Here's How Much You Should Have Saved in Your 401(k) by 55
Key Points
A common rule is to have socked away seven times your salary by age 55.
But that might be too little or too much.
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As we plan, save, and invest for our retirements, it's important to not get too far behind where we should be. One rule of thumb offered by the folks at Fidelity is that by age 55, you should have socked away seven times your annual salary.
The table below shows what that looks like. Note that if both you and your spouse are saving for retirement, you might want to use your total household income for the year.
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|
Salary |
Seven Times Salary |
|---|---|
|
$50,000 |
$350,000 |
|
$75,000 |
$525,000 |
|
$100,000 |
$700,000 |
|
$125,000 |
$875,000 |
|
$150,000 |
$1,050,000 |
|
$175,000 |
$1,225,000 |
|
$200,000 |
$1,400,000 |
|
$250,000 |
$1,750,000 |
|
$300,000 |
$2,100,000 |
Caveats to consider
That table may seem helpful, but don't let it guide you too much. Here are some reasons:
- How much you need to retire will depend greatly on your spending habits. Someone whose hobbies include golf and flying planes will likely need a bigger nest egg than someone who loves to read and volunteer.
- Your health and expected longevity (roughly speaking) are also factors, as those who stand a chance of living a very long life should aim to save more, and vice versa.
- Rules of thumb like Fidelity's are based on assumptions and aren't guaranteed to serve all equally well. The company notes that it "developed the salary multipliers through multiple market simulations based on historical market data, assuming poor market conditions to support a 90% confidence level of success." So it might not be sufficient, and if the future market behaves in unusual ways, the guideline may not hold up either.
What to do
Take some time to analyze your current spending and to estimate as comprehensively as you can how much income you'll need in retirement. Aim to set up multiple income streams, including Social Security. Remember that you can also save well in IRAs and regular brokerage accounts, not just in 401(k) accounts.
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