How Much Should You Save for Retirement at Age 45?

by Kevin Johnston

When you reach age 45, it may dawn on you that you won't be working forever. You'll need retirement money. If you've already been saving, you will set a different goal for setting aside money than if you're just starting to save. Either way, you need a plan. You can overcome your concerns about not having enough money set aside for retirement by taking action and sticking to your commitment to save money for your future.

By Age 45

If you started saving money early in your working life, you should have a good start on your retirement savings. "Time" magazine reports you should have three times your salary put away by age 45. The idea is that you want your retirement lifestyle to resemble your present lifestyle, so three times your annual salary at this age will help get you to that goal.

From Age 45 with Some Savings

You need to know how much to save from age 45 on. If you have three times your salary saved already, gradually increase your savings rate so that you'll have five times your salary saved by age 55. For example, if you're 45 and have a salary of $50,000 a year, you should have $150,000 saved. Assuming your salary goes up to $55,000 by age 55 you should plan on having five times that, or $275,000 saved 10 years from now.

Starting at Age 45

If you start saving at age 45, you will need to save 64.2 percent of your income, according to "Forbes" magazine. If you are able to achieve that savings rate, when you retire, your standard of living may be similar to those in your current income brackets. You could end up living on about 80 percent of your current income after you retire.

Alternative Methods

If you feel you can't possibly save at the rate you need to from age 45 on, you have some options. You can delay retirement to age 70 and receive a much larger Social Security benefit. In addition, you can make plans to live on an income that is 70 percent of your current income rather than the standard 80 percent that retirement calculations use. On top of that, you can plan to work part time or start your own business. If you draw Social Security benefits at your full retirement age or after, there is no limit to how much you can earn from a job or a business and still draw your full benefit.

About the Author

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.

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