It's human nature to be curious about how much money other people your age are earning. But while it's tempting to try to keep up with the Joneses, more money won't solve all your problems.
Roughly a quarter of U.S. households earning $150,000 or more per year are living paycheck to paycheck, according to a survey from Nielsen Global Consumer Insights, so a higher salary doesn't always equate to financial health.
That said, there's no harm in simply seeing what others are earning and how their retirement savings stack up to yours. But it's also important to understand whether your savings are on track for you to retire comfortably, regardless of how your salary and savings compare to that of others.
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The average salary among American workers varies between men and women, and it also depends on age. Here's what the average man and woman are earning across various age groups, according to data from the U.S. Bureau of Labor Statistics:
|Age||Average Annual Income Among Men||Average Annual Income Among Women|
|20 to 24||$31,980||$28,496|
|25 to 34||$46,436||$40,508|
|35 to 44||$58,916||$47,216|
|45 to 54||$59,956||$46,748|
|55 to 64||$60,216||$45,188|
|65 and up||$54,028||$45,812|
Source: U.S. Bureau of Labor Statistics.
While a higher income may make it easier to reach your financial goals, what's more important is how well you manage your money. If you're earning a higher-than-average salary but you're not setting aside enough for retirement, you're no more prepared than someone earning less each year.
Average retirement savings by age
You don't necessarily need a six-figure salary to save enough to retire comfortably. But it is important to ensure you're saving consistently, with a goal and a plan for reaching that target.
That's easier said than done, however, and many workers are falling behind on their retirement savings. Here's what workers across various generations have saved for retirement, according to a report from the Transamerica Center for Retirement Studies:
|Age Group||Median Retirement Savings|
|Millennials (born 1979 to 2000)||$23,000|
|Generation X (born 1965 to 1978)||$66,000|
|Baby boomers (born 1946 to 1964)||$152,000|
Source: Transamerica Center for Retirement Studies.
If your savings fall in line with those within your age group (or even if you have slightly more stashed away than the average worker), it may be tempting to assume you're on track and don't need to make any adjustments. But how much you should be saving depends on several factors, and your savings goal may be wildly different from someone else's. That's why, although there's no harm in seeing how your savings compare to the average, it's more important to set personalized goals to make sure you're on the right track to retirement.
How much should you be saving for retirement?
The amount you should be saving for retirement depends on several factors, including how much you expect to spend each year once you retire, and how many years you expect to spend in retirement.
To estimate how much you'll be spending each year in retirement, it may help to create a retirement budget. Some expenses will likely decrease once you retire, such as commuting costs and expensive lunches at the office, while others may increase, like travel costs and healthcare expenses. You won't be able to budget for every penny you'll spend in retirement, but by estimating the best you can, you'll get a more accurate idea of what you'll need to save.
Similarly, while you can't predict exactly how long you'll live, being as accurate as you can when estimating how many years you'll spend in retirement can help make sure you're as prepared as possible. Take a look at your family history and your current health to get a rough idea of how long retirement will last. When you're spending tens of thousands of dollars each year in retirement, living even a few years longer than you anticipated can be costly.
Once you have these estimates in mind, plug your information into a retirement calculator to see how much you should have saved by the time you retire as well as what you'll need to save each month to reach that goal. If you're already saving that much now, you're right on track. But if you're falling behind, you may need to boost your monthly savings to meet your target.
No matter how much you're earning, saving for retirement isn't easy. And while it can be fun to see how your income and retirement savings compare to other people's, it doesn't necessarily tell you a lot. What's more important is that you know how much you should be saving to meet your individual retirement goal and that you have a plan to make that goal a reality.
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