Editor's Note: "Retirement Savings on Track? How Much You Should Have by 55 and 60" is part of an ongoing series on getting your retirement on track by age. The first story is "Retirement Savings on Track? How Much You Should Have by 50 and 55." The third story is "Retirement Savings on Track? How Much You Should Have by 60 and 65."
It’s retirement savings crunch time. If you are in your mid-50s or early 60s, retirement may be on the horizon and on your mind.
After all, you've likely been in the workforce for years and have at least been thinking about what kind of retirement will make you happy. You may dream of traveling the world, pursuing a hobby or spending more time with family. Either way, at this age, preparation is a must.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
During your mid-50s and early 60s, step one is developing a retirement plan if you don’t already have one and refining your plan if you do, says Sharon Carson, executive director of J.P. Morgan Asset Management.
Determine your ideal retirement age
As you develop your plan, try to establish your ideal retirement age. Will you throw in the towel at 62 as soon as you can collect Social Security, wait until your full retirement age (67 for people born on or after 1960) to collect all your benefits, or hold off until 70 when you'll get 30% more in Social Security benefits?
If you are married, will you retire at the same time as your spouse? Do you plan to stop working entirely, work part-time, or transition to a new career?
It's also a good time to assess your spending needs and determine how much you’ll need in retirement. If the idea of doing a detailed budget stresses you out, Carson says you should have a general idea of how much money is coming in and going out and determine which expenses may be variable and which are fixed.
The variable column could include travel, emergencies, house repairs, health care bills not covered by insurance, and new vehicles. Fixed expenses may include rent or mortgage payments, utilities, health insurance, transportation, and taxes.
After that, think about what expenses may go up or down once you retire to get an idea of how much you’ll need. It’s also a good idea to start thinking about where you plan to live out your retirement years, whether aging in place, downsizing or moving to a more expensive location.
Work on reducing your debt
The mid-50s to early 60s is also the time to reduce your debt if you have any. Work on paying down any high-interest-rate credit cards or loans, and consider whether you will pay off your mortgage before you exit the workforce.
If you want to lower your bills in retirement and are saving enough, that may be a smart move, especially if you have a high mortgage rate.
If your cash reserves are low and you have a low mortgage rate, keeping your mortgage while you save more may be a better option. This is where a trusted financial adviser comes in.
Don’t forget your will and estate plan. You should have one at this point, but if you don’t, Carson says to get on with it!
Don't beat yourself up if you don't have a will or an estate plan. As it stands, 55% of Americans don’t have any estate documents, and only 31% have a basic will, according to a recent survey by estate planning firm Trust & Will.
Are you on track with your retirement savings?
With the planning out of the way, are you ready to see if you are on track based on your income?
To determine that JPMorgan put together a guide on how much adults should have saved based on age and income.
The Wall Street bank’s model assumes a 5% annual gross savings rate, a pre-retirement portfolio of 60% equities and 40% bonds, a post-retirement portfolio of 40% stocks and 60% bonds, an inflation rate of 2.4%, a retirement age of 65 and 35 years in retirement.
Keep in mind that these amounts are a general guide. Everyone’s financial situation is different, and some may need more or less in retirement.
See how you stack up below:
Age: 55
Income: $80,000
How much should you have saved: $420,000
Age: 55
Income: $100,000
How much should you have saved: $565,000
Age: 55
Income: $150,000
How much should you have saved: $805,000
Age: 55
Income: $200,000
How much should you have saved: $1.025 million
Age: 55
Income: $250,000
How much should you have saved: $1.295 million
Age: 55
Income: $300,000
How much should you have saved: $1.69 million
Age: 60
Income: $80,000
How much should you have saved: $520,000
Age: 60
Income: $100,000
How much should you have saved: $725,000
Age: 60
Income: $150,000
How much should you have saved: $1.045 million
Age: 60
Income: $200,000
How much should you have saved: $1.33 million
Age: 60
Income: $250,000
How much should you have saved: $1.68 million
Age: 60
Income: $300,000
How much should you have saved: $2.18 million
Think you have a savings shortfall? Here’s what you can do
If you are feeling short based on JPMorgan’s numbers, don’t despair. You still have time to make moves to shore up your retirement nest egg. There are catch-up contributions that let people 50 and older save an additional $7,500 in their 401(k)s and $1,000 in their IRAs for 2025.
If you have a financial adviser, he or she can help you refine your savings strategy to amp it up in the waning years of your career.
“Beware of trying to make up for lost ground by very aggressive investing, as that could expose you to sequence-of-return risk,” cautions Carson. That occurs when poor investment returns early in retirement negatively impact your retirement savings over the long run.
Don't despair
At the end of the day, don’t beat yourself up if you are feeling like you need to do more. The good news is you still have time to shore up your retirement savings. Even raising the amount you contribute to your 401(k) by 5% can have a big impact on your savings.
You can also consider a phased retirement, in which you cut back your hours but don't stop working altogether. A phased retirement is the most desired way to retire and is preferred by Generation X (67%) and millennials (56%), according to the Principal Financial Well-Being Index.
You also have options. You can always downsize, work part-time, curb your expenses, or delay retirement to make it work.
“When you retire can have a big impact on your financial outcome,” says Carson. “What would your plan look like if you retired a few years earlier or later?”
Related content
-
With Buffett Retiring, Should You Invest in a Berkshire Copycat?Warren Buffett will step down at the end of this year. Should you explore one of a handful of Berkshire Hathaway clones or copycat funds?
-
Eight Tricks to Shop for Glasses if You're Over 50Shopping for glasses often gets trickier — and more expensive — as you age. If you've over 50, take these steps when you set out to buy a new pair.
-
I'm a Financial Planner: How to Dodge a Retirement Danger You May Not Have Heard AboutTiming is everything, and sequence of returns risk can mean the difference between a retirement nest egg that's overflowing … or empty.
-
Caring for Aging Parents: An Expert Guide to Easing the Financial and Emotional StrainEarly conversations, financial planning and understanding the progression of care needs can help to mitigate stress and protect family relationships.
-
I'm a Financial Adviser: The OBBB Is a Reminder for Older People to Have a Long-Term PlanThe new tax bill presents a good opportunity for retirees to revisit tax plans, look into doing some Roth conversions and consider plans for long-term care.
-
Moving Abroad? You Might Need a Cross-Border Financial AdviserIf you want to live in another country long term, you could benefit from an expert's guidance. Here's how to find a good qualified adviser to help with residency requirements, documentation, financial laws and tax impacts.
-
I'm a Financial Planner and a Parent: Here Are Five Money Habits Every Young Family Should HaveWhen children are young, it can be hard to meet immediate costs, let alone save for the future, but these five habits can help build lasting financial security.
-
Advisers Face a Fiduciary Challenge When Discussing Alternatives to Trump AccountsWhile Trump Accounts offer some benefits for early savings, investment advisers need to be cautious when recommending alternatives like 529 plans or Roth IRAs, as those suggestions could create fiduciary conflicts.
-
Financial Advisers: Here's How to Help Soon-to-Be Married Clients Get Their Financial House in OrderGetting married changes a couple's life in more ways than one, so it's a good idea to discuss financial and legal issues like pre-/postnuptial agreements, estate plans and life insurance.
-
It's Not Too Late for Wealth Advisers to Participate in the Silver TsunamiWith so many business-owning Baby Boomers set to retire, wealth advisers need a plan to ensure their business-owning clients and prospects become and remain their best clients.
