How Much Should You Have Saved in Your 401(k) by 60?

By the time your 60th birthday arrives, you may be at a point where you're not planning to work much longer. A lot of people retire during their 60s. In fact, Motley Fool research finds that the average retirement age in the U.S. is 65 for men and 63 for women.

That's why it's important to have a good sense of whether you're on track for retirement savings-wise by 60. Here's the amount of money you may want to aim for by that age, with the caveat that this is not a hard and fast rule.

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What savings balance should you have by 60?

Fidelity says that by age 60, you should have 8x your salary saved for retirement. So if you're earning $100,000 a year, an optimal nest egg would be $800,000 (or more).

To put that into context, let's say you're planning to retire at 65. Even if you don't contribute more to an $800,000 nest egg, if it grows at a conservative 5% return for five more years, you're looking at a total balance of a little more than $1 million.

Not only is that a nice amount of money, but it's also consistent with Fidelity's advice, which suggests having 10x your salary by 67 (which Fidelity is most likely assuming to be your retirement age in its guidance).

There's wiggle room in that formula

If you're 60 years old and don't have 8x your salary socked away in an IRA or 401(k), don't panic. Fidelity's guidance is meant to offer a framework for savers, but it's not gospel. And whether your savings balance is problematic or not depends on factors specific to you.

It may be that you earn $100,000 a year at 60 and only have $600,000 saved. But it may also be that you only started earning $100,000 a couple of years ago, and you earned $80,000 a year for the decade prior.

If we multiply $80,000 x 8, we get to $640,000, which would be your target, per Fidelity, based on the salary you earned for quite some time. So $600,000 doesn't seem so far off.

Also, it may be that you're planning to reduce your expenses a lot in retirement by downsizing or relocating to a much less expensive part of the U.S. In that case, if you only have, say, 5x or 6x your salary by 60, you may not be looking at an actual shortfall.

Or, it may be that you're planning to work until age 70. If so, you have a good number of years to boost your retirement savings and do some catching up.

For these reasons, don't assume that you're doomed if you reach age 60 with less than 8x your salary banked for retirement. Granted, if you're only looking at 1x or 2x your salary at 60, you may need to rethink some plans and make some sacrifices to ramp up. But if you're reasonably close, there's no need to lose your cool, especially if you have reason to think your expenses will fall drastically once you stop working.

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