If you’re asking yourself how much money you should have saved up by the time you turn 50, chances are you’re worried about not having enough. But how much exactly do you need to have saved by 50 to make sure you’re not falling behind on your retirement plants? Let’s take a look.
How much does the typical 50-something have saved?
While the amount of money people have saved typically goes up with each age group, those over 50 don’t seem to have as much set aside as expected. According to Occam Investing, those between 45 and 54 have average savings of £5,000 to £12,500. In contrast, the 55-64 age group has anywhere between £12,500 and £25,000 stashed away.
Perhaps more worrying is that 25% of those under 54 are in debt or have no savings at all. It means at least a percentage of people in their 50s have no emergency funds.
How much should you have saved in emergency funds by age 50?
Financial experts recommend having the equivalent of at least three months’ salary saved up for emergencies. This means that if your essential monthly expenses are around £1,000 a month, you should aim for £3,000 in emergency savings. For a better safety net, enough to cover six months of expenses is a better option. To make the most of your emergency savings, consider putting the money away in a high-yield savings account.
But numbers aren’t looking good in general. According to analysis conducted by Finder, the average Brit had £6,757 saved up in 2020. But a third of Brits have less than £600 in savings. Even worse, 41% of Brits don’t have enough savings to live on for a month without income. And one in 10 of us have no savings at all.
How much should you have in retirement savings by the time you turn 50?
There isn’t a single answer that fits every situation, mainly because this depends on how you want to live in retirement. If you’ll retire with no mortgage and no debt, your expenses will be much lower after retirement. The same is true if you plan a quiet retirement without big purchases or expensive travel plans.
As a general rule, Fidelity Investments recommends having at least six times your preretirement income saved by the time you turn 50. This means that if you earn £25,000 a year, you should have at least £150,000 in retirement savings at 50.
If you’re a woman, you might be facing an additional challenge to achieving this. According to The Guardian, the average woman has less than half the income of men saved for retirement.
How can you start to increase your savings?
Starting to save at age 50 isn’t ideal, but it’s certainly better than not starting at all. The state pension age in the UK is now 66, but the average retirement age is currently 65.3 for men and 64.3 for women. This means a lot of people are leaving the workforce earlier. If you’d like to join the trend, this might be a good time to beef up your savings.
A few things you can do:
- Maximise your pension contributions. At 50, you still have 15 years ahead to work. If you delay your retirement until 70, then that gives you 20 years to save for long-term returns. Make sure you check how much your employer is putting into your pension pot. If it’s just the minimum, find ways to add more. For example, every time you get a raise, crank up your pension contributions.
- Find a financial advisor to guide you. At 50, you shouldn’t be taking big risks with your investments as you might have done at 20.
- Take a new look at your budget and consider ways you can cut expenses. Reroute any ‘found’ money towards savings and investments.