How Much Money Should You Be Saving Every Month at Age 60?

If you're 60, you may be dreaming of the day you can retire. You may also be confused about how much money you should have in a retirement account and, more specifically, how much you should be socking away each month. The answer is frustratingly simple: It depends on your lifestyle and how you hope to spend your retirement years.

The experts weigh in

It's no wonder that so many people ignore that they're growing older and may one day want to retire. Look at dueling financial expert opinions regarding how much a 60-year-old should have saved:

• Financial services organization Thrivent: Eight times your current salary. So, if you currently earn $100,000 annually, Thrivent's advice is to have $800,000 in a retirement account. Fidelity Investments agrees that 60-year-olds should have eight times their salary ready for retirement.
• According to T. Rowe Price, a 60-year-old who is five years away from retirement should have between 5.5 and 11 times their annual salary put away. If you're earning $100,000, you should have between $550,000 and $1.1 million in your retirement fund.

The financial services firm Edward Jones calls these numbers "retirement savings goalposts." Like the other financial advisors, how much you have put away should depend on your earnings. Here's how much 60-year-olds should have, according to Edward Jones:

Reality

What we're told we "should" save and what we've actually slipped into our retirement and savings accounts are very different. For example, according to Vanguard's "How America Saves 22" study, the average 55- to 64-year-old is pretty far behind. Even after factoring in wealthy and extremely wealthy investors, the average American nearing retirement has $256,200 earmarked for retirement.

And according to a study conducted by career site Zippia, the average 60- to 64-year-old has slightly less, with $221,452 ready for retirement. A more sobering fact uncovered by Zippia is that half the country has never had more than $15,000 in retirement savings.

Retirement: The snowflake of the personal finance world

Just as there are no two snowflakes alike, there are no two retirement plans that are precisely the same. Much depends on the cost of living in your area, how much you earn during your working years, other sources of income you can expect, and how you plan to spend your time.

With that in mind, these seven steps will give you a rough idea of how much you should save each month.

Step No. 1: Make a list of fixed expenses in retirement. Include mortgage or rent payments, car payment, utilities, and other fixed costs. Do not include discretionary expenditures, such as eating out, new clothes, vacations, or other expenses you have greater control over.

Step No. 2: Check your Social Security benefits. If you're set to receive a pension, determine how much that will pay you monthly. The goal is to pay as many of your fixed expenses using this guaranteed income. If you have a spouse, remember to add their retirement income.

Step No. 3: Check for a shortfall. Let's say your fixed bills amount to $3,000 a month, but your expected monthly Social Security benefit is $1,800. You know that you have a $1,200 shortfall.

Step No. 4: Estimate miscellaneous expenses, including dining out, home repairs, medical costs not covered by Medicare, gifts, travel, vehicle repairs, and other expenditures you are bound to run into. If you're unsure how much things will cost after you retire, err on the side of caution by overestimating. For the sake of this illustration, let's say you plan to spend $1,300 monthly on miscellaneous expenses.

Step No. 5: Add your fixed expense shortage ($1,200) to the miscellaneous expense shortage ($1,300). You need an extra $2,500 per month.

Step No. 6: Multiply the monthly amount by 12 for a yearly total. For example, $2,500 x 12 = $30,000. This is how much you'll need to withdraw each year.

Stick with us here. Step No. 7 will explain how much you'll need in retirement savings to withdraw $30,000 annually.

Step No. 7: Generally speaking, retirees can safely withdraw about 4% of their retirement savings in their first year of retirement. In the following years, they can adjust their withdrawals by the inflation rate.

Based on the 4% rule, multiply $30,000 by 25, and you come up with a total of $750,000. That's your customized retirement number, the amount of money you're aiming for. Now, subtract what you've already tucked away from $750,000, and you'll know precisely how much more you need. By dividing the amount you need by the number of months you intend to keep working, you have a good idea of how much you'll need to invest each month to reach your goal.

Insider tip: When you multiply the amount of money you need annually by 25, the calculation assumes that you will continue to invest and grow your nest egg, making it last longer than 25 years.

Speaking with a financial advisor is one of the best ways to ensure you're on track. If you don't want to commit before you get to know someone, look for an advisor who charges an hourly fee for their services. Advisors are good at spotting retirement expenses you might have missed and helping you develop a plan.

The thought of living without a paycheck is scary for some of us. If it doesn't seem possible to retire with enough money in the bank, think about a part-time job, side hustle, or turning a hobby into a money-making enterprise.

Time may not be on your side, but experience is. At 60, you're old enough and wise enough to know what works for you, and clever enough to come up with an alternative plan.