More than half of the people surveyed by Dutch bank ING said they would boost their retirement savings if they had socked away less than the average, according to a 2012 report on the Fox Business website. The media often report people need to start saving more for retirement. Looking at what people are actually saving could explain why this news story is so prevalent. Look at how much others are saving to see how you stack up.
Baby Boomer Averages
The age group between 45 to 62 years old has set aside $38,000 on average, as of 2012, according to The Survivors Club website. That savings rate is for people who don't have a company-sponsored retirement plan. Those with a company plan have saved $88,000 on average.
What You'll Need
You can calculate the amount you'll actually need to save if you follow the 4 percent rule. "U.S. News & World Report" says retirees should plan to live off 4 percent of their savings each year. This will allow a retirement portfolio to replenish itself each year. That means if you get an average return of 4 percent each year and take out 4 percent, you will not decrease the value of your portfolio. When you know the amount you want to live on, you can find your savings target. For example, if you plan to live on $50,000 a year, divide that figure by 4 percent and you will see you need $1,250,000 in retirement savings.
"The New York Times" has published a chart indicating how much you should have saved according to your age. The figures are based on multiples of your salary. For example, by age 30, you should have saved half a year's worth of your salary and by 40, two times your pay. By 50, you should have set aside four times your salary, and at 60, six times of your pay should have been stashed away. This savings rate will allow you to live about the same lifestyle you were living just before retirement.
If you feel you're not keeping up with what the average person is doing for retirement or the target savings rates for your age group, you have some catching up to do. Certain retirement accounts allow you to accelerate your savings rate after age 50. If you have a traditional or Roth IRA, you can make extra contributions. You can put away up to $6,500 per year, as of 2013. You can contribute an additional $5,500 to your 401(k), above the $17,500.
Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." He is an instructional designer with credits for companies such as ADP, Standard and Poor's and Bank of America.