Retirement Savings: Are You on Track?

Retirement is approaching for many Americans in their 50s, but the reality is that most of them may not have saved enough to comfortably retire. According to Fidelity, by the time you turn 50, it’s recommended to have around six times your salary saved for retirement. For instance, if you earn $100,000 per year, ideally you should have around $600,000 in your retirement savings account.

However, data from Fidelity Investments Q2 2023 Retirement Analysis reveals that on average, Americans between the ages of 50 and 59 have around $189,800 in their 401(k)s. However, the median 401(k) balance for this age group is $57,000, indicating that half of the balances are lower than this amount.

Getting Your Retirement Savings Back on Track

There are various factors that may have hindered someone in their 50s from saving for retirement over the years. These factors include expenses related to college tuition for their children, excessive mortgage debt, or the responsibility of caring for parents who also did not save enough for retirement.

Inflation has also played a significant role in affecting people’s ability to save for retirement, regardless of their age. The 2023 TIAA Institute-GFLEC Personal Finance Index indicates that about 25% of employed adults decreased their retirement contributions in 2022 due to the impact of inflation on their finances, with almost 12% stopping saving completely.

However, it’s not too late to improve your retirement savings. While factors like inflation and market volatility can affect your account balance, you can focus on something you can control: your retirement savings rate. Fidelity suggests aiming for a savings rate of around 15%, including any employer match. On average, people in their 50s have a savings rate of about 15.7%.

The annual 401(k) contribution limit for 2023 is $22,500. If you’re over 50, you can make additional catch-up contributions of up to $7,500 annually, increasing your 401(k) contribution limit to $30,000 per year.

If you’re already maximizing your 401(k) contributions and your income falls below a certain limit, you can explore alternative ways to save for retirement, such as contributing to a Roth IRA.

For 2023, you can contribute up to $6,500 annually to a Roth IRA if you’re single and earn less than $138,000 or if you’re married and jointly earn less than $218,000.

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