Part of planning for retirement is figuring out how much to save and invest so you can enjoy the lifestyle you want. Defining your savings goal by age can be a good way to organize your strategy and assess how to track progress toward your goals. You might also be interested in how much a typical retiree has saved at age 65, 70 and beyond. In this article, we’ll focus on how much the average person has saved and perhaps should have saved by age 70. Keep in mind, however, that your situation is always completely unique depending on your goals. You may want work with a financial advisor to make sure your savings goals match what you need to do later.
How much savings do people aged 70 have on average?
According to data from the Federal Reserve’s most recent survey of consumer finances, the average 65- to 74-year-old has just over $426,000 in savings. It’s money specifically set aside in retirement accounts, including 401(k) and IRA plans.
The Federal Reserve also measures median and mean (mean) savings on other types of financial assets. According to the data, the average septuagenarian has approximately:
-
$60,000 in transaction accounts (including checking and savings)
-
$127,000 in certificate of deposit (CD) accounts
-
$17,000 in savings bonds
-
$43,000 in life insurance with cash value
In terms of overall trends, the figures show an increase from the previous Consumer Finance Survey. According to that survey, the average 65- to 75-year-old saved $381,000 for retirement in 2016. That figure, however, was well below the $486,000 that average 70-year-olds saved in 2013.
Whether the Survey of Consumer Finances for 2022 shows an increase or a decline in savings remains to be seen. Although Social Security benefits have seen several increases in the cost of living since the last survey was completed, high inflation put more pressure on the purchasing power of Americans. The survey may show that 70-year-olds have less retirement savings if they spend more to offset rising prices.
How much savings should a 70 year old have?
Financial experts generally recommend saving between $1 million and $2 million for retirement. If you look at an average retirement savings of $426,000 for people aged 65 to 74, the numbers obviously don’t add up.
How much a 70-year-old should save for retirement can depend on several factors, including:
-
Desired retirement lifestyle
-
When they apply for Social security benefits
-
Other sources of retirement income, such as a 401(k), IRA, pension, or annuity
-
Other savings, including taxable brokerage accounts, savings accounts, and CDs
-
Overall health and life expectancy
The more money you plan to spend on living costs in retirement, the more you will generally need to save. Social Security benefits are an essential part of many retirees’ income, but these payments may not go that far. Pensions, meanwhile, are becoming increasingly rare, with employers opting instead for defined-contribution schemes.
Long-term care can strain retiree budgets and increase the amount of money you need to save. Medicare does not cover long term care, unlike Medicaid. But to qualify for Medicaid, you will usually need to spend your assets. Purchasing long-term care insurance can be a workaround so you don’t risk depleting your savings.
What is a good net worth at 70?
Net value is a measure of your assets relative to your liabilities. In other words, it’s the difference between what you own and what you owe.
The average net worth of Americans between the ages of 65 and 74 hovers around $1.2 million. The median net worth is lower, at $164,000. The typical 70-year-old has about $105,000 in debt, including mortgages, home equity loans, credit cards and student loans, as measured by Fed data.
What constitutes good net worth depends on the situation and is largely tied to your retirement goals. There are different rules of thumb you can apply to arrive at an ideal net worth calculation. For example, one rule suggests having a net worth of 70 which is 20 times your annual expenses.
If you’re spending $100,000 a year to live on in retirement, you should have a net worth of at least $2 million. On the other hand, if you only spend $40,000 on living expenses, your target net worth would be much lower at $800,000.
Is retiring at 70 a good idea?
Makes sense to retire at 70 may depend on your finances and what you plan for your dream retirement. When choosing the retirement age, it is useful to consider:
-
When will you really need to take Social Security benefits
-
If you will continue to work part-time after you retire
-
How long do you expect to live in retirement
-
Your desired savings goal and current savings rate
If you can delay receiving Social Security benefits until age 70, this may increase the amount of your benefits. You will be able to collect 132% of your benefit amount by waiting longer before applying.
You can also continue to save and invest to retirement if you work longer. For example, you can continue to max out your 401(k) each year, or at the very least contribute enough to get your employer in full. You can also funnel money into an IRA for additional savings.
Retiring at 70 means you’ll have a two-year gap before you have to start taking Required Minimum Distributions (RMD) of a traditional 401(k). You will also need to take RMDs if you have a Roth 401(k), but Roth IRAs are exempt from this rule.
In this window, you can decide to convert your traditional IRA to a Roth Account. This can mean a higher tax bill in the year of conversion since you have to pay taxes on your traditional IRA earnings. But in the future, you can benefit from tax-free distributions from your Roth IRA.
The essential
How much savings does the average 70-year-old have? Just under $500,000, according to the Federal Reserve. Perhaps the better question, however, is whether that’s enough for a septuagenarian to living in retirement so that you can align your budget Consequently. With endless inflation in sight, retiring with $500,000 may not be realistic for everyone. The good news is that the younger you are, the more time you have to plan, save and invest for the future.
Retirement Planning Tips
-
Consider talking to your financial advisor about the pros and cons of retiring at age 70 and what your personal retirement timeline should look like. If you don’t already have a financial advisor, finding one doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your corresponding advisors for free to decide which one is best for you. If you’re ready to find an advisor who can help you reach your financial goals, start now.
-
Delaying Social Security benefits could help you collect more money in retirement. Taking benefits early, however, could reduce your monthly payment amount. The earliest you can start taking Social Security is age 62, but you may benefit from waiting until at least your full retirement age to apply. Also keep in mind that if you decide to take Social Security earlier and continue to work, your benefit amount may be further reduced. Understand how maximize social security benefits can help you get the most money possible.
Photo credit: ©iStock.com/kupicoo, ©iStock.com/AleksandarNakic, ©iStock.com/jeffbergen
The post office How much savings do people aged 70 have on average? appeared first on SmartAsset Blog.