Part of retirement planning involves determining how much you need to save and invest so that you can enjoy the type of lifestyle you desire. Setting your savings goal based on age can be a good way to organize your strategy and gauge how you can track your progress toward your goals. You may also be interested in how much the average retiree has saved by age 65, 70, and beyond. In this article, we’re going to focus on how much the average person has saved and may have had to save by age 70. Keep in mind, however, that your situation is still completely unique to what your goals are. You may want to work with a financial advisor to make sure your savings goals align with where you need to be in your future.
How much savings does the average 70-year-old have?
According to data from the Federal Reserve’s most recent Survey of Consumer Finances, the average 65- to 74-year-old has saved just over $426,000. That’s money specifically set aside in retirement accounts, including 401(k) plans and IRAs.
The Federal Reserve also measures median and average (average) savings for other types of financial assets. According to the data, the average 70-year-old has approximately:
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$60,000 in transaction accounts (including checking and savings accounts)
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$127,000 in certificates of deposit (CD) accounts
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$17,000 in savings bonds
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$43,000 in cash value life insurance
In terms of overall trends, the numbers show an increase from the previous Survey of Consumer Finances. According to that survey, the average 65- to 75-year-old had saved $381,000 for retirement in 2016. However, that figure was far below the $486,000 that 70-year-olds had saved in 2013.
Whether the Survey of Consumer Finances shows an increase or decrease in savings for 2022 remains to be seen. Although the cost of living on Social Security has risen since the last survey, persistently high inflation has put pressure on Americans’ purchasing power. The survey can show that 70-year-olds have less pension savings if they spend more to compensate for higher prices.
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How much should a 70 year old have in savings?
Financial experts generally recommend saving somewhere between $1 million and $2 million for retirement. When you look at the average retirement savings of $426,000 for people between the ages of 65 and 74, the numbers clearly don’t add up.
How much a 70-year-old person needs to save for retirement depends on several factors, including:
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Desired retirement lifestyle
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When they apply for social security benefits
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Other sources of retirement income, such as a 401(k), IRA, pension or annuity
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Other savings accounts, including taxable investment accounts, savings accounts, and CDs
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General health and life expectancy
The more money you expect to spend to cover your living expenses in retirement, the more you generally need to save. Social Security benefits are a regular part of many retirees’ incomes, but those payments may not be enough. Pensions are becoming increasingly rare, as employers opt for defined contribution plans instead.
Long-term care can put a strain on a retiree’s budget and increase the amount you need to save. Medicare doesn’t cover long-term care, although Medicaid does. But to qualify for Medicaid, you usually have to deplete your assets. Purchasing long-term care insurance can be a temporary solution so you don’t risk depleting your savings.
What is a good net worth at the age of 70?
Net worth is a measure of your assets versus your liabilities. In other words, it’s the difference between what you own and what you owe.
The average net worth of Americans aged 65 to 74 hovers around $1.2 million. The median net worth is lower at $164,000. The typical 70-year-old has about $105,000 in debt, including mortgages, home equity loans, credit cards and student loans, as measured by the Fed’s data.
What constitutes a good net worth is situation-specific and largely depends on your retirement goals. There are several rules of thumb you can use to arrive at an ideal net worth calculation. For example, one rule suggests that by age 70, you should have a net worth equal to 20 times your annual expenses.
If you spend $100,000 a year to retire, you should have a net worth of at least $2 million. On the other hand, if you only spend $40,000 on living expenses, your target net worth would be much lower, at $800,000.
Is retiring at 70 a good idea?
Whether it makes sense to retire at 70 depends on your finances and what you envision for your dream retirement. When choosing a retirement age, it’s helpful to consider the following:
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When you really need to rely on social security benefits
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Whether you will continue to work part-time after your retirement
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How long do you plan to retire?
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Your desired savings goal and current savings rate
If you can delay taking Social Security benefits until you are 70, that could increase your benefit amount. You are eligible for 132% of your benefit amount if you wait longer to apply.
Even if you continue to work longer, you can continue to save and invest for your pension. For example, you can continue to max out your 401(k) each year, or at least contribute enough to get your full employer match. You can also move money into an IRA for additional savings.
If you retire at age 70, you have a two-year period before you must begin taking required minimum distributions (RMDs) from a traditional 401(k). You must also take RMDs if you have a Roth 401(k), but Roth IRAs are exempt from this rule.
Within that window, you can decide to convert your traditional IRA to a Roth account. Doing so could mean a higher tax bill in the year of the conversion, since you will have to pay taxes on your traditional IRA earnings. However, you would be able to take tax-free distributions from your Roth IRA in the future.
It comes down to
How much does the average 70-year-old have saved? A little under $500,000, according to the Federal Reserve. The better question, though, is whether that’s enough for a 70-year-old to live on during retirement, so you can budget accordingly. With higher inflation showing no end in sight, retiring with $500,000 may not be realistic for everyone. The good news is that the younger you are, the more time you have to plan, save and invest for the future.
Tips for retirement planning
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Consider talking to your financial advisor about the pros and cons of retiring at age 70 and what your personal timeline for retirement should look like. If you don’t already have a financial advisor, finding one doesn’t have to be difficult. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisors for free to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goalsstart now.
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Deferring Social Security benefits can help you collect more money during retirement. However, taking benefits early can reduce your monthly payment amount. The earliest you can start taking Social Security is age 62, but it may be beneficial to wait until at least your full retirement age to file. Also keep in mind that if you decide to take Social Security early and you continue working, your benefit amount may be reduced even further. Understanding how to maximize your Social Security benefits can help you get the most money possible.
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Have an emergency fund on hand in case you encounter unexpected expenses. An emergency fund should be liquid – in an account that is not subject to major fluctuations like the stock market. The trade-off is that the value of liquid assets can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.
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