Many Americans in their 50s are nearing retirement age, but a significant number might not have enough savings to retire comfortably. According to Fidelity, by the time you reach 50, you should ideally have around six times your salary saved up for retirement. However, the reality is that many people in this age group have not met this recommended milestone.
On average, Americans aged 50 to 59 have approximately $189,800 in their 401(k) accounts, as per data from Fidelity Investments Q2 2023 Retirement Analysis. However, the median 401(k) balance for this age group is $57,000, indicating that half of these accounts have lower balances.
There are several reasons why people in their 50s might not have saved enough for retirement. Factors such as college expenses for children, high mortgage debt, and caring for aging parents who also lack sufficient retirement savings can impact their ability to save. Inflation and rising costs have also affected retirement savings for people of all ages.
If you find yourself behind on retirement savings, there are steps you can take to get back on track. While factors like inflation and market volatility can impact your account balance, focusing on your retirement savings rate is something you can control. Fidelity recommends aiming for a savings rate of around 15% of your income, including any employer match.
For 2023, the annual 401(k) contribution limit is $22,500. Individuals over 50 can make additional catch-up contributions of up to $7,500 annually, increasing the total limit to $30,000. If you’re already maxing out your 401(k) contributions and your income is below certain limits, you can explore other options such as contributing to a Roth IRA.
Contributing to a Roth IRA can be an effective way to boost your retirement savings. For 2023, you can contribute up to $6,500 annually to a Roth IRA if you’re single and earn less than $138,000, or if you’re married and jointly earn less than $218,000. These measures can help individuals in their 50s work towards securing a more comfortable retirement.