How Much Should You Have Saved by Age 50? A Financial Expert’s Guide
Jakarta, CNBC Indonesia — Entering retirement without the anxiety of a financial crisis is surely everyone’s dream. But financial freedom in later life does not happen overnight; it requires careful planning from an early stage.
Age 50 is often seen as a crucial milestone for workers to assess the resilience of their financial portfolios before they finally hang up their boots. So how much savings or in assets should they ideally have accumulated by this age?
Global pension provider Fidelity calculates that people should ideally have savings worth six times their annual income by the time they reach 50. The formula is designed for those targeting full retirement at the age of 67.
For example, if your net annual income is Rp100 million, your retirement savings at age 50 should ideally reach Rp600 million.
Not a fixed figure
That benchmark, however, is not set in stone. Certified Financial Planner Nathan Sebesta, founder of Access Wealth Strategies, says retirement funding needs are highly personal and depend on each individual’s circumstances.
“The amount of money you need depends greatly on several key variables: when you plan to retire, your projected expenses in later life, and where you choose to live,” Sebesta said.
In addition to location and estimated lifestyle, reaching your fifties also calls for a shift in investment strategy. Portfolio allocations are advised to move towards more conservative, lower-risk instruments to protect the principal value of assets from market volatility.
How to catch up
What if your savings are still far below the ideal target?
If you are behind financially, Sebesta recommends being realistic by adjusting your lifestyle expectations and the income you anticipate having in retirement.
Use the remaining 10 to 15 years of your working life to implement strict budgeting measures, including:
Paying off debt: Prioritise clearing outstanding debts so they do not eat into your day-to-day cash flow.
Cutting expenses: Reduce spending on non-essential needs and items that are not urgent.
Downsizing: Consider moving to a region or city with a lower cost of living.
As a last-resort option, you may need to be prepared to remain productive through part-time work or start a small business in retirement to maintain a steady cash flow.
“Of course, nobody dreams of continuing to work in old age. But for those who are late in preparing and find it difficult to catch up, this is the most realistic option for making ends meet,” Sebesta concluded.