This is the average savings balance of fifty years

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How does your balance compare?

Key points

  • Personal Capital reports that its average user in their 50s has about $64,000 in savings.
  • It’s important not to tie up too much money in savings if you’re behind on building up a nest egg.
  • Many people put a portion of their funds into investment accounts because they tend to generate a higher return than savings accounts.

Turning 50 is a pivotal decade. By this time, you may have reached your maximum income level and may be thinking more seriously about planning for retirement. You may also be struggling with big expenses, like sending your kids to college.

It is important to have a good level of savings by the age of 50. At this point in life, the last thing you want is to rack up credit card debt when an emergency expense arises out of the blue.

In fact, recent data from Personal Capital shows that 50-somethings have a respectable amount of cash in savings. But how does your balance compare?

What 50-somethings have saved

The average savings balance for 50-year-olds, based on Personal Capital user accounts, is $63,961. To be clear, this isn’t what the 50-somethings have saved in total – it’s just cash savings. Funds in other accounts, like IRAs and even checking accounts, don’t count toward this amount.

How much money should you have in your savings account?

If you have a short-term goal (like buying a boat or upgrading to a new car), the money you save should go to the bank. You should also have enough money in your savings account for a full emergency fund. This usually means having enough money to pay three to six months of essential bills.

So let’s say you have about $64,000 in savings and your monthly expenses are $6,000. In this case, you are well over the amount of savings needed to cover six months of bills. And in that case, you might want to consider diverting some of your money to a brokerage account or a retirement plan. This is especially true if you are behind on retirement savings.

Once you reach age 50, you are allowed to make catch-up contributions both in a IRA and a 401(k). This is money you should aim to fund your account with if your nest egg isn’t as strong as you would like. And one way to do that is to withdraw money from your savings account.

In fact, keeping too much money in savings at this stage of life may not be the best decision. With a savings account, you will generally get a much lower return on your money than investing it, even during times when banks are paying more generously.

Now, if retirement is, say, 10 years away, you might not want to invest your money too aggressively. But even a conservative investment portfolio is likely to generate a significantly higher return than what you’ll get from your savings account, so now is a good time to assess your level of cash reserves and make sure it’s appropriate.

Keep in mind that before you officially retire, you’ll actually want to have enough money in savings to cover one to two years of expenses. This way, you will have the opportunity to leave your investments alone in case the market crashes. But you can also keep some of that money in your IRA or 401(k). And if you don’t plan to retire for another decade, you don’t need that much cash. now.

In the end, having lots of savings is only a good thing up to a point. Make sure you don’t have too much cash on hand, especially if you think your IRA or 401(k) plan balance isn’t quite where you want it.

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