How Much Money Should You Have Saved by Age 60?
8 Min Read | Last updated: August 9, 2024
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Most workers worry they won’t have enough money saved up to retire comfortably. Estimating how much you’d need by age 60 can help boost your confidence.
At-A-Glance
- Less than 30% of workers are very confident they will have enough money to retire.
- Determining a solid estimate of the income you’d need for a comfortable retirement is the first step in building up your confidence.
- A quick shortcut: Financial pros suggest aiming to have eight times your salary saved up by age 60.
Being able to retire with the money you need to live the life you want should not be an iffy proposition. Yet, according to an annual survey by the nonpartisan Employee Benefits Research Institute, less than 21% of today’s workers are very confident they will have enough money to live comfortably in retirement.1
You deserve better. Boosting your retirement confidence may be able to start today. Taking the time to work through how much money you might need to live comfortably in retirement might just serve as motivation to tweak your saving and spending strategy if you discover you’re not yet on track to have the money you need.
Here’s how to think through how much money you might need to retire.
By Age 60, Aim to Have 8x Your Salary Saved Up for Retirement
It can make sense to center your financial planning around what you’d need to retire at age 60 or so. Research shows that while workers anticipate wanting to keep working until age 65, the median retirement age is, in fact, 62.2
A shortcut answer to how much you’ll need to save by age 60 is to calculate roughly eight times your estimated salary at that age, according to Fidelity Investments. That target is based on assumptions about spending levels, life expectancy probabilities, Social Security benefits, and the expected return on your retirement investments.3
Like all useful rules of thumb, that’s just a general guideline. Your personal situation may change the math.
Assume Your Spending Won’t Initially Fall Much in Retirement
How much money you need for retirement is, of course, dependent on how much income you expect to need and want. A rule of thumb is the 70% rule — to estimate your spending during retirement, calculate 70% of your current net income. But, of course, this varies per person depending on your specific circumstances.4
Research shows that annual spending decreases for both singles and couples after age 65 — at about 1.7 percent and 2.4 percent, respectively.5 That said, the older you get, the more you may spend on healthcare.6
Calculate How Much Social Security Might Cover
Once you have a sense of how much monthly income you might need, your next step is a visit to the Social Security website to get a personalized report on the future retirement benefit you should be entitled to collect. This calculation can be a bit tricky, as your potential benefit is based on when you decide to start collecting the retirement payout.
You are eligible to start collecting your Social Security retirement benefit as early as age 62, but when you make a claim that early, your benefits will be permanently reduced. Each month you delay your start date between age 62 and 70 will entitle you to a larger benefit.7
Based on your actual earnings record, the Social Security Estimator will highlight your estimated monthly benefit at three junctures:
- Age 62. This is the earliest age at which you can claim benefits. However, the amount of benefits provided when starting at this age will be permanently reduced.
- Your full retirement age (FRA). Depending on your birth year, your FRA is somewhere between 66 and 67. This is the age when you are entitled to 100% of your benefit.8
- Age 70. This is the age when credits for delaying your start date top out. If your FRA is age 67 and you wait until age 70 to start receiving your benefit, it will be 124% of what you would be entitled to at age 67. But take note: When you reach 70, your monthly benefit will stop increasing, even if you continue to delay taking benefits.9
If you are in good health when you retire — suggesting that you may have a long retirement — it could be worthwhile to delay your start date. Waiting until age 70 to start receiving your retirement benefit will entitle you to a monthly payout that will be about 75% higher than the reduced benefit you qualify for if you start collecting at age 62 in 2023.10
If you will also receive a pension through an employer, you should exercise the same steps to get a solid sense of how much income you will receive from that retirement source. Also add in any other potential income sources, such as rental income.
If your combined income estimates cover your expected spending needs, congratulations, you’re all set. But you may need to rely on retirement savings in 401(k)s and Individual Retirement Accounts (IRAs) for additional income.
Estimate a Safe Annual Withdrawal Sum from Retirement Accounts
After decades of saving for retirement, you may want to switch gears and figure out how much money you can safely withdraw from your 401(k)s and IRAs each year in retirement without running the risk that your money will run out. Again, you’ll need to factor in how long you might live, the impact of inflation on your future essential spending needs, and what sort of return you can expect from your portfolio of stocks and bonds.
The company that handles your 401(k) and IRA accounts likely has a free online calculator to help you gin up an estimate. Or consider the 4% retirement spending rule of thumb. The idea is that if you start by withdrawing no more than 4% of your investment portfolio within the first year of retirement, and you adjust that amount annually for inflation, you may not run out of money over a 30-year retirement.11
For example, if you have a $500,000 investment portfolio, your initial annual withdrawal would be $20,000, or about $1,667 a month, with a 4% initial withdrawal rate. But remember: You will be taxed on those withdrawals if the money comes from traditional 401(k)s or IRAs. Roth 401(k) and IRA deposits are made with money that has already been taxed, so there is no tax on withdrawals.
Take Steps Today to Close Any Income Gaps
If the result of this retirement income planning exercise is that you discover you aren’t on track to save the money you need, use that as motivational fuel to make some financial adjustments now that might give you more security later.
Saving more in your 401(k) or IRA accounts is a great way to start. If that doesn’t seem possible, consider taking a clear-eyed spin through your budget to look for ways to save more and spend less. Every dollar you don’t spend today becomes another dollar you can reallocate toward retirement savings. For more, read “7 Budgeting Tips to Help You Save Money.”
Moreover, when you reduce your spending today, it has the secondary effect of reducing the amount of money you may need to support your lifestyle in retirement. That’s bound to boost your retirement confidence.
The Takeaway
Knowing how much you need to have saved by age 60 to retire comfortably takes careful planning. A good starting point is to plan to save eight times your salary. To get more detailed, start by estimating what you want to spend in retirement. Then get solid estimates of how much monthly income you can expect from Social Security and your retirement savings. If you find you’re coming up short, you can take steps to reduce your spending today to have more money you can save for tomorrow.
1 “2024 Retirement Confidence Survey (RCS),” Employee Benefit Research Institute
2 “Expectations about Retirement,” Employee Benefit Research Institute
3 “How Much to Save for Retirement by Age,” Experian
4 “What is the 70% Rule for Retirement Savings?,” Experian
6 “How heavy is the medical expense burden among the older adults and what are the contributing factors? A literature review and problem-based analysis,” Frontiers in Public Health
7 “Benefits Planner: Retirement | Retirement Age and Benefit Reduction,” SSA
8 “Benefits Planner: Retirement | Retirement Age Calculator,” SSA
9 “Delayed Retirement | Born in 1960,” SSA
10 “When to Start Receiving Retirement Benefits 2021,” SSA
11 “7 Ways to Save More for Retirement,” Experian
Carla Fried is a freelance journalist who has spent her entire career specializing in personal finance. Her work has appeared in The New York Times, Money, CNBC.com, and Consumer Reports, among many other media outlets.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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