There isn’t a one-size-fits-all answer.
The closer we get to a major milestone, the more we think about it. In many cases, we begin especially questioning whether we’re prepared to reach that milestone.
For most Americans, retirement is one of those major milestones. According to the Employee Benefit Research Institute, the median retirement age in the U.S. is 62. Many individuals will want to ensure they’ve made significant progress toward being financially ready for retirement a few years before they turn 62. How much should you have invested for retirement at age 60?
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The best answer
The best answer to this question? It depends. If anyone tells you there’s a specific amount that all Americans need to have saved at age 60 to retire comfortably, they’re misleading you. The reality is that the right amount to save for retirement depends on multiple factors.
An especially important factor is when you plan to retire. Although the median retirement age is 62, many people retire earlier and later than that age. The sooner you want to retire, the more money you’ll need to save by age 60.
Another key consideration is your sources of income outside of your retirement savings. For example, if you can count on a pension from an employer, you won’t need as much saved for retirement as someone who doesn’t have a pension.
How much you expect to spend in retirement is critical, too. A retiree who has a paid-off home probably won’t need as much in savings as someone who doesn’t. A person who lives in an area with a relatively low cost of living can stretch his or her retirement savings further than someone who lives in a high-cost area.
What financial planners say
While the amount you need to save for retirement at age 60 will vary based on these and other factors, some rules of thumb could be helpful. However, there’s no consensus on the exact rule of thumb to use.
Bank of America Retirement & Personal Wealth Solutions thinks Americans between the ages of 56 and 60 should have 6.9 times their current salary saved for retirement. This multiple increases to 8.5 for individuals between 61 and 64.
Fidelity Investments also bases its savings-to-salary ratio on age. The firm recommends that individuals age 60 have 8 times their pre-retirement income saved. Fidelity’s multiple is 7 times at age 55 and 10 times at age 67.
T. Rowe Price‘s financial planners are more aggressive. They think you should have 9 times your salary saved for retirement by age 60. Their ratio increases to 11 times by age 65.
How to get to your magic number
Even more important than how much you need to save for retirement by age 60 is how to get to your magic number. There are several things that pretty much everyone should do.
First, if you have a 401(k) company match, take advantage of it. Contribute at least enough to your 401(k) plan to maximize the amount your employer will also contribute.
Second, save your money in tax-advantaged retirement accounts. Some will prefer traditional individual retirement accounts (IRAs) and 401(k) plans, while others will like Roth IRAs and Roth 401(k) plans. You’ll benefit from tax advantages in different ways, but they’re all helpful in saving for retirement.
Third, invest with how long you have until retirement in mind. The longer you have, the more aggressive you can be. For example, a 40-year-old can be more confident about investing in growth stocks than a 60-year-old who seeks income from retirement savings.
Whatever age you plan to retire, though, it’s not too soon to begin planning for retirement. Major milestones come more quickly than you might think.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Keith Speights has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America. The Motley Fool recommends T. Rowe Price Group. The Motley Fool has a disclosure policy.