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It’s an age-old question. The answer may start with estimating how much you should have saved already. Then, review at key checkpoints to identify and overcome possible savings gaps.
A savings target can help you determine whether your retirement goal is on track. One way to gauge your progress is to estimate savings in relation to your age and income.
Source: “How Much You Should Have Saved (By Age),” Investopedia, April 2019.
10-25%
What some financial planners suggest you save every year1
Amount of your final pay that some retirement experts say you should have saved by age 67
Amount the average worker may save during that time period2
Potential shortfall for retirement for a salary of $50,000 per year
A Few Percent More a Year Can Add Up
Joe makes $50,000 per year. Over 20 years, he could potentially earn:
by saving an extra 2% a year
by saving an extra 5% a year
Hypothetical calculation of $1,000 and $2,500 annual investment over 20 years at a 6% return rate. Assumes reinvestment of all gains, dividends and interest, and does not include fees, expenses, or taxes. If all taxes, fees, and expenses were reflected, the reported portfolio value would be lower. Source: American Century Investments, 2019, Future Value Calculator, dinkytown.net.
At age 50, you may be able to put extra money in your retirement account, called catch-up contributions.3 The extra amount you can contribute depends on the type of account you have.
Hypothetical calculation of $2,000 annual investment over 15 years at a 6% return rate. Assumes reinvestment of all gains, dividends and interest, and does not include fees, expenses, or taxes. If all taxes, fees, and expenses were reflected, the reported portfolio value would be lower. Source: American Century Investments, 2019, Future Value Calculator, dinkytown.net.
Having the appropriate mix of stock, bond and money market investments may play a vital role in improving the odds of reaching your goal.
While riskier than other types of investments, stocks can potentially help your savings grow more over time.
These investments are less risky than stocks, but don't provide as much growth potential. They might help lower the risk of losing money when the stock market fluctuates.
We’re here to help you determine if you’re on the right track.
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1Note that the 10-25% figure could include retirement plan contributions, employer match, cash savings and debt repayment. Source: “How Much You Should Have Saved (By Age),” Investopedia, April 2019.
2Source: The Real Deal: 2018 Retirement Income Adequacy Study, Aon Hewitt.
3The rules and amounts for catch-up contributions are set by the IRS each year. Check irs.gov or with your employer to see what you are eligible for in your account.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.