Are You Saving Enough for Retirement? See How Your Contributions Compare to Others Like You

While younger generations are starting to save earlier than ever, the typical nest egg still falls short of what’s needed to retire comfortably. Indeed, many may not even know it.

“We ask people how much they estimate they need to save for retirement to feel financially secure. And then we ask them how they came up with the number, and almost half say they guessed,” Catherine Collinson, CEO of the Transamerica Institute, which surveyed 5,000 middle-class Americans about their retirement preparedness, told Investopedia.

Below, we take you through how much the typical person in your age group or income has saved for retirement.

Comparing Where You Stand

Your retirement savings should grow as you age, but the amount you’re saving in your 401(k) and other retirement accounts will shift as your needs change and life’s circumstances evolve. Middle-class Americans in their 20s have saved a median of $43,000, which climbs each decade to about $277,000 for those in their 60s, according to the survey.  

Why the big jump in median savings? Time and compounding work in your favor when you start early. “If you are younger and have more time, the time value of money and the compounding of investments is extraordinary,” Collinson said.

But there’s another factor: people in their peak earning years—typically their 50s and 60s—can contribute more aggressively as major expenses like mortgages and children’s education expenses wind down. Among middle-class Americans in their 60s, 16% have saved $1 million or more, compared with just 1% of people in their 20s, according to the survey.

Of course, income is the most important predictor of retirement savings. Vanguard clients with defined contribution accounts like 401(k)s earning less than $15,000 have a median balance of $4,055, while those making $150,000 or more hold $221,220—more than 50 times more, according to a Vanguard report.

The gap widens dramatically at higher income levels. Workers earning $30,000-$49,999 have saved a median of $10,928, but jump to the $50,000-$74,999 bracket and balances more than double to $27,528. Cross into six figures and the numbers surge: $98,434 for those earning $100,000-$149,999.

How To Catch Up

If the typical savings figures seem daunting and you’re behind on retirement savings, there’s still time to make real progress, no matter when you start. The key is to turn vague goals into a concrete plan and take away the guesswork many are using.

There may be reasons beyond your control for you to have savings less than the typical figures, too. “Gen X is in a retirement danger zone because they’re less likely to have a traditional pension. If they were offered 401(k)s when 401(k)s were coming online, there was a lack of widespread awareness of how absolutely critical it would be for them to start saving early and build and grow their savings,” Collinson said.

Here are steps experts often suggest to take to close the gap:

• In your 20s and 30s: Focus on consistency. Even small automatic contributions to a 401(k) or IRA can snowball over time thanks to compounding. Aim to boost your savings rate by 1% each year.
• In your 40s and 50s: Focus on catch-up contributions. Once you turn 50, the IRS allows you to add an extra $7,500 per year to your 401(k). Increasing your savings rate during your peak earning years can make a dramatic difference.
• In your 60s and beyond: Revisit your withdrawal strategy. A well-timed delay in claiming Social Security—or downsizing your expenses—can extend the life of your savings significantly.

At all ages, if your employer offers a match, never leave that “free money” on the table. A 50% match on contributions up to 6% of pay is effectively a guaranteed return.

Another key piece of advice, no matter your age or income: “Don’t beat yourself up,” Collinson said. You don’t need to tackle everything at once—break it into manageable tasks. “Maybe you have a 10-step plan. If you do one step a month, by the end of the year, you’ll have a plan, which is a lot more than if you had done nothing.”