Many Americans are not prepared for retirement.
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In fact, nearly half of Americans (48 percent) don’t think their retirement savings will ever reach $1 million, according to a recent study by Fidelity, even though more than 30 percent of Americans expect to need more than $1 million to live on after they stop working.
While experts say it’s never too late to start, the age at which you begin saving dictates how much you will need to put away each year in order to be able to live comfortably in retirement.
An analysis by the Boston College Center for Retirement Research determined the percentage of income individuals belonging to different age groups would need to save each year in order to reach a salary replacement rate of 70 percent for those planning to retire at the age of 65.
The calculations are based on median income and assume that contributions will be consistent on an annual basis.
For individuals that begin saving for retirement at the age of 25, stashing away 10 percent of income annually should be sufficient to reach salary replacement goals.
Americans that begin saving at the age of 35 need to up their annual contributions to 15 percent of income.
At 45, an individual would need to invest slightly more into their retirement accounts each year, at 27 percent.
Delaying retirement reduces those amounts slightly, to 4 percent, 6 percent and 10 percent for each listed age group, respectively.
According to research from Aon, employees will need 11 times their final pay saved to maintain their standard of living in retirement.
To meet that goal, the firm says on average employees should be saving 17 percent of yearly pay – including any contributions from employers – to prepare for retirement. The average employee will have enough saved to retire by the age of 68.