Here's How Much You Should Have Invested for Retirement at Age 60

How do you know you're saving enough for retirement? Often it's difficult to know the exact amount for sure until after you stop working and start living on your savings. But there are ways of roughly knowing whether you're on track.

Let's see how much a 60-year-old should have invested for retirement.

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Figuring out the magic number

How much income will you need in retirement? For most people, maintaining the standard of living enjoyed during their working years is a reasonable, achievable retirement goal. To do that, however, most estimates suggest you only need to replace about 80% of your work-based income. Said another way, simply working at a job can consume on the order of 20% of your salary.

The bigger question remains, though -- what lump sum of money is necessary to maintain your standard of living in retirement?

Although some people could do fine with less and others may need more, mutual fund company T. Rowe Price says you'll ideally have saved up about 11 times your annual salary by the time you retire. For example, someone earning $80,000 per year late in life should be sitting on about $880,000 once they're done working forever and want to start living on their savings, for instance.

That figure jibes with similar estimates from brokerage firms Merrill Lynch and Charles Schwab, by the way, as well as mutual fund giant and retirement plan administrator Fidelity. They all agree that savings of around 11 times your full-time wages earned later in your career should be enough to generate annual spendable cash of about 80% of that amount once you retire.

To reach that mark, of course, you'll need to save and grow your money over the course of your entire career.

And that's where things can get a little complicated. The bulk of your retirement fund's initial progress will obviously come from cash contributions. Then, about two-thirds of the way through your savings time frame, capital appreciation takes over as the big growth driver. (Those fireworks are the fun ones to watch.) Even so, you're adding additional money to an account while it's also achieving growth through capital gains, which can make it a bit tricky to make proper projections.

The investment industry still has a pretty good idea of where you should stand at different life stages, though. Just to make sure you're on track to amass retirement savings of around 11 times your pay by the time you're ready to retire in your later-60s, T. Rowe Price adds that you'll want your nest egg to be about nine times your annual pay when you're 60 years of age. A 60-year-old earning a yearly salary of $80,000 should have $720,000 squirreled away for retirement by then, for instance.

And this rule of thumb once again aligns with recommendations from Schwab, Merrill, and Fidelity, and again, it's in the middle of a reasonably wide range. Some people will be fine with only six times their yearly wages saved for retirement when they're 60, while others may be setting themselves up for fiscal strain with as much as 11 times their salary at this stage of life.

If you're behind

But you're behind? Most 60-year-olds technically are. But don't panic, or beat yourself up.

In its most recent (2022) survey of U.S. consumers' finances, the Federal Reserve suggests that the average 60-year-old only has a little over $500,000 in retirement savings, which isn't terrible, but arguably not enough to fully fund the comfortable retirement they've likely dreamed of. The Census Bureau reports that the typical retiree living in the United States is spending an average of $60,000 per year. Half a million bucks isn't going to cover that amount of annual outlays for very long.

This average savings figure is also a somewhat misleading number -- for the worse. As Vanguard's "How America Saves" report for 2024 points out, although the average 401(k) balance for people between the ages of 55 and 64 is $244,750, the median number is a far lower $87,571. That means half of its plans' participants have even less than this latter figure saved up. The "average" is skewed higher by a small number of abnormally wealthy investors.

Image source: Getty Images.

Still, being behind doesn't mean you can't catch up, and it certainly doesn't mean you shouldn't do anything. The key is simply doing all the little things you can start doing in the meantime while you figure out ways to do the bigger things that may seem initially out of reach. They're not.

Yes, this means some serious saving -- probably more than you can comfortably do without major cost-cutting. This may mean foregoing the purchase of a new vehicle and finding a quality used one instead, which could cut your car payment in about half. You might be surprised to learn that, based on Bureau of Labor Statistics data, the average American household spends approximately $4,000 yearly on restaurant dining. That can be dialed back as well. Then there's the streaming services you don't quite use enough to justify even their modest cost. Collectively, they're not cheap.

Also, bear in mind that some investments are more likely to perform better than others. It's shocking how many savers leave their retirement accounts invested in cash-like and near-cash instruments when a range of alternatives would yield better returns.

The point is, there are things you can do if you're a 60-year-old who wants to -- or needs to -- tuck away more for retirement. In fact, you should be excited if that's where you are. Although you're clearly closer to retirement than not, the six or seven years you've got left to work are not only apt to be high-earning ones for you, but that's actually quite a bit of time to work with.

The hard part is simply getting started by taking that first action step. This might encourage you though: Each step you take gets easier than the last.

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Charles Schwab is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends Charles Schwab and T. Rowe Price Group and recommends the following options: short March 2025 $80 calls on Charles Schwab. The Motley Fool has a disclosure policy.