The number depends on what you spend and what you earn.
Age 45 is an interesting one. You're maybe a bit too old to be staying out till 3:00 a.m. with your buddies, but you're probably not quite ready to start meeting up for dinner at 5:30 p.m. so you can make sure you're in bed by 9:00 p.m.
Age 45 is also an important one financially. At this point, you're probably halfway through your career, which means retirement should be on your radar. And if you have kids, you may be starting to think about (or worry about) paying for college.
So how much savings should you have by age 45? It depends on how much you spend each month and how much you earn each year.
What your savings account balance should look like by age 45
As a general rule, you should have a robust enough emergency fund to cover a full three months of bills. But you may want to aim higher.
See, the point of having enough money in your savings account to pay for three months of expenses is to get you through a period of unemployment (and also, to cover other unexpected expenses that might arise). But by age 45, you probably won't want to take any old job if you lose yours. Rather, you might have specific needs. And you'll want the flexibility to spend more time looking if the right fit doesn't materialize within three months.
That's why having enough savings to cover six months' worth of essential bills is really a better bet by age 45. It could take the pressure off if you're let go at work, or if major home repairs start to pop up as your house ages.
What your retirement plan balance should look like by age 45
If you're 45 years old, retirement isn't exactly right around the corner. But it's also not so far away. And so at this point, you should ideally have a decent chunk of money saved up in an IRA or 401(k).
Fidelity says that by age 40, you should aim to have three times your salary socked away for retirement, and by age 50, you should aim to have six times your salary. So if we meet those figures down the middle, it means that by age 45, you should ideally have 4.5 times your salary set aside for retirement. If you earn $90,000 a year, it means you're in good shape if you have $405,000.
That said, many people's retirement plans lost money in 2022 due to stock market volatility. So if you had 4.5 times your salary before the market took a dive, but you have a lower balance now, don't worry -- you're still in good shape, and once the market rebounds, your balance might climb back up.
What to do if you're behind on savings
Whether you're behind on regular savings, retirement savings, or both, it may be time to make some lifestyle changes. That could mean taking a closer look at your spending and finding ways to cut back on non-essential expenses, like takeout meals and subscriptions. Along these lines, if you commonly take a vacation every year that costs your family $5,000, you may want to opt for a staycation for the next few years and bank that money instead.
By age 45, you should be in a good place with regard to both emergency and retirement savings. If that's not the case, all definitely isn't lost. But it is time to get serious about buckling down and make savings your priority.
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As a financial expert with a demonstrated depth of knowledge in personal finance and retirement planning, I understand the critical importance of financial strategies at different life stages. The article you presented touches upon key concepts related to managing finances at the age of 45, incorporating evidence-based advice and best practices.
Firstly, the article emphasizes the significance of having a robust emergency fund by age 45. The recommendation is to have at least six months' worth of essential bills saved up in a savings account. This advice is grounded in the understanding that, at this point in one's career, the need for financial flexibility becomes more pronounced. Having a larger emergency fund not only helps during periods of unemployment but also provides the freedom to seek a more suitable job if the need arises.
Additionally, the article discusses retirement planning for individuals aged 45. It refers to Fidelity's guidelines, stating that by this age, one should ideally have 4.5 times their annual salary saved for retirement. This figure is derived from the broader recommendations of accumulating three times your salary by age 40 and six times your salary by age 50. The article acknowledges the impact of market volatility on retirement plans, assuring readers that market fluctuations are a natural part of investing, and balances may recover over time.
Furthermore, the article suggests practical steps for those who find themselves behind on savings. Lifestyle changes, such as scrutinizing spending habits and cutting back on non-essential expenses, are recommended. The importance of reassessing vacation plans and redirecting funds toward savings is highlighted as a proactive measure to catch up on financial goals.
In summary, the article provides a comprehensive overview of financial considerations at age 45, encompassing emergency funds, retirement planning, and actionable steps for those lagging behind in their savings journey. The advice is grounded in a solid understanding of personal finance principles and is designed to empower individuals to take control of their financial well-being.
FAQs
As a general rule of thumb, you'll want to have saved three to eight times your annual salary, depending on your age: 40: At least three times your salary. 45: Around four times your salary. 50: Six times your salary.
How much savings should a 45 year old have? ›
Savings Benchmarks by Age—As a Multiple of Income
| Investor's Age | Savings Benchmarks |
|---|
| 40 | 1.5x to 2.5x salary saved today |
| 45 | 2.5x to 4x salary saved today |
| 50 | 3.5x to 6x salary saved today |
| 55 | 4.5x to 8x salary saved today |
4 more rowsMay 29, 2024
The average net worth of someone younger than 35 years old is $183,500, as of 2022. From there, average net worth steadily rises within each age bracket. Between 35 to 44, the average net worth is $549,600, while between 45 and 54, that number increases to $975,800.
How much 401k should I have at 45? ›
By age 40, you should have three times your annual salary already saved. By age 50, you should have six times your salary in an account. By age 60, you should have eight times your salary working for you. By age 67, your total savings total goal is 10 times the amount of your current annual salary.
How much investments should I have at 45? ›
But what's your starting point? The National Bank of Canada suggests that by age 40 you should have 2.1 times your annual income saved for retirement, while the U.S.-based firm Fidelity recommends three times annual income in retirement savings by age 40, and four times annual income saved by age 45.
Where should I be financially at 45? ›
As you reach your 40s and 50s, saving for retirement will become one of your most important goals. As a general rule of thumb, you'll want to have saved three to eight times your annual salary, depending on your age: 40: At least three times your salary. 45: Around four times your salary.
How much money do you need to retire comfortably at age 45? ›
Average retirement savings by age
| Age | Average retirement savings (2022) | Median retirement savings (2022) |
|---|
| 35 to 44 | $141,520 | $45,000 |
| 45 to 55 | $313,220 | $115,000 |
| 55 to 64 | $537,560 | $185,000 |
| 65 to 74 | $609,230 | $200,000 |
2 more rowsMay 28, 2024
Earnings start to level out in your 40s. The median salary of 45- to 54-year-olds is $1,224 per week or $63,648 per year. That's only slightly more than the median for 35- to 44-year-olds, though the weekly median for men aged 45 to 54 years is $1,368.
How much should I invest at 45 to be a millionaire? ›
Here's how much 45-year-olds would need to invest each month to become a millionaire by the traditional retirement age: If making investments that yield a 3% yearly return, a 45-year-old would have to invest $3,100 per month to reach $1 million by age 65.
Is 3 million at 45 good? ›
You can probably retire in financial comfort at age 45 if you have $3 million in savings. Although it's much younger than most people retire, that much money can likely generate adequate income for as long as you live.
If you have $400,000 in the bank you can retire early at age 62, but it will be tight. The good news is that if you can keep working for just five more years, you are on track for a potentially quite comfortable retirement by full retirement age.
Is it too late to start 401k at age 45? ›
It is never too late to start saving money you will use in retirement. However, the older you get, the more constraints, like wanting to retire, or required minimum distributions (RMDs), will limit your options. The good news is, many people have much more time than they think.
Is 300k in savings good? ›
$300,000 can last for roughly 26 years if your average monthly spend is around $1,600. Social Security benefits help bolster your retirement income and make retiring on $300k even more accessible. It's often recommended to have 10-12 times your current income in savings by the time you retire.
What is the best investment for a 45 year old? ›
Invest in a Roth IRA
Among the reasons the Roth rules: More favorable early withdrawal rules before age 59½, compared with the taxes and early withdrawal penalties with traditional IRAs and 401(k)s. Tax diversification. In years when your income is higher, you can take advantage of tax-free withdrawals from a Roth.
Can I retire at 45 with 500k? ›
Key Takeaways. It may be possible to retire at 45 years of age, but it depends on a variety of factors. If you have $500,000 in savings, then according to the 4% rule, you will have access to roughly $20,000 per year for 30 years. Retiring early will affect the amount of your Social Security benefit.
Is 45 too old to start investing? ›
Investing for retirement is important at any age, but an individual's strategy may change at various life stages. Asset allocation by age helps build a sound retirement investing strategy. Younger investors can tolerate more risk, but they often have less income to invest.
Is 45 too late to start saving for retirement? ›
Although it's important to start your retirement planning and saving early, you can still fulfill your goals even if you're between 45 and 54. Small business owners may be able to stash extra savings by funding retirement accounts designed for small businesses and the self-employed.
Can I retire at 50 with 300k? ›
With $300,000 planned for your use as a retiree, a retirement age of 50, and an anticipated life expectancy of 85 years, you need that money to last you 35 years. This should mean that your yearly income is around $8,571, and your monthly payment is around $714.
How much does the average middle class person have in savings? ›
Key Statistics on Average Savings Account Balances
According to the Federal Reserve's 2022 Survey of Consumer Finances (SCF), Americans' average (mean) household savings account balance is $62,410. However, the median savings account balance of $8,000 might be a more accurate representation.
