The Average Retirement Savings By AGE! (2025 Edition)

Transcript:

On this episode of the Personal Finance Podcast, the average retirement savings by age in 2025. What's up everybody?

And welcome to Z personal Finance podcast. I'm your host Andrew, founder of Master money.co. And today on the personal finance podcast, we're going to be diving into the average retirement savings by age in 2025.

If you guys have any questions, make sure you join the Master Money newsletter by going to mastermoney.co/newsletter. And don't forget to follow us on Apple podcast, Spotify, YouTube, or whatever podcast player you love listening to this podcast on it. If you want to help out the show, consider leaving a five star rating and review on Spotify, Apple Podcasts, or your favorite podcast player.

Now today we're going to be diving into the average retirement savings by age. We're going to dive into Fidelity's data where they looked at millions of different 4O1K and different retirement plans and looked at how much people had in those accounts by age.

Now today what I'm going to go through is I am going to go through the different age levels and how much they have saved. But then in addition, right after I'm going to talk through some of the challenges is that you have by each decade, meaning that what are some challenges that people have in their 20s versus people in their 30s versus people in their 40s?

And how do you overcome some of those challenges to ensure that you can saving the for retirement too? So I absolutely love doing these episodes because they are super, super helpful for a lot of people. And so when we're talking about this, Fidelity has this chart of a four O 1K balance by age.

And this chart is going to help you kind of visualize and see, hey, most people do not have enough saved for retirement. And so we want to make sure that we make those changes. And so we're going to overcome those challenges as we go through this. So without further ado, let's get into it. All right, so if you're in your 20s, what is the average retirement savings by age?

Well, according to Fidelity's data, the average 401K balances for people in their 20s, if you're between age 20 to 24 is $7300. And if you are age 25 to 29, it is 24,000 dollars.

Now this is something where we are seeing, you know, the average person who is in their 20s, they are starting off with a lower income or entry level salary. And so because of this, because you have lower income or an entry level salary, it is a lot harder to figure out what the gap is going to be. Now, what is the gap?

That is the difference between your income and your expenses. And so many people who are in their 20s, they are just entering the workforce. I know my first job when I left college was a very low paying job. I had an entry level job. I was making $30,000 every single year and I realized very quickly it is very difficult to have enough cash on hand to also save for retirement.

And so this constraints how much you can save or divert towards retirement. Also, a lot of people who are in their 20s, they have a high debt burden, specifically when it comes to student loans. So I know how frustrating student loans can be. And every single year it seems like the rules are changing with your student loans and it becomes very difficult to plan on how you can pay those down.

And so this is constraining a lot of people when it comes to their budgets, trying to figure out how to save enough and get more dollars in those retirement accounts also is they don't have financial habits yet. So when I first graduated college, I've tell this story a million times, but I didn't have those financial habits in place yet.

And you have to kind of learn as you go. And so because I did not learn to budget, I did not learn to save and figure out where all of my money was going by the end of the month. I never truly knew how much was leftover. And so that is a huge thing that I think a lot of people in their 20s have to go through also is just uncertainty.

So early career is often a time of transitions. So you're either changing jobs and job hopping because there are better opportunities to make more money and or you just don't like the initial place that you started to work, or you're trying out new industries and seeing if you like those industries. And because of this uncertainty, sometimes you can have setbacks when it comes to your finances.

And also there could be lifestyle pressure. So maybe some of your friends are making more money right off the bat and they're going out on these vacations and doing these things and you want to do the same exact things. And so you have some of that lifestyle pressure, that lifestyle inflation coming into place. So we want to make sure that we are thinking through all of these challenges that you're going through now.

How do you improve your retirement savings in your 20s? Because people in their 20s, they obviously just have tons of different challenges that are coming up in addition to the big one we did not talk about, which is the cost of living. It is very expensive right now to live. And when wages are so low, the cost of living is high.

It is difficult to get by with some of that stuff. And so we need to figure out how we can improve our retirement savings in our 20s. Now here's one thing I want you to know. 20 year olds, because you're in your 20s, you need to note that overall, this is the decade where even small amounts of money are going to make a huge impact to your retirement over time.

So even if you have 5000 hundred and $5200, it has a major impact on your bottom line. So we have this thing called the wealth builders matrix. And if you've never seen the wealth builders matrix, it tells you based on how much money you save, what every single dollar is worth based on your age.

So in the wealth builders Matrix, it's going to show you the value of every, every single dollar you invest. So you'll see that even small amounts of money overtime can grow to very large amounts of money. Someone in their mid 20s, every dollar they invest is going to be worth $70 by the time they retire at age 65.

And so this is where it is really, really important to note that small amounts of money can grow to very large amounts of money. So I don't care how much extra you have, you need to take a small portion of that extra and start putting it towards retirement accounts. You will not regret it. I have never heard anybody in their 20s say, man, I really wish I did did not save that extra money towards my retirement account.

No, every single time people are happy they did it. Now you can do this a number of different ways. You can do this with your employer match. That is a great way to get some automatic savings because it's going to double up or help you boost those retirement savings. So if you don't know what your employer match is, that is where your employer offers you a match.

If you put a certain amount in your 4O1K, so let's say for example you put 3% in your 4O1K, then they will also put 3% up to whatever the employer match is. So check with your HR department, see if they have that employer match, and then in addition, looking into your Roth IRA or your 4O1K can be an awesome option.

Number 2 is to automate these contributions. So once you start sending money to your retirement accounts, I want you to automate those contributions to make it seamless, to make it easy and reduce friction and reduce the willingness on your willpower. What you do not want to do is have to rely on your willpower to send money every single time.

Instead, I want you to send it automatically so you don't even have to think about it. You don't have to lift a finger, you don't have to budget it out. It just happens automatically. It is by far the best way to do this. Now we have something called the automation checklist. If you've never automated your money before, we have an automation checklist that takes you step by step and teaches you exactly how to automate your money.

So we'll link up that down below in the show notes so that you can check out the automation checklist #3 is to make sure you capture that employer match. So we just talked about this is to capture that employer match because it is free money. It is a 100% rate of return. So at the bare minimum, no matter what you do, if you're paying off have high interest debt, you're trying to save in your emergency fund, all these other things, you first always want to make sure that you get that employer's match because it is going to be free money and you want to take advantage of that.

Also, any high interest debt that you have on hand, we want to make sure that we reduce that high interest debt. So I'm talking any debt above a 6% interest rate. If you have high interest debt, I need you to knock that down. So if you have credit card debt, that's probably a 20 to 30% interest rate. That my friends is a huge problem.

We need to get rid of that as fast as we possibly can. And so once we get rid of that credit car debt, you're going to have extra cash leftover that you're going to be able to put towards your emergency fund and towards your retirement accounts. That's going to be very, very important. Keeping expenses in check is another thing. So a lot of your friends may be going out and having some fun.

Maybe they're going on vacations. But what you don't know is when you're in your 20s, a lot of people are making poor financial decisions. And a lot of times either they're living paycheck to paycheck and they're spending every single dollar they make and, or they're going into debt with some of these financial decisions.

You would be surprised at how many people who are around you that are actually going deeper and deeper into debt every single month. How do I know? Because they come and have conversations with me saying I need to get out of this situation. And so really the big, big thing we need to note is that you do not make financial decisions based on the actions of other people around you.

I want you to change your mindset and instead focus on the things that you can control. What can you focus on that you can control? You can control your savings rate. You can control how much you earn, the skills that you have. You can control how you spend your money and how you intentionally think about spending your money.

All of those are really important ways for you to think about your finances over time and then educating yourself. One of the things that we do in Mastermind Academy that I absolutely love is we have the High Performance Book Club in there. We are all working on our financial education at the same time together as one community and so this is something where we are reading through a book every single month.

Most people are working through the wealth builders journey and trying to transform their finances. We have Index Fund Pro and all these different things inside of Mastermind Academy that help you through this process. And so it is so cool to see people who are all on the same page, including myself. We're going through these books and reading through them together and we all have one common goal, which is financial independence.

And that is why I love Mastermind Academy and some of the ways that we are educating ourselves. And you should be doing that to spend time every single week, at least an hour every single week, educating ourselves on different things that you need to grow on. So maybe that is learning about finance and personal finance because you're just getting started.

Maybe that is is learning how to invest, maybe it is understanding how to automate your money, or maybe you're trying to increase some of the skills that you have on hand so that you can grow financially. All of these are wonderful, wonderful things that you need to be doing, but spending an hour every single week focusing on your education is all you need.

That is all you need to be able to make a huge impact on your financial life. An hour every week is 365 hours per year. You know how much you can grow in 365 hours per year? Hour per week is 52 hours per year. You know how much you can grow with 52 hours per year of education.

Imagine if you did an hour a day, that's 365 hours per year of education. That is going to change your financial life for sure. And then learning how to set goals. So we teach you to set goals in 12 week increments, meaning that the big thing that we want you to do is we want you to achieve those goals quarterly.

What a lot of people do is they do these stretch goals throughout the year and just a couple months down the line, they never achieved those goals. Well, we teach you to tighten that up and we want you to be able to to achieve those goals very, very specifically over the course of 12 weeks now in Master Money Academy.

One thing we are doing over the course of the new year is we're going to be going through goal setting strategy sessions with all of our members. And so we're going to be talking through how to set goals, how to make sure you accomplish those goals throughout the next year in 2026. And it's a really powerful way for most people to learn.

This is how you set goals. We have very specific ways that we set them. And so learning how to do that with yourself is also very important. So we're coming up to the end, end of the year, you guys need to start thinking about your financial goals for next year so that you can accomplish them and start to list some of those out and start to prioritize some of those financial goals.

And having those milestones and goals is really important. A great one is to Max out some of those retirement accounts cuz we're looking at the average retirement savings by age year. And so we want to make sure that we are maxing out those accounts as much as we possibly can. So those are some of the things for folks in their 20s. I highly encourage you to check out because this is going to change your life financially if you can start to to overcome some of these hurdles and learning how to overcome one hurdle at a time is how you get there.

This is a long term process. We're playing the long game here so that we can achieve financial independence and actually accomplish our goals. So that's what I want for each and every single one of you. So making sure we do that is perfect. Now let's jump into the 30s. So once you hit your 30s, now it's time to get the ball rolling when it comes to your finances and making sure that you actually take advantage of the time that you still have left available so that you can actually retire comfortably.

Our entire goal in our 30s is let's strap up. Let's make sure we get as much money as possible into retirement accounts so that that money can grow over time and compound interest takes over. And so in your 30s, there's a number of things that I want you to do. But first let's look at the average balances according to Fidelity of People in their 30s.

So people aged 30 to 34, the average 4O1K balance is $49,000. And people aged 35 to 39, the average 4O1K balance is $85,000. So if you are just getting started, that is completely fine. But those benchmarks and those averages are very low in comparison to where you should be.

You should have much more in your retirement account than some of those numbers. Now, again, if you're just getting your finances together, you just paid off a ton of debt. You've been working through your 20s trying to figure out what the heck you're even doing with your finances. Nothing wrong with that. But if you have been, you know, getting your finances together for a certain period of time and you have a low balance, it's time to crank that up even more.

Now, Fidelity has these benchmarks, and they talk through these different benchmarks stating how much you should have saved up by age. So according to them, by age 35, you should have two times your annual salary saved for retirement, and by age 40, you should have three times your annual salary saved for retirement.

And so these are some of the benchmarks that you can look to target. One thing that we talk about a lot is making sure you're on path or in progress to figuring out what is my retirement age or when do I want to retire and how do I get 25 X my annual expenses in order to be able to retire.

That's the 25 X rule that we talk about all the time. And so that is really, really important. Now, what are some common challenges for people in the 30s? Because I want to talk through these challenges and then we're going to go through ways to get over these hurdles for folks in their 30s. Because when you're in your 30s, what happens? This is, is the messy middle.

This is the time frame where life gets chaotic. It gets hectic. Why? Well, number one, a lot of folks are getting married or maybe you already were married in your 20s. And so because of that, you're going to have a lot of different life changes. What do we do with our finances? Do we combine our finances? Do we keep them separate?

That is a huge hurdle to overcome in and of itself. Secondly, is a lot of people start to have kids. If you didn't start to have kids in your 20s. And so kids are really going to make your life hectic, chaotic. It's awesome, but it's also chaotic. And so you want to make sure that you are planning financially.

When you have kids, all of this stuff is going to come into play where this in your personal life is going to make everything a little bit more hectic. But guess what? Secondly, is your career is probably starting to take off a little bit and you're making a little more money and you got to figure out what to do with those dollars.

And you're trying to balance a number of different things. Maybe you're trying to buy a house, maybe you're trying to buy a new car, you're trying to balance your vacation goals, you're trying to balance your retirement goals. You want to save for retirement, all of these different things, trying to juggle them is not easy unless you have a financial plan in place. And in Mastermind Academy, that's why we give you that financial road map.

We give you the exact road map that you need in order to make sure that you achieve those financial goals. So let's go through some of these challenges that you're thinking through because this messy lifestyle is something that you can absolutely make clean, neat, and organize where you don't need to have stress around your money.

The last thing you need to focus on is everyday financial decisions. Instead, if you have an automatic system in place, you can achieve so much more. Second thing is major life expenses start to stack up. Maybe you bought a house, maybe you have a car payment, you have kids, you have daycare costs.

Daycare costs are a massive cost for most people in their budget and not enough people talk about it. If you have young kids and you have to send them to daycare because both the husband and the wife work well, guess what? Now we have an issue where this is one of our biggest expenses in our budget.

And so because of this, these major life expenses can add up. But in addition, you still have maybe student loans that have carried over in all these different things. Then we have a debt and savings tug of war, meaning that we are trying to figure out how do I pay down debt, but how do I also save enough for retirement? How do I do all of these things?

And so really having that financial road map in place is very important. Then we think through, well, time. We don't have as much time as we used to in your 20s, maybe you were single or maybe you just got married and you had a lot more time than you do right now, where time becomes less abundant in your 30s because it gets messy.

And then lastly, if you don't have a plan in place, you're going to be dead in the water. You need to make sure that you have that financial plan in place step by step, what you need to be doing next. That is the most important thing overall because once you have a written financial plan, then you'll be able to achieve anything you want to just by following those steps.

Now, how do we boost our retirement savings in our 30s? Because we see these averages here by Fidelity. Those are not the averages that we want to be seeing. And so how do we boost these retirement savings to make sure that you are hitting your retirement goals, hitting that retirement number so that you can achieve keep financial freedom at some point in time?

Well, number one is we want to prioritize raising our contribution rate. So every single time you get a raise, for example, we can start and look and increasing that contribution rate every single year. Now I highly recommend for everybody out there to at least increase how much they are contributing to their retirement accounts by at least the inflation rate.

If you're not maxing them out already, at least increase it by the inflation rate. That means you increase the buying power that is going into these retirement accounts. But also, so that means that you are going to keep up with the purchasing power over time. So in your 20s, if you start with 5%, for example, you had a really low retirement savings.

We need to try to increase that over time. So our minimum that we want you to be saving is 20% of your income or more. If you want to be a true wealth voter, it is 20% of your income or more needs to be going towards wealth building activities. What are wealth building activities that's going towards your emergency fund and your investment savings.

So secondly is to continue to maximize employer match and get at least up to that match at the bare minimum. So we talked about your employer match in your 20s, but making sure you continue to do that over that time frame #3 is maximizing other retirement accounts. So once you start to make more money and in your 30s, your goal should be to increase your income as much as possible because these are some of the peak earning years that you were going to have.

Your 30s, your 40s, and even your early 50s are going to be some of those peak earning years. We need to make sure we are taking advantage of those and throwing chunks of money over to retirement so that compound interest can take over. Compound interest can work so much harder than you can. And so growing the gap is very, very important and we need to make sure we are looking at that.

Number 4 is watching out for lifestyle creep. So if you don't know what lifestyle creep is, that is when you get a raise and you spend all of that raise, meaning you increase the amount that you're spending every single month by that given raise. Well, that is a huge problem and a lot of people start to see lifestyle creep take over in their 30s because of these lifestyle changes.

So maybe you bought the bigger house and so your mortgage is much, much higher because you got a raise and then you get another raise and you buy the fancy car and then you get another raise and you go on all the fancy vacations every single year and it seems to never end. Let me give you a rule that's going to help you out with this. Instead, I want you to spend some of it on yourself.

You worked hard. You deserve to spend a portion of that raise on yourself. But you also need to make sure that you are saving a portion of that raise for your financial future. And So what we're going to do is the 5050 rule. Save 50% and spend 50%.

So 50% goes towards whatever you want to blow it on. If you want to go blow it on a vacation, if you want to blow it on a new handbag, if you want to blow it on some brand new Golf clubs to hit it right into the water, you can do that. But if you don't want to spend it on that, you can save all of it as well. But then take the other 50% and make sure you're investing those dollars.

That's what we want you to be doing when you get these raises. Next is I want you to figure out and optimize your tax strategy. Now. Taxes are a huge portion of what a lot of people do not optimize in their. Your 20s and I want you to really focus on this in your 30s because it can change your financial life if you do this find ACPA now we have a free checklist that will show you how to go out and find ACPA.

We'll link it up down the show notes below so that you guys can check that out, but make sure you learn how to find ACPA who is also a tax strategist. This is going to help you tremendously when it comes to building wealth. Next is to build an emergency fund. If you don't have an emergency fund in place, six months is our minimum and we follow the 136 method here and the 136 method means you save one month of expenses, then you pay off high interest debt, then you save three months of expenses, then you can start investing and you start to split off the rest between emergency fund and investments till you get to six months.

Six months is the minimum. We want you to have six months in your emergency fund. Always, always, always. Why? This is for job loss because if you do lose your job, then you to have six months of expenses in place that can help cover those expenses over that time frame. News flash, it is a lot harder to get a job right now than it used to be.

And so because of that, you need six months of expenses. And if you want to have a little more, more power to you. I think that's a good idea to be honest. So overall, having that safety net in place is really, really important. I highly encourage you to listen to the 136 Method episode. That's one of our most popular episodes that we have ever done, but that is our system teaching you how to save up with your emergency fund.

And so these are some of the things that you need to be doing in your 30s. It gets messy, it gets crazy. I know you are time constrained, but these are very important steps that we need to be taking in our 30s in order to ensure that we build wealth. Let's jump into the next one. So let's look at the average retirement savings for folks who are now in their 40s.

So according to Fidelity, who Fidelity again has millions and millions of four O 1 KS within some of their data sets, age 40 to 44 is $115,000 is what the average 4O1K balance is. Age 45 to 49 is $185,000.

So again, this is going to be way too low for most people. If you want to retire comfortably, if you want to have the retirement you've always dreamed of, if your 4O1K balance between age 45 to 49 is only 185 dollars, then we need to try to increase those contributions. Now, some of the benchmark goals that I want to talk through here are by age 40, Fidelity states that you need to aim to have at least three times your annual salary saved and by age 50 aim to have at least six times your annual salary saved.

So why does it jump so much between age 40 and age 50? Well, compound interest should be kicking in now and it should be doing some of the work to help you through that process. And so this is the catch up decade for a lot of people when you are trying to make sure that you maximize your retirement contributions. Your 40s is now the time to giddy up, my friends, because this is the time frame where you are really going to have to make significant progress.

Yes, you have enough time available where you can still maximize some of those contributions and you can reap the benefits of compound interest, but you don't have enough time to wait. You cannot wait anymore. When you're in your 40s, now is the time to get the ball rolling. Now, what are some of the common challenges for people in their 40s?

Well, first, you're going to have some of your peak expense years in your 40s. Your kids are getting older. Maybe they're starting to play sports. They're starting to do extracurricular activities. In addition, you may have demanding mortgage payments, you may have to be saving up for college. You're, you've got aging parents that are coming into your life and you're trying to figure out, OK, what do I do with them?

How do we figure out their care? In addition, lifestyle costs are peaking from all directions. Your 40s and even your early 50s, this is where your lifestyles costs are really peaking. Secondly is retirement starts to feel urgent in your 40s where a lot of people feel the pressure for retirement because they're realizing, Oh my goodness, I am just a couple of decades away from being in my 60s.

I got to make sure I get the ball rolling now. And people often feel guilty for how far behind they are, at least in their own eyes, they feel like they're far behind. Well, this is the time frame where I'm going to show you how to strap up and I'm going to show you how to get the ball rolling here. Also, they may have career plateaus or maybe even pivoting their career.

If you're in your 40s and you've realized, oh, man, I don't want to keep doing this. What I've been doing over the course of the last couple of decades, I can't do this for two more decades. I'm going to make a pivot while a lot of people in their 40s start to do things like that. And so making sure that we think through and we figure out how is this, it's going to impact our retirement, how is this going to impact our savings?

All of those are really important. They also may be balancing a lot of different priorities. Like we said, you could have aging parents, you could have young kids, you can have older kids, you could have a higher mortgage payment. You can have all these different costs that have been arising. And a lot of people in the 30s, again, This is why lifestyle inflation is dangerous because your cost could be rising over the course of your 30s.

And then all of a sudden you get a monkey wrench in where you also have to take care of an aging parent or you have to make sure that you are covering the cost for your kids. And this is where it gets really, really tight. And so we want to make sure that we are covering all that stuff and health insurance considerations.

So health insurance costs have been creeping up and we have to make sure we have enough in retirement for those. In fact, over the course of the last couple of decades, the inflation rate for healthcare has been 7% per year. And so you may feel behind just because some of the costs in retirement are rising.

And so you need to increase those contributions based on that time frame. So how do we boost our retirement savings in our 40s? What are some of the things that we can be doing in our 40s to make sure that we take advantage of this? Well, first we need to aim to Max out our retirement accounts.

If we can, try to increase your income enough to Max out those retirement accounts and get them fully funded. If possible, try to contribute to the IRS minimum in 2026. Guess what? Those IRS minimums are going up again. The four O 1K is going to get $1000 increase.

The Roth IRA is going to get a $500 increase. And every year those increases happen, we need to make sure we are increasing using our contributions. Using raises strategically is the second thing you need to do. So every time you get a raise, I don't care if it's 3%, I don't care if it's 10%. I don't care if you got a promotion and you're making 50% more.

You need to make sure that you are very careful with those raises and use them strategically. Do not blow the whole thing on a brand new car. Do not have a midlife crisis and go get a Corvette instead. Let's decide to think about how we are going to spend some of those raises.

Third is thinking through and considering that catch up mindset early, earlier you can start investing more the better off you are going to be. So if you're in your early 40s and you're listening right now and you're like man, this is the light bulb moment. It is time right now to get my financial act together. I need to make sure that I am saving enough.

Now is the time because time is slowly ticking away. It is never too late to start saving for retirement. So don't get me wrong here, but time is starting to tick away slowly. We need to get the ball rolling. Let's light a fire and let's keep it moving. Also, if you are maxing out those retirement accounts, let's consider also utilizing some other accounts.

Maybe you want to look at real estate, maybe you want to look at a taxable brokerage account. Both of those are fantastic, especially for those who want to retire early. A taxable brokerage account is a great option. And so making sure that we are looking at some of those other accounts is going to be important. And then refining your investment allocation. So let's look at our asset allocation and say to ourselves as we get into our late 40s and early 50s, when do we want to retire?

If you're on pace to retire on time, then look at your asset allocation and make sure it still fits the criteria that you're looking for for as you begin to approach retirement age. Now also, a lot of you out there are thinking to yourself, well, I need to make sure I'm saving for my kids college. Guess what?

That is great if you want to save your kids college, but you need to be on track with your own retirement goals before you even send a dime over to that 529 plan. Why? Because there are no loans in retirement. And if you become a financial burden to your children later on in life, then it's going to be a way bigger financial burden than any student loan ever would be.

And so you need to take care of your own retirement first. Then you always can help your kids later on down the line. But financially, your retirement always needs to come first. Always, always, always. It's the oxygen mask method. When a plane is going down. What do we do first?

We put on our own mask, then we help others. The same goes with your retirement planning. When you are saving for retirement, you need to take care of yourself first. Then you can start putting money in your kids 529 plan. I see way too many people out there right now who save in their Kids 529 plan before their own retirement.

Do not do that. Let me say this again, do not ever save for your kids college before you save for your own retirement. That is not the way to do this and you're going to become a financial burden to your own children later on down the line.

It's going to be way more expensive for them than it would be for them to just take out student loans. OK, So I need you to understand this very early and folks in your 40s, you need to make sure that you were covering that first. And then lastly is run your numbers by your 40s. You need to know your retirement number and you need to make sure you're on top of it every single year, meaning that you need to rerun the number every year and you need to ensure that you are on track.

How do you figure out your retirement number? Well, what's the quick and dirty math? We teach you how to do this in a very detailed way in Master Money Academy. But what's the quick and dirty back of the napkin math? You can look at how much you spend every single year. Multiply that number by 25. OK, so if you spend $80,000 per year, multiply that by 25, you're going to have $2,000,000.

That means you need $2,000,000 invested and you're financially free. If you could do that in five years, then you're retired. If you can do that in 15 years, then you're retired in 15 years. But you need to figure out what that number is so that you can, every single year, make sure that you were on track to hit it. So those are just some of the things that you can do in your 40s to stay on track for retirement and really get to the point in time where you were going to be able to retire comfortably.

That's what we want. We want you to retire, have your dream life, do exactly what you want, and money is the tool to help you do that. So if you're in your 50s, you don't have any time left. You have to make sure that you were planning for retirement now. Now is the time because you're in the last decade before your retirement years are coming up to ensure that you were on pace to retire comfortably.

And so Fidelity has this data of the average 4O1K balance by age in your 50s. And so if you look at age 50 to 54, the average 4O1K balance is $208,000, according to Fidelity. And between age 50 to 59, the average 4O1K balance is 270,000 $1000.

My friends, that is not enough on hand and that is way too low. So Fidelity has these benchmarks and they tell you how much you should have on hand. And by age 50, they say you need to aim for six times your annual salary at least saved in order to be on track for retirement. And by age 60, they say 8 times your annual salary saved in order to be on track for retirement.

Now, this is the power decade for retirement savings because we can take advantage of a number of different things, including ketchup contributions. So a lot of retirement accounts out there are going to give us a competitive advantage because they're going to allow you to catch up with your contributions to ensure that you can actually stay on pace for retirement.

It's a really, really important to focus and hone in on this decade because this is where the rubber meets the road. This is where you need to make sure you are levelling up big time. So what are some of the challenges that people go through in their 50s? One is retirement feels close and real. The last 10 years before retirement, you really need to have your plan in place.

The last five years, that plan needs to be locked in. I'm talking five years out. You need to know exactly what you need to be doing. If you're five years out from retirement, you're watching this or listening to this right now and you're saying to yourself, I don't know what my plan is. You need to figure it out ASAP. I'm telling you, there is urgency in this.

The last five years are imperative because you need to have your portfolio set up. You need to have all of your cash on hand and how you're going to manage cash. You need to decide how much debt you're going to have, if any. We recommend not having any debt and then going from there. There's a lot of other things you need to plan out, including healthcare, Social Security, all that different stuff.

So it's very close. It is very real. Number 2 is healthcare costs begin to rise in your 50s. You're spending more money on healthcare and so that is a cost you're going to have to deal with when you get into your 50s. Three is you have some of these sandwich generation pressures, meaning that many people support both aging parents and college age kids when they're in their 50s.

This is where you are spending a lot of money on both. And so we need to make sure that we plan and prioritize for both those different things. 4 is you feel job burnouts or you even feel job insecurities in your 50s. So I have seen a lot of 50 year olds that I've talked to in the past who are insecure about their job.

They feel like younger people are coming in who are faster and quicker at some of the things that they are doing right now with technology. And so if that is you, some people feel that career pressure, that mounting challenge that could be coming up. And then lastly is inflation. So fixed costs like mortgages or tuition or lifestyle upgrades may limit the ability to aggressively save.

And so we want to make sure that we are thinking through, well, how do we get some of those extra dollars into retirement accounts and go through this. So how can we boost our retirement savings in our 50s? One is we can Max out contributions plus catch up contributions. So in 2025, you can put $23,500 into your 4O1K.

Well, you also have a catch up contribution of $7500. It's going to get you to $30,500. Now this is going up $1000 next year in 2026, which is absolutely fantastic #2 you also have that with the Roth IRA. So your Roth IRA contributions are $7000 this year, but you also have an additional ketchup contribution that you can utilize in your 50s.

Next is to aggressively eliminate remaining debt. So if you do have debt on hand, whether it is high interest debt or even something like a mortgage or car payment, getting rid of all of your debt before retirement is very important in my opinion. Meaning that you need to take care of all that debt and you need to enter retirement debt free.

I don't think you have to be debt for your entire life, but once you start to approach retirement age, you need to enter retirement debt free. Now is the optimized thing. If you're behind on your retirement savings, I would much rather you put those dollars in investments if it's low interest at, but if you're not behind a retirement savings, getting rid of the mortgage, getting rid of the car payments, that's going to be the way to go. 3 is diversifying income streams.

So if you can diversify some of those income streams and start consider taxable brokerage accounts, HS as or side income to provide some extra income coming in, that's going to be really, really helpful. Next is the asset allocation. So I want to spend some time talking about this because your asset allocation is really, really important once you reach your 50s.

So there are two phases to portfolios. There is the accumulation phase. So when you're young, in your 20s, your 30s, your 40s, you're trying to accumulate and get the highest rate of return you possibly can. But once you hit your 50s, you have to start making some choices. Because if you're five years out from retirement, do we need to add more bonds into the portfolio to start leveling out this portfolio?

Because when you hit retirement, you are now in the preservation phase. So you went from the accumulation phase. Now the preservation phase is here. And we want to figure out just how to preserve this portfolio and ensure that we can live on this for our entire life spam. And so to do that, we need to make sure we think through our asset allocation.

Do we need to add more bonds? Do we need to add more safe haven assets? How much cash do we have on hand? Thinking through that is really important. And so going from accumulation to preservation is what I want you to really think through and map out plan step by step, year by year.

Do I want to add 5% in bonds every year? Do I want to add 10% in bonds every year? How do I want to think about this? And what is my risk tolerance and asset allocation? Now, there are retirees out there who do not add bonds. There are retirees who sit there with an entire stock portfolio. There's nothing wrong with that, but it has to fit your risk tolerance and you have to have enough on hand to make sure that it will cover the cost in a down market.

Next is we need to run a detailed plan. You need to ensure that you understand how much you anticipate to have in Social Security. So if you go to ssa.gov, you can find out and answer their questionnaire and they can tell you how much is anticipated for Social Security. You need to think about your pension benefits, if that is applicable and how much you were going to be getting in a pension.

Is that pension guaranteed? We need to understand what the retirement savings gap is. So if you don't know what the retirement savings gap is, it is the difference between your guaranteed income, meaning your Social Security benefits, your pension income, any other income that you may have coming in, and then figuring out how to make up the difference.

So the difference between, you know, your monthly expenses and that guaranteed income that's coming in is going to be what you need to have in your portfolio to be able to draw down. So you can draw down 4% of your portfolio every single year. So let's say for example, that your Social Security, maybe a pension is going to come in, they're going to cover about 30 to $40,000 per year, but you need to live on $80,000 per year.

Well, if that's the case, we need to have $1,000,000 invested to make up the difference. So the additional $40,000 means that you can draw it on 4% your portfolio every year. So 4% of 1,000,000 is $40,000. And so we need to have that plan set up and in place so that we can go from there.

Then when major expenses end, so let's say you pay off your mortgage or let's say you pay off that car loan or tuition it or all these different options could happen. Well, if that happens, then take that extra expense and put it towards your savings rate, start to save that cash, put it aside or start to invest that money for retirement so that you have that extra cushion so that when you reach retirement age, boom, we are there and we are ready to go.

And then protecting your downside. So making sure that you're looking at your insurance options, making sure that you're looking at your emergency fund and you're not tapping into retirement accounts when there's a crisis, but you have all that stuff on hand is very, very important. Again, that's why we have the Wealth Builder's Journey and Master Money Academy is because step by step, we teach you exactly what you need to be doing in the exact order.

And we talked through insurances, we talked through this stuff to protect your downside. It's very, very important to protect the financial house. Well, listen, thank you guys so much for being here on the Personal Finance Podcast. I truly appreciate each and every single one of you joining us today. I hope this episode was valuable for you.

Our goal is to bring you as much value as we possibly can. And so if you have any questions, please reach out to us. And I can't wait to see you on the next episode.