How Much Should Retirees Have Invested by Age 65?

Key Points

• Future retirees should think in terms of maintaining their standard of living while working.

• Waiting even just a couple more years to retire can make a world of difference to your future retirement income.

• Simply establishing a target and making a plan to reach it is helpful, even if you’re never actually going to meet that goal.

• The $23,760 Social Security bonus most retirees completely overlook ›

Are you creeping up on the age of 65? Or maybe you're already there? If so, even if it's not happened yet, retirement is on your near-term radar.

This raises an important question for anyone around this age, but particularly for those near-65-year-olds who may still be working: How much should you have saved up for retirement by now?

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There's no absolute answer, since everyone's financial situation and needs are different. There is a rather specific rule of thumb, however, that just might help you figure out if you've got enough tucked away.

There is no universal number, but...

The proverbial magic number is $1.26 million, by the way. That's the amount of savings Northwestern Mutual's most recent annual survey of U.S. investors suggests people think they'll need to retire comfortably, down from 2024's figure of $1.46 million.

Just take the number with a grain of salt. It reflects a huge range of inputs. Plenty of people would be satisfied with half that amount. Others would still worry with twice as much.

Perhaps a more meaningful figure, therefore, is a number that would help you maintain the particular standard of living you enjoyed during your working years. A multiple of your current income does the trick, since this amount of savings will ultimately be used to generate retirement income.

That number is? About 10 times your annual salary as of the end of your working years, according to mutual fund company T. Rowe Price. For example, if you're earning $100,000 per year, you'll want to have on the order of $1 million saved up by the time you retire to ensure you're not downgrading your lifestyle.

The figure isn't etched in stone, to be clear. T. Rowe Price concedes that a multiple of anywhere between 7.5 and 13.5 times your late-career yearly earnings would be a reasonably healthy sum.

That range does align with similar suggestions from brokerage firms Charles Schwab and Merrill Lynch, however.

Be ready to make a tough decision

But you're miles away from even the low end of the suggested range? Don't sweat it too much -- most people are. Mutual fund giant and retirement plan administrator Vanguard reports that as of last year, the average account balance for 65-year-old (and up) participants in its retirement plans was just under $300,000, while the median amount was a little less than $100,000. Even adding non-work-related retirement savings to the mix doesn't seem like it would get most of those people to T. Rowe Price's suggested target.

Don't panic if you're part of this crowd. See, you've got options... particularly if you're still working.

Chief among these options is continuing to work for at least a little while longer. Doing so provides a double benefit to your retirement savings efforts. First, it lets you tuck away more income in a tax-deferring account funded by tax-deductible contributions. While this money won't have a great deal of time to grow, it will at least grow without being impeded by taxes. (Even cash-like money market mutual funds are paying on the order of 4% right now. Not bad.) If you're like most of your peers, most of life's major expenses like mortgages and school are in the rearview mirror, so you've got a fair amount of income you can put toward retirement.

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The second benefit of continuing to work? It allows you to postpone the initiation of Social Security's retirement benefits.

This is no small matter, either. Even just waiting another two years to reach your full retirement age of 67 would translate into monthly Social Security payments that are about 12% more than what you'd collect beginning at age 65. And if you can wait until you're 70 years old before claiming Social Security, your payments will be about 25% bigger than the ones you'd be getting if filing at 67 years of age.

Just setting a target is a great start

Again, it's just a rule of thumb. Most people survive just fine with far less, while others end up running out of money despite starting out retirement with a far bigger sum. How you handle your finances in retirement -- especially your first few years, when you're also still seeking investment growth -- can make the difference between having plenty and not having enough.

Nevertheless, this is a rule that a bunch of professional planners agree on. Whatever you can do to get yourself as close to this target amount as possible would be time and energy well spent.

The $23,760 Social Security bonus most retirees completely overlook

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Charles Schwab is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends T. Rowe Price Group. The Motley Fool recommends Charles Schwab and recommends the following options: short June 2025 $85 calls on Charles Schwab. The Motley Fool has a disclosure policy.