Retirement Savings Goals By Age 60

Quick answer

• By age 60, many financial experts suggest having saved at least 8-10 times your annual income.
• A significant portion of your retirement savings should be in relatively stable investments by this age.
• Review your spending habits and adjust your budget to maximize savings in these crucial final years before retirement.
• Ensure your investment fees are low and understand the tax implications of withdrawals.
• Consider working longer than planned if your savings fall short of your retirement income needs.
• Understand your projected retirement expenses to set a realistic savings target.

What to check first (before you invest)

Time Horizon

Your time horizon is the length of time you expect to invest your money before you need to withdraw it for retirement. For someone approaching age 60, this horizon is likely shorter than for a younger investor, typically ranging from a few years to perhaps 20-30 years if you plan to live well into your 80s or 90s. A shorter time horizon generally means you have less time to recover from market downturns, influencing your investment strategy.

Risk Tolerance

Risk tolerance is your ability and willingness to withstand potential losses in your investments in exchange for potentially higher returns. As you approach retirement, your risk tolerance often decreases. You may prefer to shift your portfolio towards more conservative assets to protect your accumulated savings, even if it means accepting lower potential growth.

Emergency Fund

An emergency fund is a stash of readily accessible cash to cover unexpected expenses like medical bills, job loss, or home repairs. Before focusing heavily on retirement investing, ensure you have a robust emergency fund. For those nearing retirement, this fund might be slightly larger, covering 6-12 months of living expenses, as you have less time to rebuild savings if an emergency depletes them.

Fees and Tax Impact

Investment fees, such as expense ratios on mutual funds or advisory fees, can significantly eat into your returns over time. Similarly, understanding the tax implications of your investments, including capital gains taxes and taxes on retirement account withdrawals, is crucial. High fees and unfavorable tax treatment can diminish your nest egg, so it’s essential to minimize both.

Account Type (401(k), IRA, Brokerage)

The type of account you use for retirement savings matters due to their unique rules and tax advantages.

• 401(k)s and similar employer-sponsored plans: These often offer tax-deferred growth and potential employer matches, which are essentially free money.
• Individual Retirement Arrangements (IRAs): Both Traditional IRAs (tax-deferred growth, potential tax deductions) and Roth IRAs (tax-free growth and withdrawals in retirement) offer valuable tax benefits.
• Taxable Brokerage Accounts: These accounts don’t have contribution limits or withdrawal restrictions like retirement accounts, but investment gains are taxed annually.

By age 60, you should have a clear understanding of how your savings are distributed across these account types and how they align with your retirement goals.

Retirement Savings Goals By Age 60: A Simple Workflow

Step 1: Calculate Your Current Savings

• What to do: Tally up the balances of all your retirement accounts (401(k)s, IRAs, pensions, etc.) and any significant non-retirement investments you plan to use for retirement.
• What “good” looks like: You have a clear, consolidated number representing your total investable assets earmarked for retirement.
• A common mistake and how to avoid it: Forgetting about older, forgotten accounts. Avoid this by actively searching for any old 401(k)s from previous employers and consolidating them if appropriate.

Step 2: Estimate Your Retirement Income Needs

• What to do: Project your annual expenses in retirement. Consider housing, healthcare, travel, hobbies, and basic living costs.
• What “good” looks like: A realistic annual spending figure that accounts for your desired lifestyle and potential inflation.
• A common mistake and how to avoid it: Underestimating healthcare costs. Avoid this by researching average healthcare expenses for seniors and factoring in potential long-term care needs.

Step 3: Determine Your Target Savings Amount

• What to do: Use a retirement calculator or a rule of thumb (like aiming for 8-10 times your pre-retirement income) to establish a target savings goal.
• What “good” looks like: A concrete savings number that, when invested, could reasonably support your estimated retirement income needs.
• A common mistake and how to avoid it: Relying solely on Social Security. Avoid this by understanding that Social Security is meant to supplement, not replace, your personal savings.

Step 4: Assess Your Current Savings Against Your Goal

• What to do: Compare your current savings (from Step 1) to your target savings amount (from Step 3).
• What “good” looks like: You know the gap, if any, between what you have and what you need.
• A common mistake and how to avoid it: Not being honest about the numbers. Avoid this by using accurate, up-to-date figures for both your savings and your target.

Step 5: Evaluate Your Investment Allocation

• What to do: Review your current investment mix across your accounts.
• What “good” looks like: Your portfolio is aligned with your risk tolerance and time horizon, likely with a greater weighting towards less volatile assets as you approach 60.
• A common mistake and how to avoid it: Staying too aggressive or too conservative. Avoid this by rebalancing to a mix that balances growth potential with capital preservation.

Step 6: Analyze Fees and Expenses

• What to do: Identify all fees associated with your investments (mutual fund expense ratios, advisory fees, trading costs).
• What “good” looks like: You understand the percentage of your returns being consumed by fees and are actively seeking lower-cost alternatives.
• A common mistake and how to avoid it: Ignoring small, recurring fees. Avoid this by realizing that even seemingly small percentages can significantly impact your nest egg over years.

Step 7: Understand Tax Implications

• What to do: Consider how withdrawals from different account types will be taxed in retirement.
• What “good” looks like: You have a strategy for tax-efficient withdrawals, potentially drawing from taxable accounts first or managing income to stay in lower tax brackets.
• A common mistake and how to avoid it: Not planning for taxes on withdrawals. Avoid this by consulting with a tax professional to understand the tax consequences of your retirement income sources.

Step 8: Maximize Contributions (If Possible)

• What to do: If you’re still working, contribute as much as you can to tax-advantaged retirement accounts, especially catching up on any missed contributions if allowed.
• What “good” looks like: You are consistently contributing the maximum allowed by your employer plan or IRA, or at least significantly increasing your savings rate.
• A common mistake and how to avoid it: Stopping contributions too soon. Avoid this by continuing to save aggressively, even if you’re close to retirement, to bridge any savings gaps.

Step 9: Consider Working Longer

• What to do: If your savings are insufficient, explore the possibility of working a few extra years.
• What “good” looks like: You have a clear understanding of how an additional year or two of work can boost your savings and reduce your retirement spending needs.
• A common mistake and how to avoid it: Refusing to consider working longer out of pride or perceived inflexibility. Avoid this by viewing it as a strategic option to secure your financial future.

Step 10: Review and Adjust Regularly

• What to do: Revisit your retirement plan at least annually, or whenever significant life events occur.
• What “good” looks like: Your plan remains relevant and actionable, adapting to market changes, personal circumstances, and updated retirement goals.
• A common mistake and how to avoid it: Setting it and forgetting it. Avoid this by treating your retirement plan as a living document that requires periodic attention.

Risk and Diversification: Building a Resilient Portfolio

• Don’t put all your eggs in one basket: Diversification means spreading your investments across different asset classes (stocks, bonds, real estate, etc.) and within those classes (different industries, company sizes). This reduces the impact if one investment performs poorly. For example, if you only own tech stocks and the tech sector crashes, your entire portfolio suffers. Owning a mix of tech, healthcare, and consumer staples stocks, along with some bonds, can cushion such blows.
• Stocks offer growth, bonds offer stability: Stocks (equities) generally offer higher potential returns but come with higher volatility. Bonds (fixed income) typically offer lower returns but are more stable and can provide income. As you get closer to retirement, you might shift more towards bonds to protect your principal.
• Asset allocation is key: This is the mix of stocks, bonds, and other assets in your portfolio. A common strategy for those nearing retirement is to have a more conservative asset allocation, perhaps 60% bonds and 40% stocks, though this can vary widely.
• Rebalancing is crucial: Over time, market performance will cause your asset allocation to drift. If stocks perform very well, they might become a larger percentage of your portfolio than intended, increasing your risk. Rebalancing involves selling some of the overperforming assets and buying more of the underperforming ones to return to your target allocation.
• Understand different types of risk: Market risk is the risk of the overall market declining. Inflation risk is the risk that your money won’t buy as much in the future due to rising prices. Interest rate risk affects bond prices. Diversification helps mitigate many of these risks.
• Consider your time horizon: If you have 20 years until retirement, you can generally afford to take on more risk than if you have only 2 years. Your time horizon dictates how much volatility you can tolerate.
• Example: Imagine you have $100,000. A diversified portfolio might be $50,000 in a broad stock market index fund, $30,000 in a bond fund, and $20,000 in real estate investment trusts (REITs). If the stock market drops 10%, you lose $5,000. But if you only held stocks and the market dropped 10%, you’d lose $10,000.

What to do during market drops: During market downturns, it’s natural to feel anxious. However, for those nearing retirement, it’s often a time to stick to your plan. Avoid panic selling, as this locks in losses. If you have cash available, a market drop can be an opportunity to buy assets at lower prices, especially if you have a longer time horizon within retirement itself. Rebalancing can also be done strategically during these times.

Common Mistakes (and what happens if you ignore them)

Mistake	What it causes	Fix
<strong>Not having a retirement plan</strong>	Uncertainty about your financial future, potentially leading to under-saving or overspending.	Create a written retirement plan, including income needs, savings goals, and investment strategy.
<strong>Underestimating retirement expenses</strong>	Running out of money in retirement, forcing lifestyle cuts or relying on others.	Thoroughly research and budget for all potential retirement expenses, including healthcare and long-term care.
<strong>Ignoring investment fees</strong>	Significantly reduced investment growth over time, meaning less money for retirement.	Regularly review investment statements to understand all fees and seek low-cost investment options.
<strong>Staying too invested in aggressive assets too close to retirement</strong>	Significant portfolio losses just before or at the start of retirement, jeopardizing income.	Gradually shift your asset allocation towards more conservative investments as you approach your retirement date.
<strong>Not having an emergency fund</strong>	Being forced to dip into retirement savings for unexpected expenses, depleting your nest egg.	Build and maintain an emergency fund covering 6-12 months of living expenses before or alongside aggressive retirement saving.
<strong>Failing to account for inflation</strong>	Your retirement savings losing purchasing power, meaning they won’t cover your expenses as planned.	Factor inflation into your retirement income projections and choose investments that have the potential to outpace inflation.
<strong>Relying solely on Social Security</strong>	Not having enough income to cover your living expenses, as Social Security is often insufficient on its own.	Save diligently in personal accounts to supplement Social Security benefits and ensure a comfortable retirement.
<strong>Not understanding tax implications of withdrawals</strong>	Unexpectedly high tax bills in retirement, reducing your net income and potentially pushing you into higher tax brackets.	Consult with a tax advisor to create a tax-efficient withdrawal strategy for your retirement accounts.
<strong>Procrastinating on retirement savings</strong>	Missing out on years of compound growth, requiring much higher savings rates later to catch up.	Start saving as early as possible and contribute consistently, taking advantage of employer matches and tax-advantaged accounts.
<strong>Not reviewing or updating your plan</strong>	Your plan becoming outdated and irrelevant to your current situation and market conditions.	Schedule annual reviews of your retirement plan and make adjustments as needed due to life events or market shifts.

Decision Rules (Simple If/Then)

• If your current savings are less than 5 times your annual income by age 60, then you likely need to significantly increase your savings rate or consider working longer because you may not reach your retirement goals otherwise.
• If your retirement expenses are projected to be high due to healthcare needs, then you should prioritize building a larger retirement nest egg and explore long-term care insurance options because these costs can be substantial.
• If your investment fees exceed 1% annually across your portfolio, then you should investigate lower-cost index funds or ETFs because high fees erode your returns significantly over time.
• If you have a significant portion of your portfolio in highly volatile assets (e.g., individual growth stocks), then you should consider rebalancing into more stable investments like bonds or dividend-paying stocks because you have less time to recover from market downturns.
• If your emergency fund is depleted or insufficient, then you should pause aggressive retirement contributions and rebuild your emergency fund because unexpected expenses can derail your retirement plans if you lack liquid savings.
• If you are still working and eligible for an employer match in your 401(k), then you should contribute at least enough to get the full match because it’s essentially free money that boosts your savings immediately.
• If your retirement income sources (Social Security, pensions) are projected to cover less than 60% of your estimated retirement expenses, then you must increase your personal savings aggressively because you will have a significant income gap to fill.
• If you are considering retiring in the next 1-5 years, then you should consult with a financial advisor to stress-test your plan because expert guidance can identify blind spots and optimize your strategy.
• If you have significant debt (e.g., credit cards, high-interest loans), then you should prioritize paying down this debt before or alongside maximizing retirement savings because high-interest debt can counteract investment gains.
• If you are uncomfortable with market fluctuations, then you should adjust your asset allocation to include a higher percentage of bonds or other less volatile investments because peace of mind is important for sticking to your long-term plan.

FAQ

How much money should I aim to have saved by age 60?

A common guideline is to have saved 8 to 10 times your annual income by age 60. For example, if you earn $80,000 per year, aim for $640,000 to $800,000 in savings. This is a general target and can vary based on your lifestyle and retirement duration.

Is it too late to start saving for retirement at age 60?

It’s never too late to improve your retirement outlook. While starting earlier offers more benefits from compounding, you can still make significant progress by saving aggressively, working longer, and making smart investment choices.

What is a good asset allocation for someone at age 60?

A common allocation for someone nearing retirement is more conservative, perhaps 60% in bonds and 40% in stocks. However, this depends on your risk tolerance, health, and how long you expect to be retired. Some may still maintain a higher stock allocation if they have a longer life expectancy or desire more growth potential.

How much will Social Security provide in retirement?

Social Security benefits vary widely based on your earnings history and when you claim. It’s designed to be a foundation for retirement income, not a complete replacement for your working income. You can get an estimate of your benefits by creating an account on the Social Security Administration website.

Should I pay off my mortgage before retiring?

Paying off your mortgage can significantly reduce your monthly expenses in retirement, providing more financial security. However, weigh this against the potential investment returns you might miss by not investing that money. It’s a personal decision based on your financial situation and risk tolerance.

What are the biggest financial risks for people in their 60s?

The biggest risks often include outliving your savings, unexpected healthcare costs (including long-term care), and market downturns that deplete your portfolio close to retirement. Inflation also poses a risk to the purchasing power of your savings.

How can I increase my retirement savings if I’m behind schedule?

Consider working a few extra years, continuing to contribute to tax-advantaged accounts, delaying Social Security to receive higher benefits, and cutting discretionary spending. Reviewing your budget for potential savings is also crucial.

What is the 4% rule, and is it still relevant?

The 4% rule is a guideline suggesting you can withdraw 4% of your retirement savings in the first year of retirement and adjust that amount for inflation each subsequent year, with a high probability of your money lasting 30 years. While still a useful benchmark, its effectiveness can be debated in today’s economic climate, and many advisors recommend a slightly more conservative withdrawal rate.

What this page does NOT cover (and where to go next)

• Specific investment product recommendations: This page provides general guidance on asset allocation and diversification, not advice on buying specific stocks, bonds, or funds.
• Detailed tax planning strategies: While tax implications are mentioned, this page does not offer in-depth tax advice, which should come from a qualified tax professional.
• Estate planning and wills: This article focuses on accumulating retirement assets, not on how to distribute them after your passing.
• Healthcare and long-term care insurance specifics: While healthcare costs are a significant retirement factor, detailed analysis of insurance policies and providers is beyond this scope.
• Annuities and complex insurance products: The pros and cons of various insurance-based retirement income solutions are not explored here.
• Social Security claiming strategies: Deciding when to claim Social Security benefits has a major impact, but this page does not delve into specific claiming strategies.