How Much Should You Have Saved by 50? (Why the Rules Are Wrong)

Walk into any financial advisor's office at 50, and you'll likely hear the same refrain: you should have saved six times your annual salary by now. Earning $80,000? Better have $480,000 tucked away. It's a tidy benchmark that sounds authoritative and gives you a clear target.

There's just one massive problem: it's wildly imprecise for your actual situation.

These retirement savings benchmarks originated from well-meaning financial institutions trying to simplify complex planning. Fidelity suggests 6x your salary by 50. T. Rowe Price recommends 6.5x. Some calculators say 5x. The numbers vary, but they all share the same fundamental flaw: they assume your income directly correlates with your spending needs.

Spoiler alert? It often doesn't.

Let's look at two different people, both earning $100,000 at age 50:

Person A lives in a paid-off home in a low-cost area. They're comfortable spending $45,000 yearly. No debt. Simple lifestyle. Healthcare costs are their biggest concern.

Person B has a $3,500 monthly mortgage, two kids in college, lives in a high-cost city, and their lifestyle runs $95,000 annually. They've got expensive hobbies and ambitious travel plans.

According to the 6x rule, both should have $600,000 saved. But do they have the same retirement needs? Absolutely not.

Person A might be in great shape. Person B? They're going to need significantly more than $600,000 to maintain their lifestyle, even with Social Security kicking in around $30,000-35,000 annually.

This is why focusing on income multiples can be dangerously misleading. You're not retiring your salary. You're retiring your spending.

Here's the better approach: figure out what you'll actually spend in retirement, then work backwards.

Financial planners often use the 4% rule as a starting point. This suggests you can withdraw 4% of your retirement savings in the first year, then adjust for inflation each year, with a reasonable expectation your money will last 30 years. It's not perfect (what is?), but it's more grounded in reality than salary multiples.

Let's say you estimate you'll need $60,000 yearly in retirement. Here's the math:

• $60,000 annual need
• Minus estimated Social Security ($25,000, for example)
• Equals $35,000 from your savings
• Divide by 0.04 (the 4% rule)
• Target savings: $875,000

Notice we didn't mention your salary once in that calculation. That's intentional.

Now, the 4% rule has its critics, especially with today's market volatility and longer lifespans. Some advisors suggest 3.5% to be safer. But the principle remains: your spending drives your number, not your earning.

Generic benchmarks also fail to account for these critical factors:

Your pension situation. Got a pension that'll pay $30,000 yearly? That's essentially like having an extra $750,000 saved (using the 4% rule). The benchmarks don't adjust for this.

Healthcare costs before Medicare. Retiring at 62 means three years without Medicare. That's potentially $15,000-20,000 annually for marketplace insurance. The salary multiple doesn't care.

Where you live. Retiring in rural Tennessee versus San Francisco creates vastly different cost realities. A 6x salary benchmark treats them identically.

Your debt situation. Entering retirement debt-free versus carrying a mortgage, car payments, or other obligations completely changes your cash flow needs.

Your health. Family history of longevity? You might need your money to last 35+ years. That changes everything about withdrawal strategies and required savings.

Forget the benchmarks for a moment. Here's what actually moves the needle:

1. Track your real spending. Not what you think you spend. What you actually spend. The last 12 months of bank and credit card statements don't lie. This is your retirement baseline.

2. Maximize your catch-up contributions. At 50, you're eligible for catch-up contributions. For 2024, that means you can put $30,500 into your 401(k) (regular $23,000 limit plus $7,500 catch-up) and $8,000 into an IRA ($7,000 plus $1,000 catch-up). These final 15 years are crucial.

3. Don't leave employer matches on the table. If your company matches 401(k) contributions, contribute at least enough to get the full match. That's free money with an immediate 50-100% return, depending on the match formula.

4. Consider your Social Security strategy. You can claim as early as 62, but waiting until 70 increases your benefit by about 8% per year. This decision intersects with how much you've saved. More savings gives you flexibility to delay and get a bigger lifetime benefit.

5. Model different scenarios. What if you retire at 62 versus 67? What if you downsize your home? What if healthcare costs spike? Run the numbers on various possibilities.

The IRS, Social Security Administration, and your 401(k) provider all have calculators that can help, though they often still rely on those flawed benchmarks. Better tools consider your actual projected expenses.

I've spent this whole article criticizing the 6x rule, but let's be fair: it's not completely useless.

If you're nowhere close to these benchmarks, it's a wake-up call. Having only 1-2x your salary saved at 50 suggests you're likely behind, regardless of your spending plans. The benchmark can serve as a reality check.

They're also helpful for people who genuinely plan to maintain their current lifestyle in retirement. If you're spending most of what you earn now and expect to continue, the salary multiples become more relevant (though still imperfect).

Think of benchmarks like bathroom scales. They give you a general sense of direction but don't tell the whole health story. You wouldn't base your entire fitness plan on a number alone, right? Same principle here.

Instead of 'Do I have 6x my salary saved?' ask yourself: 'Can my savings, Social Security, and other income sources support my actual lifestyle in retirement?'

That's a harder question to answer, which is exactly why generic benchmarks became popular. But it's the right question.

For many Americans at 50, the honest answer is 'I'm not sure.' And that's okay. You've still got 15-20 years of earning and saving ahead. The important thing is starting to figure it out now, not comparing yourself to arbitrary multiples that may have nothing to do with your reality.

Consider working with a fee-only financial planner (look for CFP certification and fiduciary duty) who can analyze your specific situation. The investment in planning often pays for itself many times over in tax efficiency and strategic decisions.

Remember, retirement planning isn't about hitting someone else's benchmark. It's about creating a realistic plan that lets you live comfortably in your later years without the money running out first. Your path there is uniquely yours.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. fidser. is not a certified financial planning service. We strongly recommend consulting with a qualified financial advisor or certified financial planner before making any significant financial decisions regarding your retirement savings and planning.