Retirement savings by age: What to know

The amount of Americans 55 and older that are deciding to retire is growing, with about half of people that age opting to step away from the workforce, according to Pew Research. 

Yet some are returning to the working world as inflation and bumpy markets slash into their nest eggs. That may have you wondering about your own retirement plans - no matter what your age.

The earlier you start preparing for retirement, the more your money works for you through compounding interests, noted Danielle Harrison, a certified financial planner and founder of Harrison Financial Planning in Columbia, Missouri.

"When you start saving as a young adult, time is on your side. You can begin setting aside a small percentage of your paycheck, let compounding do the hard lifting, and be well prepared for retirement," Harrison said.

While it's never too late to start, the longer you wait, the more you'll have to sock away to reach your retirement goals, Harrison noted. By waiting, you "lose years of compounding," Harrison said. "The percentage of your salary you must devote to retirement savings increases substantially."

That's why it makes sense to start right away. Start earning more money on your savings and build toward your retirement goals.

And, If you think you're already behind, don't lose heart. Many factors decide how much you can put aside for retirement. Your current financial circumstances, retirement timing, potential investment returns, expected lifestyle and corresponding living expenses (including anticipated medical care) all come into play.

One common goal for annual retirement is to ensure at least 80% of your working income. Consider automatically depositing a set amount into an account of your choosing. In addition to a 401(k) or pension plan, most experts point to IRAs (both traditional IRAs and Roth IRAs) as well as personal brokerage accounts as other ways to build wealth.

If you don't have one, a Roth IRA could help you meet your retirement goals. Start exploring your options today.

Strategies and options, however, depend both on your age and how much you need and want to retire with.

What is my best retirement strategy by age?

"There is the old adage that 'the best time to plant a tree was 20 years ago. The second best time is today.' The same goes with saving for retirement," Harrison said. "You can't go back and change your past savings behavior, but you have the power to begin today and make a real difference in how your future self will live."

Whatever your strategy, "make sure that the investment allocation within your retirement savings portfolio is in line with your personal risk tolerance," said Martin A. Scott, a CFP and the founder of Lasting Wealth Principles in Freehold, New Jersey. 

Carefully scrutinize fees tied to those investments, Scott added.

Here are some strategy tips by age group:

• 20s: Set a small amount for retirement aside automatically from each paycheck. If your firm offers a 401(k) or equivalent (especially if they offer "matching" funds") then contribute the max allowed if you can.
• 30s and 40s: "People in this age range still have approximately 25-30 years before they retire so there is still a long enough time horizon to accumulate wealth for retirement," Scott said. Harrison suggested re-evaluating yearly and not waiting until your children graduate. This age "can be the perfect time for individuals to make great headway towards their retirement goals if they haven't already."
• 50s and 60s: Regularly review your retirement savings and investments. Some experts recommend moving to 50% to 60% lower-risk investments as age 65 approaches. 
• 65 and older: As you near 70, cut stock funds to 30% of your portfolio. If able, consider waiting as long as possible to start receiving social security.

Not sure about the best path forward? You can also speak to a financial adviser who can make recommendations based on your own personal circumstances.

How much money should I have saved for retirement by what age?  

The amount of money you have saved for retirement varies by age. Fidelity Investments, a major investment and financial services firm, recommends these general goalposts for individuals:

• 30: Your annual salary
• 35: 2x your annual salary
• 40: 3x your annual salary
• 50: 6x your annual salary
• 55: 7x your annual salary
• 60: 8x your annual salary
• 67: 10x your annual salary

Say you earn $75,000 per year at age 30. You'll need savings of $225,000 by age 40, $450,000 by age 50 and $600,000 by age 60, based on Fidelity's calculations.

However, each situation is different when it comes to retirement savings. Variables include earnings and unexpected expenses, overall financial goals and potential health conditions, Harrison noted. 

"The typical rules of thumb when it comes to how much an individual should have saved for retirement tends to focus on having 'X' times their income saved at each age, but I think this is drastically different for each individual's situation," Harrison said. 

Don't discount life insurance and other financial protections

Retirement savings, while a crucial element to ensure successful golden years, are only one part of smart financial planning. Retirement savings, after all, are for you to spend and live on after you've retired from work. But that doesn't necessarily mean you will have enough (or even should plan to have enough) to leave your family upon your death. 

This is when life insurance comes into play. Life insurance, whether it's whole, term or some other type, can offer unique secure financial protection. By making a relatively inexpensive payment to a provider each month (depending on your billing schedule) you can ensure that your beneficiaries will receive an agreed-upon lump sum of money when you die. Life insurance can be cheap or it can be a bit more expensive, depending on a variety of factors. 

But what almost all financial advisers agree on is that it's worth having. So, if you're currently in the market for life insurance, or just want to increase the coverage you already have, now is a good time to do so. You can start by getting a quote today.

What if I need cash now?

While it's not generally advantageous for seniors (or those approaching retirement age) to take out new debt they do have some options to free up cash. Here are three to know:

• Life insurance: Whole life insurance policies offer policyholders the option to cash out a portion of their policy to use while they're alive. Just note, if the amount deducted isn't paid back, then the payout amount will be for the agreed-upon sum minus any deductions made while the policyholder was alive. Learn more now.
• Cash-out refinance: This is when a homeowner takes out a new loan in an amount larger than their current mortgage balance. They then use the new loan to pay off the old one and keep the difference in cash for themselves. The refinance will fully replace the existing mortgage loan. Borrowers will pay it back monthly, plus interest, until the loan is paid off. Learn more now.
• Reverse mortgages: This alternative is only available for homeowners 62 and older. Owners who have completely paid off or paid off most of their mortgage then take out a portion of their home's equity. This would qualify as tax-free income. It needs to be repaid, however, if the homeowner dies or elects to sell the home. Still, it may be worth pursuing if the cash is needed. Learn more now.