Many people retire sometime in their mid or later 60s. This means if you are currently in your 50s, you're getting to the point where you should have a good amount of money in your brokerage account so you can support yourself once you stop earning a regular paycheck.
But, how much exactly should you be saving each month at 50? Here's what you need to know.
This is how much you should have saved by 50
To determine how much you should be saving each month, you'll need to know if you're on track to accomplishing your retirement goals or if you're at risk of ending up with an empty checking account in your later years.
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By the time you are 50 years old, you should have about six times your annual salary saved for your retirement. This is a good goal if you're planning to leave the workforce at age 67. That's the age at which anyone born in 1960 or later will hit their full retirement age for Social Security and be able to claim their standard benefit without early filing penalties applying.
This means if your salary is around the annual median wage of $61,900, you'd need a nest egg of about $371,400 by the time you're 50. You'll still want to keep saving, though, as the ultimate goal will be to end up with about 10 times your final salary by the time you leave the workforce for good.
This is how much you should save each month at age 50
The only way to determine how much you need to save each month at age 50 is to take into account the amount of money you currently have invested, the point at which you plan to leave the workforce, and your likely return on your investments. That's because all of these individual factors affect your savings rate.
For example:
- If you have $100,000 saved (the median amount of retirement savings for Americans between the ages of 45 and 50), you plan to retire in 15 years, and hope to have around $600,000 (about 10 times the median salary of people ages 55 to 64), and you expect 10% average annual returns before inflation (which is what the S&P 500 has historically produced), you'd need to invest about $478.07 per month.
- If you have $350,000 saved, you plan to retire in 15 years, and you hope to have $1 million saved, you don't actually need to contribute anything more as compound interest would allow your investment to grow to $1.4 million. Of course, you'd still want to keep saving if you can, because it's better to have too much money as a retiree than too little.
- If you have $0 saved, you plan to retire in 15 years, and you hope to have $600,000, you'd need to save about $1,573.68 per month.
Obviously, there's a big difference between these situations. And that's why it doesn't always make sense to follow blanket rules of thumb (like when experts advise you to save 10% or 15% of your income). Your goal needs to be personalized to you based on where you're starting from and where you hope to end up.
Calculate your own savings and investment goal
To figure out how much you specifically need to invest, estimate your future salary by assuming you'll get a 2% raise annually from now through retirement. Assume you'll need 10 times that amount to retire comfortably.
Then, use the calculator at Investor.gov to input your current savings amount, your desired nest egg balance, and your projected returns to get an estimate of the necessary monthly contributions. This will give you a personalized answer to how much you should be saving every month by age 50.
Once you know your number, try to arrange to have that amount contributed automatically to a tax-advantaged retirement plan, so you can enjoy your later years with the funds you need to live it up.
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