Savings for Retirement Progression: Understanding How Much You Need by Age 55 and 60
As you enter the waning years of your career, it's crucial to start thinking about retirement and having a solid plan in place. This is the focus of the third story in our ongoing series on getting retirement on track.
JPMorgan's guide suggests that by age 60, you should have saved around 8 to 10 times your annual income in retirement savings to maintain your lifestyle in retirement. This general rule of thumb can help you set realistic savings goals.
For example, if your annual income is $80,000, JPMorgan recommends having saved $420,000 by age 60. If your income is $100,000, aim for $725,000, and if it's $150,000, strive for $1.045 million. The amounts increase as your income does, with those earning $250,000 or more needing over $2 million saved by age 60.
These multiples are based on a 4% withdrawal rule to sustain spending in retirement. However, the exact amount you need depends on your expected expenses, lifestyle, healthcare costs, debt, and other factors like Social Security or pensions.
Sharon Carson, executive director of J.P. Morgan Asset Management, emphasises the importance of developing or refining a retirement plan during this age. She also warns against making up for lost ground by very aggressive investing, as that could expose one to sequence-of-return risk.
In addition to saving enough for retirement, it's essential to assess your spending needs and determine how much money will be needed to cover fixed and variable expenses in retirement. Fixed expenses may include rent or mortgage payments, utilities, health insurance, transportation, and taxes, while variable expenses might include travel, emergencies, health care bills, and new vehicles.
Moreover, downsizing, working part-time, curbing your expenses, or delaying retirement are options to make retirement work. Phased retirement, in which you cut back your hours but don't stop working altogether, is the most desired way to retire and is preferred by Generation X (67%) and millennials (56%), according to the Principal Financial Well-Being Index.
It's also important to establish an ideal retirement age, whether to collect Social Security early, at full retirement age, or later. Reducing debt, especially high-interest-rate credit cards or loans, is advised during the mid-50s to early 60s.
Whether to pay off a mortgage before retirement depends on factors such as cash reserves and mortgage rate. JPMorgan's guide offers a comprehensive guide on how much adults should have saved based on age and income to determine if they are on track for retirement.
Lastly, having a will and estate plan is important, especially at this age. A financial adviser can help refine your savings strategy and provide personalized targets tailored to your goals. A recent survey shows that 55% of Americans don't have any estate documents, and only 31% have a basic will.
In conclusion, by age 60, aim for roughly 8 to 10 times your salary saved, adjusting upward if you expect higher expenses or lack other income sources. Given individual circumstances, consulting a financial advisor can provide personalized targets tailored to your goals.
Personal-finance decisions become increasingly important as you age, and by age 60, it's advisable to have saved around 8 to 10 times your annual income in retirement savings. A financial adviser can help refine your savings strategy and provide personalized targets tailored to your goals, ensuring a solid personal-finance plan for retirement.
