Most people know they should be saving money for retirement. But knowing that you need money to fund retirement and understanding how much to save for retirement by different ages are two very different things.

Bring order to your retirement planning strategy and see how buying an annuity could provide additional financial comfort with this look at the economic aspects of the work-retirement transition.

How Much Should You Save for Retirement?

Saving for retirement can be tricky, but referring to expert-recommended benchmarks can help you construct a financial blueprint that gets you closer to your goals.

Financial experts suggest multiplying your annual salary by a specific number, according to age, to determine a personal savings guideline. But these recommendations don’t exist in a vacuum. Your personal savings strategy should also consider other key factors, such as:

• Your planned retirement age.
• Your preferred lifestyle (both before and during retirement).
• When you started saving.

For example, individuals who plan to live with their children in a multi-generational household during retirement may not need as much money in savings due to reduced housing costs. Those who begin saving in their 30s or 40s instead of their 20s may need to increase their multiplier to make up ground. And if you plan on spending your retirement traveling, you may need to build a larger nest egg to accommodate those plans.

Note: The numbers below are only guidelines and may not apply to every individual or situation. Savings recommendations assume a 15% annual savings rate, a retirement age of 67, full Social Security benefits, and that at least 50% of pre-retirement savings will be invested in stocks. Always consult a licensed financial advisor for personal financial recommendations.

How Much To Save for Retirement by Age

Here’s a more detailed look at the retirement savings milestones you should ideally reach in each decade of life.

• By age 30, you should have saved at least 1x your income. To reach that target, you’ll need to establish strong savings habits in your 20s. Experimenting with tried-and-true tactics like the 50/30/20 savings model can help you balance current and future financial obligations.
• By age 40, you should have saved at least 3x your income. Continuing the savings habits established in your 20s can help you stay on pace during your 30s. Get to know your employer-sponsored savings options, such as a 401(k). Ask your financial advisor about an IRA if you want to double down on savings or if you don’t have access to a 401(k).
• By age 50, you should have saved at least 6x your income. To do so, you’ll have to deftly navigate your 40s, a time that’s often marked by increased financial obligations. Continue saving, but also pay down debt to free up additional funds that would otherwise be lost to interest.
• By age 60, you should have saved at least 8x your income. Make note of the IRS provision that allows catch-up contributions to your 401(k), 403(b), SARSEP, and governmental 457(b) plans after the age of 50.
• By age 67, you should ideally have 10x your salary saved up. This benchmark is specifically highlighted because Americans born in 1960 or later can receive full Social Security benefits when they turn 67.

How Much Money Do Americans Have in Savings?

Looking at recommended savings for retirement by age is important, but context is equally integral to a comprehensive understanding. The Federal Reserve Survey of Consumer Finances (SCF) from 2022 lists average and median retirement savings by age range.

Retirement Savings Options

A resilient retirement income strategy requires both short- and long-term savings vehicles plus a diverse portfolio that includes multiple approaches to building financial independence.

Savings Account

Traditional savings accounts aren’t necessarily the best way to grow your money. But they do offer flexibility and modest growth—more if you utilize a high-yield savings account with a 4% or greater interest rate. These accounts can come in handy if you want to keep some cash available for emergencies while locking up other funds in a longer-term account or product, like a 401(k) or an annuity.

401(k)

Get to know the basics of 401(k) plans early in your savings journey, even if you don’t yet have access to one. These plans are often employee-sponsored, with some companies choosing to match employee contributions for faster accumulation. There are also 401(k) options for self-employed individuals, also known as solo 401(k)s.

The IRS sets annual contribution limits for 401(k)s. In 2024, contributions are capped at $23,000 per person.

IRA

An individual retirement account (IRA) is another tax-deferred savings opportunity you can leverage as you plan for retirement. IRAs are not employer-sponsored, so you can open one if you are self-employed or as a secondary savings vehicle on top of your employer-sponsored 401(k).

Traditional IRA contributions are tax deductible, and earnings on those contributions are only taxed when you start making withdrawals from the account. Roth IRAs work differently, with contributions that are not tax deductible and some distributions earmarked as tax-free.

Note: Any reference to taxation in this material is based on Annuity.com’s understanding of current tax laws. We do not provide tax or legal advice. Please consult a qualified tax professional regarding your personal situation.

Annuities

Annuities are not an investment but an insurance savings product. You purchase an annuity in exchange for periodic distributions later, essentially guaranteeing retirement income. The amount of income you’ll receive in retirement depends on several factors, including:

• The size of your principal (how much you pay into the account).
• Interest rates/potential growth during any applicable accumulation period.
• The age you start taking distributions.
• Your life expectancy.

Annuities can technically be purchased at any age, but most insurance companies require consumers to be over the age of 18.

Note: All guarantees are subject to the claims-paying ability of the insurer.

Tips for Saving for Retirement

In addition to understanding average retirement savings by age and setting your savings goals accordingly, there are some ways you can better strategize for your financial health in retirement.

• Start saving early: The earlier you start saving for retirement, the more time your money has to grow. Starting in your 20s versus your 40s or 50s also means you’ll need to save a smaller percentage of your overall pay to reach the same financial threshold.
• Invest in tax-advantaged plans/products: Make the most of your savings by leveraging products that help reduce your tax burden and maximize your retirement income.
• Avoid common retirement planning mistakes: From overreliance on Social Security to failing to max out your 401(k), there are lots of ways you can misstep while planning for retirement. Do your research and consult a financial expert for sound advice based on your needs.
• Explore annuity laddering: You can stack or stagger multiple annuity contracts to provide income that stretches across multiple stages of retirement. Ideally, your contracts will create consistent and predictable income, flexibility, and more opportunities for diversification.
• Customize your savings plan: No savings product is one-size-fits-all, so it makes sense to customize whenever possible. For annuities, this could mean adding on an annuity rider that adjusts distributions to account for the increased cost of living or helps pay for long-term care.

Note: Riders may be subject to eligibility and underwriting requirements, additional premium requirements and/or minimum or maximum coverage amounts. Availability and rider provisions may vary by state.

Putting Together Your Personalized Retirement Plan

Just 36% of adults who regularly save for retirement think they’ll have enough funds to be financially secure once they stop working. While employment concerns and unexpected expenses can negatively influence retirement savings, a lack of understanding of savings milestones can be just as impactful. Getting to know recommended retirement savings by age and how that relates to your income needs later in life is a vital part of making deliberate financial moves that will pay off when it matters most.

Diversification can help you save the right amount of money on the right terms at the right time. To see how annuities can fit into your multifaceted retirement strategy, speak to one of Annuity.com’s licensed agents today.