency savings wouldn’t be a bad idea, either.
Your best move will depend on your age, income, debts, and other circumstances.
It’s our job to help you figure out how you can move from “behind” to “on track.”
Please book a free introductory call if you'd like to talk to a CERTIFIED FINANCIAL PLANNERTM about your unique situation!