Personal Finance

If you're 50 and make $300k per year, you should have this much saved for retirement - are you on track?

Rich Duprey

Published: November 27, 2024 3:30 pm

Retirement planning is a marathon, not a sprint. That makes keeping track of how you are progressing an important part of retirement planning. If you don’t know where you are, you can’t know where you’re going or whether you’ve arrived.

Yet the reality of retirement planning can feel daunting, especially in the face of relentless inflation. The ever-increasing cost of living has shifted the goalposts, demanding a more realistic and proactive approach to achieving a comfortable future. 

If you’re 55 years old, and after years of hard work you’ve diligently saved and invested, the question that still lingers is: are you on track to achieve your retirement dreams? 

Financial experts suggest that by this age, you should have accumulated a nest egg of $1.68 million to maintain your current lifestyle. This sizable sum can be formidable, even demoralizing, especially considering the relentless erosion of purchasing power due to inflation.

It’s not just about rising prices at the grocery store, but also the cumulative effect on the value of your hard-earned savings as well as the cost of healthcare, housing, and everyday essentials. Your plan today needs to recognize these issues.

24/7 Wall St. Insights:

• Keeping track of where you going is essential for ensuring you can reach your destination.
• It has become more challenging to achieve our goals due to inflation and it requires a large nest egg if we want a comfortable retirement.
• Fortunately, high-income wage earnings have more options available to them, especially if they are beating the odds and are ahead of the game.
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

Sizing up your situation

While achieving that $1.68 million mark may seem like an insurmountable challenge, it is important to remember it is a combination of factors, not just one number. Financial planners have identified several assumptions to contribute to a successful retirement plan. 

• Consistent Savings: Contributing at least 15% of your pre-tax income to retirement accounts is essential.
• Smart Investments: Investing in a diversified portfolio of stocks, bonds, and other asset classes to aim for a 6% return before retirement and a 5% return afterward.
• Social Security: While not a primary source of retirement income, taking Social Security benefits at age 65 for an average benefit of $41,112, can provide a valuable safety net.

However, it’s crucial to acknowledge that reaching these goals requires a proactive approach and a willingness to adapt to changing circumstances. Those million-dollar figures may be eye-opening, so let’s see what you can do if you find yourself behind or even if you are ahead of the game.

What to do if you are behind

If you find yourself falling short, don’t panic. You can get back on track with some simple steps:

• Reassess Your Goals: Take a hard look at your expenses, lifestyle, and the impact of inflation on your retirement plan and adjust it to reflect the current economic landscape.
• Boost Your Savings: Increase your contributions to your retirement accounts, even if it’s just a small amount. Every dollar counts, and consistent contributions can make a significant difference over time.
• Maximize Your Investments: Explore investment options that align with your risk tolerance and that can generate higher returns. 
• Seek Professional Advice: Don’t hesitate to work with a financial planner to create a customized retirement plan that addresses your specific needs and goals. They can provide expert guidance on investment strategies, tax planning, and other essential aspects of retirement planning.

What to do if you are ahead

Congratulations! You’ve done the hard part. Now is not the time to stop. If you’re ahead of the curve on saving, here’s how to turbocharge your journey to financial freedom:

• Supercharge your savings: Max out your 401(k) and Roth IRA. If you’re already doing this, open a taxable brokerage account. This gives you the flexibility to invest without tax breaks, but also without penalties if you need to access your money before retirement.
• Diversify your portfolio: Consider investments beyond stocks. such as real estate, rental properties, commodities, private equity, venture capital, or hedge funds. This can help you maximize returns and weather market storms.

Key takeaway

Remember, retirement planning is a lifelong journey, not a sprint. It’s about making informed decisions based on current conditions and adjusting your plan as required. It means staying committed to your financial goals.

By taking proactive steps and seeking professional guidance, you can navigate the economic realities to ensure a secure and comfortable retirement.