Age 60 is close to retirement age, but not quite there yet. Find out how much you should have invested for retirement by this point in your journey.
Not being prepared for retirement is a top financial worry for many Americans, and it is also an understandable source of concern. While Social Security helps seniors support themselves during retirement, it only replaces about 40% of pre-retirement income. That amount is not enough to maintain your standard of living as a senior.
Unfortunately, preparing for retirement by saving and investing isn’t something that you can do in a few years.
Given the huge amount of money you’ll need to support yourself for decades of life with no paycheck, you’re going to have to work toward saving throughout your career. And once you reach your 60s and start moving very close to retirement, you’ll need to make sure you are in a good financial position.
So, what is a good spot to be in when it comes to your retirement plans? How much are you really going to need to have saved at 60 to be ready to leave work soon and support yourself for life? Here’s what you need to know.
Image source: Getty Images.
This is how much you’ll need saved at 60
There is a simple answer and a complicated answer to the question of how much money you are going to need saved at 60.
The simple answer is that you typically should have eight times your salary invested in your 401(k) and other retirement plans. This could mean you have money invested in an IRA, Roth IRA, 401(k), HSA, and a variety of other financial accounts earmarked for your later years.
This number comes from Fidelity, and it is designed to ensure that you’re on track to retire at 67 with 10 times your salary saved. The age of 67 is full retirement age for Social Security, which is the age when you collect your standard benefit unreduced by early filing penalties and not increased by delayed retirement credits. It’s a reasonable age to assume you’ll retire.
If you have eight times your salary saved at 60 and you retire at your FRA, your money can grow for another seven years, and you can keep contributing until your chosen retirement date. Since most experts do recommend having around 10 times your final salary saved, the fact that you’ll be on track to hit that target is a good thing.
However, there is also a complicated answer to the question of how much you’ll need saved at 60. That’s because the recommendation to save eight times your final salary is a generic one meant to apply to everyone — and your situation is unique to you.
How to decide on your personal retirement savings goal
While you could follow the generic rules of thumb mentioned above, the best way to know how much you need saved for retirement at 60 is to run the numbers.
That’s because your retirement savings target will look different at 60, depending on whether you want to retire in two years at 62, want to retire at 67 as Fidelity projects, or want to retire eight years away at age 70.
With so much variation in retirement planning, setting a personalized target for your retirement accounts just makes good sense.
To do this, work backwards from where you want to end up. Start by deciding what age you want to retire and what you want your nest egg to be at that time. Then, use online calculators at Investor.gov to see how much you’ll need to save between now and your chosen retirement date. Once you know that number, you can make sure you are on track toward achieving it.
Of course, it is always better to have more saved rather than less. If you decide you need $1 million saved by 67 and you already have $900,000 at 60, you’re in great shape and you don’t need to contribute much more — but you may want to increase your savings goal anyway as part of your retirement planning so you can retire sooner or enjoy your life more as a retiree.
By taking the time to figure out your personal plan for a secure future, you can create the life that works for you.