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Saving for retirement is arguably one of the important financial goals in your life. That’s because it impacts your financial security and quality of life, especially after you leave the workforce. Although it’s never too late to start saving at any age, the earlier you start, the better for various reasons.
Not only do you secure your financial independence, but you also benefit from compound growth, protect yourself from inflation, and don’t have to rely on Social Security as your sole source of income.
Key Takeaways
- There are many benefits to saving early for retirement, including the power of compounding interest and more time to recover from market risks.
- You should save 3.5 to 5.5 times your salary for retirement at 50.
- Maximize your contributions and reduce your debt.
- Consider adjusting your retirement plans, and don’t forget to save for your healthcare costs if you’re 50 and older.
The Earlier, the Better
It’s important to start saving for retirement regardless of your age. But the earlier you start, the better. That’s because the longer you wait, the more money you’ll have to save. As you save, it’s important to have a focused goal in mind, even if it’s to end up with financial independence, according to André Small, financial planner at A Small Investment.
“Even for younger clients where retirement is 35 years away, I focus on what the client values most and let that guide their plan and savings strategy for retirement,” he says. “So, yes, start saving early and often, but also do it with a plan that aligns with your values and desired retirement.”
Starting your retirement savings plan early gives you many benefits:
- Your money has time to grow because it works on the principle of compounding interest. The money you contribute earns interest, which also accumulates interest. This gives you a larger retirement plan over time.
- You have more time to recover from market risks because you have a longer time horizon. You have a greater risk tolerance when you’re younger, so you can invest in riskier investments.
- When you’re younger, you can invest in more diverse asset classes, which allows you to manage more risk. So, if your stocks aren’t doing well, your bond returns may balance out those losses. and vice versa.
- Your financial burden is lower when you’re younger. You can afford to invest smaller amounts when you’re younger because you have a greater length of time until you retire.
Retirement Benchmarks
There are certain benchmarks that experts suggest investors stick to when it comes to their retirement planning. The chart below highlights how much people should consider saving by their age group:
| Age Range | Benchmark |
|---|---|
| 30 | 0.5× of salary |
| 35 | 1× to 1.5× salary |
| 40 | 1.5× to 2.5× salary |
| 45 | 2.5× to 4× salary |
| 50 | 3.5× to 5.5× salary |
| 55 | 4.5× to 8× salary |
| 60 | 6× to 11× salary |
| 65 | 7.5× to 13.5× salary |
So, if you’re 50, you should be saving 3.5 to 5.5 times your salary for retirement. That benchmark gets wider the closer you get to retirement, As such, it’s important to decide what age you want to retire.
“Someone in their 50s should have a plan in place as they approach their desired retirement year,” says Small. “The 50s is the perfect time to evaluate values, goals, and how they align with where someone is currently.”
While you may not have time on your side, that doesn’t mean you should delay saving. Small says you should have a plan in place as you approach your desired retirement year. Being in your 50s is the perfect time to evaluate your values and goals.
Keep in mind that you should make adjustments to that benchmark if you’re single, married with one income, or married with two incomes. According to Small:
- Start with your current expenses (minus any existing saving strategies and any other expenses that you may not expect in the future) as the benchmark to determine what you’ll need in retirement.
- Adjust for inflation for the years to and through retirement.
- Once this expense number is determined, you can decide what you need to save now.
Tip
Make sure you have an emergency fund. This is money set aside in a liquid account, such as a high-yield savings or money market account. You should have at least three to six months’ worth of expenses saved.
Factors to Consider
There are a lot of different factors that you’ll have to consider when you’re approaching or in your 50s. For instance, make sure you review and optimize your investment strategy. Remember, your portfolio returns should not be compared at this point in your investment career to the S&P 500 or any other index, for that matter.
“Returns should be assessed based on what’s needed to support your retirement income goal,” says Small. That’s because your situation means you may not need to take on additional stock market risk to obtain your desired retirement lifestyle.
Here are a few other things you should consider as you head toward retirement.
Maximize Your Contributions
Small says you should take advantage of employer-sponsored retirement plans, especially if your company offers an employer match. This is money your company contributes on your behalf based on how much you set aside. Put simply, it’s free money you give away if you don’t contribute. Remember, 401(k) plan contribution limits are $23,500 in 2025 with an additional $7,500 if you are 50 or older.
And don’t forget to invest in traditional individual retirement accounts (IRAs). These plans allow you to contribute as much as $8,000 if you are 50 or older in 2025.
The same limits apply for Roth IRAs, but you must meet certain income thresholds. The table below highlights the income qualifications for 2025:
| Filing Status | Modified Adjusted Gross Income (MAGI) Range | Allowable Contribution |
|---|---|---|
| Single | Less than $150,000 | $8,000 |
| $150,000 to $165,000 | Partial contribution | |
| $165,000 or more | $0 | |
| Married Filing Separately (if you didn’t live with your spouse at any point during the year) | Less than $150,000 | $8,000 |
| $150,000 to $165,000 | Partial contribution | |
| $165,000 or more | $0 | |
| Married Filing Separately (if you lived with your spouse during the year) | Less than $10,000 | Partial contribution |
| $10,000 or more | $0 | |
| Married Filing Jointly | Less than $236,000 | $8,000 |
| $236,000 to $246,000 | Partial contribution | |
| $246,000 or more | $0 | |
| Surviving Spouse | Less than $236,000 | $8,000 |
| $236,000 to $246,000 | Partial contribution | |
| $246,000 or more | $0 | |
| Head of Household | Less than $150,000 | $8,000 |
| $150,000 to $165,000 | Partial contribution | |
| $165,000 | $0 |
Reduce Your Debt
Look for opportunities to cut back on your debt. Take a proactive approach to tackle your debt. You can do this by prioritizing high-interest debt, such as credit cards and personal loans. Use debt repayment strategies like the debt avalanche or debt snowball method to pay off your debts faster.
Consider downsizing after you’ve turned 50, especially if your kids have left home. Moving to a smaller home can reduce your living expenses and free up your monthly bills so you can save more money for retirement.
Cut unnecessary expenses, such as unused streaming services and memberships. Eliminate any nonessential spending like that extra night out. Remember, making small sacrifices can help you in the long run.
Adjust Expectations About Retirement
You may have to make mindful changes about when you’ll retire. Be realistic. If you haven’t started saving for retirement, you probably can’t expect to be financially independent and live a lavish lifestyle solely on Social Security at age 65, so you may have to delay retiring. You may also want to consider the following:
Make Healthcare Plans
Healthcare is one of the biggest concerns for retirees, which is why you need to make plans about the cost of your medical care even before you leave the workforce.
“Keep in mind that any individual’s health situation is unique, and they may need to plan for additional healthcare costs in retirement,” says Small.
Remember that people are living longer. According to the U.S. Centers for Disease Control and Prevention, the average life expectancy in the United States was 78.4 years (75.8 for males and 81.1 for females) as of 2023. With Medicare, you’ll have out-of-pocket costs for co-pays, co-insurance, premiums, and deductibles, so you must set aside cash to cover these expenses.
The Bottom Line
Everyone’s financial situation is different, so not everyone may have the chance to start saving for retirement early. But make sure you take every opportunity you get. While the points listed above serve as a general guideline for people in their 50s, it’s always a good idea to sit down with a financial professional to map out a plan and lay down a solid foundation for your retirement planning.
