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How Much High-Income Earners Have Saved for Retirement

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A senior woman comparing how much she has saved for retirement against other savers in her age group.

If you’ve got more money, you’ve got more retirement options. High-income earners have substantial resources at their disposal, presenting the potential for massive gains and crushing losses. However, practical strategies and careful financial decisions can help you retire as a multi-millionaire. High-income earners often have different retirement needs than others. Here’s how much high-income earners are saving and how to get your savings on track.

If you’re falling behind on your retirement savings goals, a financial advisor can help you create a financial plan.

How Much High-Income Earners Have Saved for Retirement

A high-income earner is an individual or household that earns a substantial amount of money compared to the average income in the country. High-income earners in the United States make over $500,000, putting themselves in the top 1% of the wealthiest households in the country. For a comparison, the median household income in the United States in 2022 was $74,580. As a result, you must make over seven times the typical household income to be a high-income earner.

While saving for retirement has no one-size-fits-all answer, high-income earners usually save more because of their financial abilities. Specifically, high-income earners save $2.68 million by their mid-to-late sixties.

Remember, having a high income doesn’t automatically equate to having a secure retirement fund. Proper financial planning, budgeting and investing are crucial for anyone, regardless of income level, to ensure a comfortable retirement. Additionally, factors like lifestyle choices, debt levels and unexpected expenses can all impact how much an individual or household can save for retirement.

Average Retirement Savings By Age of High-Income Earners

High-income earners start with significant retirement savings and accumulate more throughout the decades.

Let’s take a look at how much each age group has saved for retirement in 2022. Data comes from the Federal Reserve Board and is based on the mean amount for each age group:

  • Under age 35: $49,130
  • From 35 to 44: $141,520
  • From 45 to 54: $313,220
  • From 55 to 64: $537,560
  • From 65 to 74: $609,230
  • Age 75 and older: $462,410

Based on the data, retirement savers under age 35 saved almost one-tenth as much as those 75 and older; and almost one-third as much as those between ages 35 and 44. Retirement savers between ages 65 and 74 saved the most — over 12 times more than those under age 35.

Where Your Retirement Savings Stand

A man adjusting his retirement savings goals after researching the average savings for his age group.

Evaluating your current retirement savings is a crucial but challenging task as you work your way to your golden years. A detailed retirement plan incorporates your monthly budget, savings goals and lifestyle, among other factors.

For example, you might decide to save specific amounts when you reach a certain age, such as three times your salary by age 40. On the other hand, you could set one savings goal, such as $3 million by age 65.

Additionally, your savings method is foundational to your plan. You could save 10% of your salary every year or set a stringent monthly budget and dump as much as possible into various assets.

Remember, your investment strategy is as critical as the money you set aside. For instance, choosing low-fee investments, maxing out your accounts (401(k)s and IRAs), and automating savings will help boost your nest egg as you go. Furthermore, minimizing debt means you’ll have more to put towards retirement.

The essence of retirement is setting specific savings goals and following a disciplined approach to achieve them. That being said, financial obstacles (divorce, education for children, etc.) and temptations to spend more in the present can hinder anyone’s retirement savings plan. As a result, consulting a financial expert could help you create and execute your plan.

How to Get Your Savings on Track

High-income earners have unique opportunities and challenges when it comes to retirement planning. Here are four common strategies to help get your retirement savings on track:

  • Maximize contributions to tax-advantaged accounts. Contribute the maximum allowable amount to your tax-advantaged retirement accounts. In 2023, the maximum annual contribution for your 401(k) is $22,500 ($23,000 in 2024); and $6,500 for your IRA ($7,000 in 2024). Additionally, catch-up contributions are available to savers age 50 or older, increasing maximum contributions by $7,500 for 401(k)s and $1,000 for IRAs in both 2023 and 2024.
  • Consider non-qualified deferred compensation plans. Non-Qualified Deferred Compensation (NQDC) plans have no contribution limits and more flexible withdrawal rules. These plans are available only for executive-level roles high-income earners often occupy, and can offer these employees a unique tax advantage by allowing them to set aside significant portions of their income for retirement beyond a 401(k)’s limits.
  • Expand your investment types. Open a brokerage account, buy real estate, or become a stakeholder in a small business. These alternatives could help diversify your portfolio and mitigate risk. Remember, each asset has specific tax implications.
  • Avoid lifestyle inflation. This will involve making intentional financial choices to prevent your expenses from rising with your income. Start by setting clear financial goals, both short- and long-term, to give yourself a clear sense of direction. Create a budget to track your income and expenses, distinguishing between essential needs and discretionary spending. Automate your savings and investments so a portion of your income consistently goes towards your financial goals. Then review and adjust your budget to align it with your evolving financial situation and goals.

Bottom Line

A senior couple compares their retirement savings with other people in their age group.

High-income earners can save a lot of money. But, they will need to take effective steps to secure their financial future. Key steps include maximizing contributions to tax-advantaged accounts, considering non-qualified deferred compensation plans and diversifying investments.

Tips for High-Income Earners Saving for Retirement

  • A comfortable retirement isn’t automatic, regardless of your income level. Fortunately, a financial advisor can help you tackle specific challenges for your retirement needs. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Taxes and lifestyle can drain your finances, drying up your savings capacity. Here’s where high earners lose most in these areas and how to counteract them.

Photo credit: ©iStock.com/fizkes, ©iStock.com/szefei, ©iStock.com/brizmaker

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