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Retirement Savings Goals by Age: How Much to Save

How far along should you be in your retirement savings?
Grandparents playing soccer with grandchildren.

Some financial planners suggest you should put 5-20% of your income toward retirement each year, depending on your age. And as you get closer to retirement, your savings should multiply along with your income. Are you finding this harder to do with recent market uncertainty and fears of a recession? Wondering how much to have saved at each age? Or, not sure where to start?

While those guidelines may seem like lofty goals, remember that your savings might include more than just your retirement contributions. The “free” money from employer retirement plan matches, smart debt repayment and windfalls (such as bonuses, tax refunds, inheritance, etc.) can also put you ahead for retirement.

Want to see how you’re doing? We’ve got smart retirement tips, goals and checkpoints for any age and income level.

Retirement Tips for Every Age

These tips are useful no matter your age, so keep reading for yourself and your future self—or to share with your kids, parents or anyone else who might need an extra nudge toward retirement savings.

What part of the journey are you on?

Long Way to Go

Savings Goal

5-10% of your annual income

Savings Checkpoints

0.5x-1x your annual salary by age 30, 2x-3x by age 40

How to Get There

Start early and establish good investing habits.

If you’re under 40, you still have many years to contribute toward your retirement—and handle the ups and downs of the financial markets. Here are some savings tips that might make the most impact at this stage of your working life. 

Invest the "free money."

If your employer matches your workplace retirement plan contributions, make sure you meet the minimum for the match.

3% of your own contributions + 3% employer match = 6% invested each pay period

Bump up contributions.

As you get older, your financial obligations might increase—but so could your income. Even if you already contribute a specific percentage of each paycheck to your employer’s retirement plan, many plans offer automatic annual increases (in 1% increments, for example). Opt in for a hassle-free way to increase your contributions.

Don’t have an employer plan? Learn more about different types of IRAs to invest on your own. And if you’re self-employed, workplace plans like SEP IRAs offer a way to save and get tax deductions for your business.

Balance debt and savings.

You may find that paying off higher-interest loans might be more of a priority than extra retirement contributions. But if you have a lower rate on your loan, the return on your investments over time has the potential to offset any interest payments you’re making.

Learn more retirement savings hacks.

Well on Your Way to Retirement

Savings Goal

10-20% of your annual income

Savings Checkpoint

4x-5x annual salary by age 50, 6x-8x by age 60

How to Get There

Use various investment account types to your advantage.

By your 40s and 50s, you’ve likely had time to get settled into a career and savings habits. Knowing your options for IRAs and HSAs can help you save even more—and get tax benefits.

Catch up with IRAs.

When you’re age 50 or older, you can make additional $1,000 contributions into IRA accounts. Retirement plans also allow catch-up contributions for those over 50.

Not yet 50? You can play catch-up other ways. Increase your employer plan contributions each year (see “Bump up contributions” above), and get as close to the maximum contribution limit as you can.

Know your IRA options.

Depending on your age and income, traditional and Roth IRAs can provide different tax benefits. Roth IRAs might be more suitable if you’re currently in a lower tax bracket and expect your tax rate to go up. Traditional IRAs might be better if your tax rate is lower at the time you withdraw the money. A tax advisor can help you decide which type is best for your retirement goals.

Use HSAs for more tax benefits.

Health savings accounts (HSAs) can be used for today’s medical expenses and your future retirement, with triple tax benefits: tax-deductible contributions, tax-deferred earnings and tax-free withdrawals for qualified medical expenses. And at age 65, you can use any remaining funds as retirement income.

Avoid cashing out retirement accounts.

Once you’ve saved a healthy amount for your retirement, it can be tempting to turn to those funds to cover an immediate expense. Though you may handle the expense quickly, using your IRAs, 401(k) or other retirement plan to do so may have long-term effects. Taking money before retirement age can lead to taxes and penalties and can dent your savings levels.

The Countdown to Retirement Is On

Is there anything else you can do to boost your savings before you’re ready to retire? These retirement savings tips can help as you near the finish line.

Savings Goal

20+% of your annual income, or as much as you can afford

Savings Checkpoint

6x-8x annual salary by age 60, 9x-10x by age 67

How to Get There

Make the most of your final savings years.

Add, don’t subtract.

Even if you can withdraw from retirement plans and IRAs at 59½, try to avoid it. Instead, continue to add to your IRAs and retirement plan as long as you still have earned income (no more age 70½ cutoff for traditional IRAs) and up to the maximum contribution limits, if possible.

Get your full benefits

Working a little longer will give you more time to save for retirement—and can help you increase your wages to maximize pension or Social Security benefits.

For example, if your full retirement age is 67, your Social Security benefit is reduced by 30% if you apply for benefits at 62. If you wait until 70, your benefit will increase by 24%.

For example, if your full retirement age is 67, your Social Security benefit is reduced by 30% if you apply for benefits at 62. If you wait until 70, your benefit will increase by 24%.

Source: Social Security Administration. Full retirement age (FRA) is 67 for those born after 1960. For those born between 1937 and 1960, FRA is 65 plus two months for each year after 1937.

Look for extra contributions.

You can use raises, bonuses, tax refunds, inheritance and settlements to boost retirement savings. Investing a lump sum can have its advantages; not only will you avoid spending the money right away, it can grow and compound over time. 

Watch your investment mix.

Keep an eye on how your retirement assets are invested as you approach retirement. While a more aggressive portfolio may seem attractive for the potential gains it may offer, you're also taking on additional risk. Too much volatility at this stage may make it difficult to recoup losses.

Enjoying Retirement

Savings Total

70-80% of your preretirement income

Spending Rate 

~4%, depending on other income

How to Stay There

Map out your retirement income plan.

You’ll need to decide how to convert your savings into a steady income that will need to last the rest of your life. Here are three popular strategies (or watch the Retirement Income video).

Regardless of which strategy you follow, don’t neglect to build a retirement budget strategy. A plan for spending and saving may be even more critical when you no longer receive a steady paycheck.

Total return strategy.

This looks very similar to a preretirement investment portfolio. The goal is to continue earning money throughout retirement, without taking on unnecessary risk. Too much risk and you could lose money; too little risk and your savings won’t grow.

This strategy may be appropriate for people who have a well-funded retirement, can handle more risk or want more control over their money.

Time segmentation (or “bucket”) strategy.

Divide your money into short- and long-term categories. Short-term buckets contain your less risky investments. Longer-term buckets can carry more risk because they have time to recover from market drops. The goal is to draw income from the short-term investments and refill it from the long-term.

The bucket strategy may work well if you are anxious about risk, have precise short- and long-term goals or you have a tight retirement budget.

Divide your portfolio into two to six buckets, each with it's own allocation/income goal.

Income floor strategy.

Divide your savings into two parts: essential expenses (house, vehicles) and discretionary (entertainment, travel). Essential expenses are your “income floor” and should contain very conservative investments. For discretionary expenses, you’ll manage your money like the total return portfolio above, including more aggressive investments.

This option may be a good retirement income strategy for people who are especially worried about risk or who have lower retirement savings.

Where Do You Stand?

Whether you’re not sure if you’re saving enough or if you need help after a slow start, we can help. Our Investment Consultants and retirement tools can help you gauge your progress.

Want More Guidance?

Call an Investment Consultant today at 888-345-2441 to help you plan your retirement.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.

You could lose money by investing in a mutual fund, even if through your employer's plan or an IRA. An investment in a mutual fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.

Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.

This information is for educational purposes only and is not intended as a personalized recommendation or fiduciary advice. There are different options available for your retirement plan investments. You should consider all options before making a decision. Our representatives can help you evaluate all of your distribution options.