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As those 45 years and older start to think about the future, they often wonder how they compare to others their age and, more importantly, if they’re doing the right things to set themselves up for financial success and freedom in the future.

If you’re one of those people, keep reading to learn how you rank among others your age – and where you should be.

Where do I rank?

The most recent Survey of Consumer Finances published by the Federal Reserve in 2022 shows that people in every age group, including 45–54-year-olds, are saving at wildly different rates. In fact, the average results were so skewed by high earning (and high saving) outliers, that the survey published both average and median results.

When it came to retirement, the average 45–54-year-old had $313,220 saved, while the median savings, which is more representative of the typical American, had a little more than a third of that amount saved, with $115,000.

For transactional accounts, or accounts where money is readily available, including savings and checking accounts, the difference was even more staggering. While the average amount saved was $71,130, the median was only $8,700.

These wide ranges make it difficult to understand how you really compare to your peers. And when some people are living paycheck to paycheck and others have large amounts of inherited financial wealth, knowing where you rank may not be a very good indicator of where somebody in your position or with your goals should be.

Where should I be?

While it may be helpful to know how you compare to other people who are not only your age, but compare to your financial situation, what you’re really planning for is your future and your legacy. Depending on what your goals and needs are, how you approach financial planning may look very different than your counterparts. Because of this, the first step in assessing where you should be is asking yourself a very important question: What is my money really for?

What are you using your money for now? What are you hoping to use your money for in the future? What legacy are you hoping to build? Answering these questions will help you make informed decisions about your financial planning.

Still, regardless of what you plan to use your money for, there are a few things we recommend that everybody have by the time they turn 45.

The first is retirement savings. We strongly recommend that you either invest in a 401(k) or an IRA – but, ideally, you’ll invest in both. Because 401(k)s are employer funded, they often offer less control to individuals and err on the side of more conservative investments. This is incredibly important, as it allows you to securely build your retirement savings with less risk. However, an IRA grants you more flexibility and allows you to invest more aggressively, giving greater opportunities for financial growth.

We also believe that everybody 45 and older should have an emergency savings fund containing at least $35,000. Should you experience a financial setback, medical emergency, or face some other unforeseen circumstance, you will be prepared to face it without tapping into retirement or investment accounts.

Speaking of investments, folks 45 years and older should have at least two different investment accounts, each with their own time horizon. The first, an account with a ten-year time horizon, tends to be more aggressive, as the money won’t need to be accessed for at least ten years and won’t be as affected by passing market trends. Meanwhile, the five-year time horizon will be more moderate, and investments will be made with five-year goals in mind.

These relatively short-term goals give you something tangible to work towards. Whether it be a large vacation, helping to pay for a child’s wedding, or purchasing a new home, these goals help you answer the question “what is my money really for?”

Finally, if you are 45-years-old, it would be in your best interest to have an annual consultation with an advisor to talk about their finances. While having retirement, savings, and investment accounts protects you for the future, a financial expert will make sure that you’re getting as much out of your money as possible. From taking advantage of tax situations to making informed investment recommendations, an advisor will ensure that you’re on the right track to grow your money and build your legacy.

Are you ready to make sure you’re positioned to achieve your financial goals? Reach out to us at 847.680.9052 to schedule your consultation!

Additional Disclosure:

The information contained in this article is distributed for informational purposes. Information contained herein has been obtained from sources believed to be reliable. The information contained in this article is accurate as of the data submitted, but is subject to change.