Here’s How Much You Should Have Invested for Retirement at Age 50

Do you know how much money you’ll need to retire comfortably? Most people at least have a guess. Insurer and mutual fund company Northwestern Mutual reports that Americans, on average, believe $1.46 million is the magic number.

That figure sounds about right, too. If you apply the 4% rule for withdrawals from a retirement fund, such a nest egg would provide roughly $60,000 worth of income the first year it was tapped… a figure that would then grow with inflation in future years. Supplemented with the average monthly Social Security check of $1,767, most people could make that amount work.

Problem? The idea of saving up $1.46 million can be daunting.

The thing is, amassing such a sum is quite possible even with just an average income. The key is aiming at smaller milestone goals en route to the endzone, rather than fixating on the size of an admittedly intimidating goal. Doing so makes the matter far more manageable. And for most people, age-based milestones make the most sense.

With that as the backdrop, here’s a look at how much you should have saved up for retirement by the time you’re 50 years old. Spoiler alert: Although you’re nearer the end of your working years at age 50, you may not even need to have half of your target nest egg in place yet at this point.

The magic retirement savings number

A couple of footnotes are worth highlighting before getting to the numerical nitty-gritty.

First, although the average assumption is $1.46 million, that’s a figure made up of a wide range of numbers. You may need measurably more to maintain your current standard of living, or you might be able to do so with much less. The simple rule of thumb is that you’ll only need to replace about 80% of your last year’s work-based wages once you retire if you don’t want to downgrade your lifestyle. Everything is relative.

Second, the age at which you intend to retire can affect the amount you need once you do. If you’re planning to work until you’re 70 years old, you won’t need quite as much saved up when you’re 50. If you’d like to retire in your early 60s, you’ll need a little more than most others would.

To this end, the typical 50-year-old should have somewhere between 3.5 and 6 times their annual salary saved up for retirement. Those are the numbers from fund company T. Rowe Price, anyway, although they jibe with suggestions from Fidelity, as well as Bank of America’s brokerage arm Merrill Lynch.

If you need specific numbers, based on the Bureau of Labor Statistics’ reported average annual income of just under $60,000, you should have something on the order of $200,000 and $360,000 in your retirement fund once you’re 50 years old.

You’re nowhere close to that? Don’t sweat it. Most people aren’t. Mutual fund outfit Vanguard says the average account balance for workers between the ages of 45 and 54 participating in its 401(k) plans is only $142,000 — and that’s an average skewed higher by a small handful of high earners. The median (or midpoint) of all of these account balances is a markedly lower $48,000.

Still, your biggest retirement concern is you. If you’re not on track now, you could end up living a lesser retirement than you’re currently hoping for. The good news is, it’s not too late to close the gap.

What’s it going to take between now and then?

Just as a working figure, let’s stick with the assumption that you’re aiming for the aforementioned nest egg of $1.46 million. Let’s also assume you’ve at least saved a little something, even if it’s not enough. We’ll say you’ve amassed $100,000 for retirement, putting you in the ballpark with the majority of savers your age. What’s it going to take to get you all the way to your goal?

A great deal of the math depends on how much you’ll save in the meantime, how you’ll invest those savings, and how much longer you’re planning on working.

If you’re comfortable taking on maximum risk by remaining 100% exposed to the stock market, you’ll likely earn its average annual return of 10%. But you’ll need to tuck away $30,000 in an IRA every year for the next 15 years to reach the sum of $1.46 million. Never say never, but for most folks, that’s a lot of extra cash to come up with every year.

But what if you worked until you turned 70 years old? That helps — a lot, actually. You’d only need to find an extra $12,500 per year for the next 20 years to hit the $1.46 million mark. Even so, that’s still a lot for the typical household to come up with these days, and it’s not a great idea to be fully invested in the stock market as your retirement comes into sight anyway. You’ll want to start shifting toward a more conservative portfolio a few years before you stop working.

But what if you dialed back your retirement fund goal to $1 million? That’s no small sum either, although plenty of people have lived well on less. At that target, it would take $17,000 worth of additional annual savings added to your existing stash of $100,000 every year for the next 15 years. And again, you’d need to remain fully invested in stocks and hope the market is still strong at the time you retire. That’s still a big risk.

If you can work another 20 years, though, a more modest $6,000 worth of contributions every year between now and then would get you to the seven-figure mark. These are only back-of-the-envelope figures, of course, meant to paint a picture with broad brush strokes for the purposes of providing you with scope. You’ll want to fine-tune this math for your particular situation.

A small something is better than nothing — seriously

But you still know you’re going to fall short of even this lowered target? That’s OK. Although most people think they need on the order of $1.46 million to live in on retirement, the majority of them don’t actually get there. The most recent Survey of Consumer Finances performed by the Federal Reserve indicates that the average person between the ages of 65 and 74 only has around $600,000 in a retirement fund. They’re still doing all right, with their incomes from their retirement fund still being reasonably well supplemented by Social Security.

Whatever the case, your goal is — or at least should be — doing as much saving as you can for as long as you can, and making the most of the savings you’re able to scrape together. Whether its $1.46 million or only $1 million or even just half a million bucks, all of it helps. The hardest part is simply starting, or doing something more than you already are. Once you do that, you often build momentum that helps you accelerate the growth of your retirement savings.