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Retirement planning is one of the most important aspects of financial security, yet many people are unsure if they are on track with their savings. A recent study by Empower, one of the nation’s largest 401(k) providers, sheds light on the average and median retirement account balances by age group. In this article, we’ll explore how much the typical 60-year-old has saved for retirement, what those numbers really mean, and how to determine if your savings will be enough to support your desired lifestyle.
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Before diving into the numbers, it’s crucial to understand the difference between average and median savings.
By looking at both numbers, we can get a clearer picture of how much people actually have saved for retirement.
According to Empower’s latest data, here’s how retirement savings stack up by age group:
For those in their 60s, the average retirement savings is around $1.1 million, while the median is $590,000. This discrepancy highlights the impact of high-net-worth individuals on the average, reinforcing why the median is a better measure of where most people stand.
While looking at averages and medians can be helpful, the real question is: How much do you need for retirement? The answer depends on your lifestyle, income sources, and expected expenses. Let’s go through a simple calculation to estimate whether your savings are sufficient.
A good starting point is estimating your monthly retirement expenses. Let’s assume you want to spend $4,500 per month in retirement, covering all living expenses, discretionary spending, and travel.
Most retirees will receive Social Security benefits. Let’s assume a combined $3,000 per month for you and your spouse.
The remaining amount needed from your portfolio is:
$4,500 - $3,000 = $1,500 per month (or $18,000 per year).
If you have $500,000 saved, you would need to withdraw:
$18,000 ÷ $500,000 = 3.6% withdrawal rate
The 4% rule suggests that retirees can withdraw 4% of their starting retirement balance annually, adjusting for inflation, with a high likelihood of the money lasting 30+ years. At a 3.6% withdrawal rate, this hypothetical retiree appears to be in good financial shape, even with less than half of the $1.1 million average savings reported by Empower.
If you plan to retire before claiming Social Security, your withdrawal rate may be temporarily higher. For instance, if you retire at 62 but delay Social Security until 67, you might need to withdraw closer to 10% of your savings per year until benefits begin. This is where dynamic withdrawal strategies can be useful.
Your ideal retirement savings amount depends on your lifestyle, expenses, and financial goals. While the median savings for those in their 60s is $590,000, many retirees successfully fund their retirement with less, thanks to Social Security, pensions, or lower living costs.
If you’re uncertain about your readiness, working with a financial planner can help create a personalized strategy that maximizes your savings and income potential. If you’d like to explore your retirement plan further, consider scheduling a consultation with a financial advisor.
By understanding where you stand and taking steps to optimize your savings, you can retire with confidence and financial security.
