The Reality of Retirement Savings in Your 50s: What You Need to Know

People nearing retirement age in their 50s generally have little savings for their post-working years. Experts recommend that you should ideally be saving for retirement at age 50, or six times your annual salary. For example, you might try to save about $600,000 if your annual income is about $100,000. However, many people in this age group have very little saved in their retirement accounts. Fidelity Investments, U.S. a company that offers 401(k) retirement plans, provides data that by the last quarter of 2023, the average American 50-year-old will have an account balance of only $60,900 though the average balance is $199,500. Below is how much Americans saved in their 401(k) accounts by the fourth quarter of 2023, based on data from Fidelity.

Understanding the 401(k) Gap

Many people in their 50s didn’t save enough for retirement because they weren’t aware of recent changes to the 401(k) program. Retirement researcher and author Anne Lester notes that younger workers have benefited from the employer support of the 401(k) plan systems with features such as self-registration and auto-enhancement. But by the time these changes were made, older workers were already well-established in their jobs. "Generation Xers first started working when they had to decide whether to join their employer's pension plan, and participation rates were low," says Lester. "But if they just sign up, the engagement rate is usually higher, around 95%, because people are less likely not to want to."

One advantage is that of all age groups, people in their 50s have the highest savings rates, which means they allocate most of their income to retirement They save, which employers include matching, and they averaged about 13% of their salary for retirement, up from about 15% that Fidelity advises it offers. 

How to Improve Your Retirement Savings in Your 50s

If you're in your 50s and worried about not having enough saved for retirement, there are steps you can take to get back on track.

Contribution to retirement

Adults aged 50 and over have the option to make additional contributions, called "catch-up" contributions, to tax-benefit pension fund plans for the 2023 and 2024 tax years with those aged 50 and over making $7,000 another will support their 401(k ) accounts. You can donate up to $1,000 which can also be transferred to a traditional or Roth individual retirement account (IRA).

Consider delaying retirement

If you are falling significantly behind your savings, it may be time to rethink your retirement age. Start thinking about your retirement plans in your 50s, suggests Anne Lester. Investigate scenarios, such as retiring at 62, 65, 67, or 70, and plan accordingly. Working longer allows you to save more and reduces your retirement needs because your retirement will be shorter. Also, delaying retirement gives you more time to build up your savings.

Choose long-term Social Security benefits

While you can start receiving a Social Security pension at age 62, it pays to wait until the full retirement age set by the Social Security Administration. Benefits start early and offer regular payment discounts. Anne Lester advises waiting a few more years because for every year you delay your full retirement age beyond age 70 your Social Security benefit increases by 8%. This gift can significantly increase your guaranteed retirement income.

What if You Don't Want to Retire Late?

But not everyone has the ability or desire to put off retiring. If so, Lester advises that you may need to figure out how to live on less money in your post-employment years. When you know exactly how much money you'll have left over when you quit your job, you can begin to consider ways to cut back on your expenses.

"It's helpful to explore where your financial limits are," Lester explains. "There's a minimum level you don't want to go below, but you can also get used to spending less." You might want to look into places with cheaper living expenses or make plans to cut back on certain discretionary spending in advance if you anticipate living on a lesser yearly income during retirement.