Individual Retirement Accounts (IRAs) serve as a cornerstone of retirement savings for millions of Americans, providing a tax-advantaged way to accumulate wealth for the future. Understanding how IRA balances vary by age can offer valuable insights into the progress individuals make at different stages of life. While younger savers typically have modest balances, the power of compounding and steady contributions help balances grow significantly as people approach retirement. This article explores average IRA balances across age groups and provides benchmarks for saving, helping individuals gauge whether they are on track to meet their financial goals.
Average Balance by Age
According to Fidelity Investments, their average IRA balance was $129,200 at the end of the second quarter of 2024. This is a 14% increase from the previous year.
Here are some other average retirement savings by age:
- Under 35: $49,130
- 35–44: $141,520
- 45–54: $313,220
- 55–64: $537,560
- 65–74: $609,230
- 75 or older: $462,410
Some recommend saving the equivalent of your annual salary by age 30. As you age, you can aim to save three times your annual salary by age 40, six times by age 50, and eight times by age 60.
The Demographics of IRA Account Holders
Individual Retirement Accounts (IRAs) play a crucial role in U.S. retirement savings, with participation spanning various demographics. As of recent data, approximately 63% of U.S. households hold some form of retirement asset, including IRAs, employer-sponsored defined contribution (DC) plans, or defined benefit (DB) plans. However, only about 5% hold exclusively IRA assets.
Ownership patterns indicate that larger employers tend to offer better retirement plan access, increasing the likelihood of employee participation. Demographic disparities are evident, with higher-income households more likely to own IRAs. Changes in contribution behaviors, particularly rollovers from employer plans, also drive growth in IRA balances.
How Much Should You Save?
According to general guidelines, to secure a 20-year retirement, a person should aim to save between 7 and 10 times their final pre-retirement income, which means if you earn $60,000 per year, you would need to save between $420,000 and $600,000 for a 20-year retirement.
Key points to consider:
- The 4% Rule:
A common rule of thumb is the “4% rule,” which suggests withdrawing 4% of your retirement savings annually to maintain your desired lifestyle.
- Lifestyle Factors:
Your ideal retirement lifestyle will significantly influence how much you need to save.
- Inflation:
Remember to factor in inflation when calculating your retirement savings needs, as the cost of living will likely increase over time.
- Age and Time to Retire:
The earlier you start saving, the more time your money has to grow through compounding interest.
Important factors to consider when calculating your ideal retirement savings:
- Current income: How much do you earn currently?
- Desired retirement income: What level of income do you want to maintain in retirement?
- Retirement age: When do you plan to retire?
- Life expectancy: How long do you anticipate living in retirement
Conclusion
Planning for retirement requires a long-term strategy, and IRAs offer a flexible way to build wealth outside of employer-sponsored plans. By regularly contributing and taking advantage of compounding growth, savers can accumulate substantial assets over time. Regardless of your current balance, it’s essential to assess your progress periodically and adjust your savings strategy to align with your retirement goals. With thoughtful planning and consistent saving habits, individuals can build the financial security needed to enjoy a comfortable retirement.
uDirect IRA Services, LLC is here to help you~! We are not a fiduciary and we do not offer tax or legal advice. We do not recommend specific investments, rather we guide you through the process to self-direct your retirement savings into the “alternative assets” you choose. To get started, we offer a free consultation. Schedule yours HERE – To open an account, click HERE.
