As Americans get older, retirement savings often become the primary financial concern, especially for individuals currently in their 50s. Certified financial planner Melissa Caro of New York City pointed to the issue of knowing what you’re contributing to your 401(k). Her mission is to help workers save smarter as they plan for retirement. Starting in 2025, the annual contribution limit for a 401(k) will increase to $23,500. Workers aged 50 and older can even throw in an extra $7,500 on top of that!
Their analysis, based on data from more than 24 million 401(k) accounts, found that workers are remarkably close to achieving this goal. It discovered that 401(k) accumulations for workers aged 50 to 54 average $193,100. For workers 55 to 59, this number jumps to $236,200. These balances become an increasingly important source of retirement funds as people approach retirement age. Fidelity recommends that workers target saving six times their salary by age 50 and eight times their salary by age 60.
Currently workers in their 50s have a median income of approximately $67,000. In order to be adequately prepared for retirement, they should expect to save at least $402,000—upward of $536,000. For many people with disabilities, this target remains an unreachable goal. Caro encourages anyone currently facing retirement savings challenges not to wait and get started today.
“The worst thing you can do is nothing,” – Melissa Caro
Workers aged 50 and older get new opportunities to enhance their retirement savings beginning in 2025. In addition to the increased 401(k) contribution limits, they can save an additional $1,000 in their IRA, increasing the baseline limit to $7,000. This extra infusion can do even more to supercharge retirement savings.
According to Fidelity’s State of Retirement report, Generation Xers are saving an above-average 15.4%. This rate is barely above the suggested 15% ceiling. For many, having good retirement savings is still out of reach. Caro recommends that people start by taking a holistic view of their finances.
“Start with a full financial assessment: List your savings, income, debt and what you actually spend,” – Melissa Caro
Even for retirees who might think they’re too far gone in their savings path, fear not. Take for example a hypothetical worker with a $193,100 balance at age 50. If they save $200 per month and earn an estimated 7% annual return, they would have about $711,000 saved by age 67.