Comparing your financial position with generalized benchmarks can prove challenging, particularly when contemplating retirement savings in the United States. The absence of pensions and a lack of adequate social safety nets mean that individuals must take it upon themselves to create a nest egg for their retirement years. Though numerous benchmarks exist to guide you on this journey, they are by no means conclusive assessments. Life is complex, with various financial priorities, and each person's requirements in retirement are different.
T. Rowe Price offers a flexible, age-based retirement savings benchmark, aimed to provide most people a good chance of covering their expenses throughout retirement. Their suggestions are based on a series of assumptions, such as commencing retirement savings when young and placing them in tax-deferred accounts. According to their recommendations, at age 35, an individual with a $50,000 income should ideally have $50,000 to $75,000 saved for retirement. By age 55, with a household income of $100,000, retirement savings should range between $450,000 and $800,000.
In reality, many Americans' savings often fall below the suggested targets. The Employee Benefit Research Institute's retirement confidence survey revealed that only 36% of respondents reported having $250,000 or more in savings. However, this is not cause for despair. Factors such as jointly considering income and savings with your spouse, or leveraging home equity through downsizing or relocating, can significantly contribute to your retirement security.
Hitting recommended savings targets may also result in leaving behind a substantial sum after passing away, which may not be a priority for everyone. Some individuals may choose to work past age 65, allowing their savings more time to grow. Benchmarks provide a goal to strive for, and T. Rowe Price offers a table to help assess how much more could be saved annually, based on your current savings.
As you approach retirement, generalized benchmarks become less useful, as personal circumstances and lifestyle choices heavily influence savings requirements. Ann Minnium, a certified financial planner from New Jersey, emphasizes the importance of spending habits on retirement savings and recommends saving 15% to 18% of your salary annually, starting with your first job. If this is unattainable, consider saving enough to qualify for your employer's full matching contribution in your workplace plan.
