How Much Should I Have Saved By Age 45?

Reaching your mid-40s often brings a heightened awareness of retirement planning and financial security. As you approach this significant milestone, you might find yourself wondering: How much should I have saved by age 45? While there’s no one-size-fits-all answer, financial experts typically suggest having about four times your annual salary tucked away by this age. This benchmark serves as a helpful guideline, though your specific circumstances — including your lifestyle, career trajectory and retirement goals — will ultimately determine your ideal savings target.

A financial advisor can help evaluate how well you’re doing in preparing for retirement and can even put together a plan.

How Much to Save By Age 45 According to Benchmarks

One way to look at retirement savings by age is to examine how much people are actually putting away. Vanguard’s “How America Saves 2023” report revealed that 45- to 54-year-old employees had average balances of $142,069 in the 401(k) plans that the company oversees. This only captures those holding or contributing to 401(k) plans, however, and doesn’t indicate whether these account balances are likely to be adequate to fund a comfortable retirement.

T. Rowe Price addressed retirement adequacy in a recent study that suggested a typical person should have 2.5 to 4 times their salary saved by age 45. The assumptions used in this analysis were typical of conventional financial planning benchmarks, including:

• Retiring at age 65
• Saving in a tax-deferred retirement plan
• Generating 7% average annual investment returns
• Including estimated Social Security benefits
• Aiming for a retirement income from all sources equal to 75% of pre-retirement income

T. Rowe Price didn’t break down incomes by age, but assumed individuals of all ages had household income between $75,000 and $300,000, and that couples had between $100,000 and $400,000. For a 45-year-old individual bringing in $187,500, at the midpoint between the top and bottom earners, using T. Rowe Price’s benchmark, they should have saved between 2.5 and 4 times their salary, or between $468,750 and $750,000. A married couple earning a combined $250,000 should have saved between $625,000 and $1 million.

How Much to Save By Age 45 – Salary Considerations

A typical retirement saver probably earns less than T. Rowe Price assumed. The Bureau of Labor Statistics reported that first-quarter 2024 median wages and salaries for people aged 45 to 54 total $67,756. This suggests, using the T. Rowe Price guideline of 2.5 times to 4 times earnings, a 45-year-old should have saved between $169,390 and $271,024.

Now let’s consider a 45-year-old who earns $135,512, or twice the BLS-reported median for that age. In that case, the indicated savings amount is between $338,780 and $542,048.

Next, look at a lower-earning worker with a salary of $33,878, half the BLS median for a 45-year-old. This worker would need to have saved between $84,695 and $135,512 by that age.

Factors Impacting Retirement Savings

Many factors will affect whether a given individual has saved enough by age 45. Some of these are known, such as their current income, and others are predictable, such as the age at which they plan to retire. However, many elements are not easy to forecast. These include future investment returns, inflation and taxes. Major variations from the assumptions for hard-to-predict factors can change the outlook considerably.

One key assumption is how much income a retiree needs. This is where creating a retirement budget can be helpful. Many planners use 75% of pre-retirement income as a standard. However, this simple rule of thumb may not suit everyone. Higher earners, for instance, are likely to need lower percentages of pre-retirement income to cover their retirement expenses than low earners.

One careful study by a Morningstar researcher of retirees’ likely income needs was done in 2014, and found that income replacement rates ranging from 54% to 87% were likely enough for most retirees. It suggested that commonly used standards of 70% to 80% of pre-retirement income exceeded a typical retiree’s needs.

BlackRock and the Employee Benefit Retirement Institute reported in 2023 on a survey of more than 1,500 retirees across a wide range of income levels, asking about their retirement finances. It found that after 20 years of not working, most retirees still had 80% of their nest eggs, and a third had more than when they left the workforce. This highlights the difficulty of determining how much to save and the value of taking an individualized approach to financial planning. It’s also why some people choose to work with a retirement advisor.

How to Save More for Retirement

Time is your greatest ally when saving for retirement. The sooner you begin setting money aside, the more opportunity your investments have to grow through compounding. Even small contributions made consistently in your 20s and 30s can outperform larger amounts invested later in life. Consider automating your retirement contributions so they happen before you have a chance to spend that money elsewhere.

Each time you receive a raise or bonus, consider directing at least a portion of it toward retirement before lifestyle inflation sets in. Increasing your contribution rate by just 1% annually can make a substantial difference over time without feeling like a major sacrifice. This gradual approach helps build your retirement savings while maintaining your current standard of living.

Don’t rely solely on employer-sponsored plans. Consider opening an IRA to complement your 401(k) or similar workplace plan. This diversification provides tax advantages and more investment options. Roth accounts, which offer tax-free withdrawals in retirement, can be particularly valuable if you expect to be in a higher tax bracket later in life.

Bottom Line

By age 45, financial experts typically recommend having saved 3-6 times your annual salary for retirement. However, determining how much you should have saved by age 45 depends on your unique circumstances and goals. While this benchmark provides a starting point, factors like your desired retirement lifestyle, expected longevity, healthcare needs and existing debt all influence your optimal savings target.

Retirement Saving Tips

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