Here's How Much You Should Have Invested for Retirement at Age 60

How much money do you need to ensure a nice retirement? Data gathered by insurer Northwestern Mutual suggests that most people think the magic number is $1.46 million. That's an average based on a wide range of estimates from ordinary investors, though. You could be just fine with less. Or you might end up needing considerably more. Your spending plans and habits have a great deal to do with your future need.

There is one thing almost every investor understands, however. That is, you don't amass your retirement savings overnight. You do it over time through a combination of contributions of new money and the growth of your previously contributed money, meeting financial milestones en route to retirement.

This not-so-small detail raises an important question: How much should you have invested at age 60, when you're not quite ready to retire, but when that day is within sight?

Here's a rough figure.

A working target

There's no single correct number, of course, since everyone's budgetary needs are different. Assuming you simply want to maintain your current standard of living, here's a good rule of thumb: When you're 60 years old, you'll want to have retirement savings on the order of 9 times your present annual salary. That's the figure from mutual fund company T. Rowe Price, anyway, although it jibes with suggestions from Fidelity and brokerage firm Merrill Lynch.

Just bear in mind that that's the midpoint of a wide range of serviceable amounts. At the low end, a more modest 6 times your current yearly income could be plenty. At the other end of the spectrum, some investors will want to have amassed as much as 11 times their present annual income.

This still won't be enough to secure the retirement you likely want, to be clear. Although retirement is on the near-term horizon for many 60-year-olds, most of these people will work at least a few more years. Retirement savings plan administrator Empower reports that the average U.S. worker retires at age 65. At that point, T. Rowe Price says you'll want to have saved up something between 7.5 and 13.5 times your current yearly salary, which -- presuming it's managed wisely -- should help you maintain your current standard of living.

Of course, to reach that mark, you'll need to have enough already saved up by the time you turn 60.

To this end, here are the retirement savings milestones T. Rowe Price suggests, beginning at the age of 30 all the way through 65 years of age.

Data source: T. Rowe Price.

Making an action plan

$1.46 million is a daunting goal, made even more daunting by seemingly sky-high interim goals.

Even if you're well behind this suggested savings schedule, don't panic! You've still got time to close at least some of the gap. You'll just want to make the most of the time you've got left to save, and capitalize on the life advantages you likely have that younger people don't.

Chief among these advantages is higher income. Although workers between the ages of 45 and 54 tend to earn slightly more, Fidelity reports that the 55-to-64 crowd is the U.S.'s second-highest earnings cohort, taking home an average of $65,208 per year. At this latter stage in life, however, mortgages tend to be paid off and children tend to be out of school. Fund company Hartford also reports that 60-year-olds pay the least for automobile insurance.

In other words, 60-year-olds are likely to enjoy more disposable income by virtue of lower total bills. You'll just need a detailed budget and spending plan to make sure it matters.

As for making the best possible use of your time, you should also know that the IRS offers anyone over the age of 50 so-called "catch-up contributions" to individual retirement accounts, including 401(k) accounts. These allow you to contribute more money to an IRA than younger workers are able to, allowing you to tuck away more savings in tax-deferring and/or tax-sheltered-growth vehicles. In some cases, these contribution limits are now several thousand dollars higher than the limits imposed on people under the age of 50.

You should also understand that five years (give or take) is actually a long time when it comes to investing. As the image below illustrates, most of any retirement savings account's net gains materialize with the last one-third of the savings and growth period, no matter how long you save. That's the case even if you don't make ever-bigger contributions as time marches on -- you're earning more and more on your previous investment gains. You know this mathematical phenomenon as compounding.

Data source: Calculator.net. Chart by author.

The point is, even if you don't think you've got enough saved up at this time in your life, don't stop! Work with what you've got, and add what money you can. It's not unheard of to double your retirement savings in just five years' time, if the market is cooperative.

Keep the bigger picture in mind... along with the small details

That being said, don't fall into the trap of becoming so numbers-focused that you forget to effectively manage the process along the way. For instance, no matter how much you've got saved up right now, you'll want to invest it well. That means maintaining a portfolio allocation that's not only appropriate, but that consists of quality investments.

You'll want to make and monitor a spending budget as well, just to ensure you've got extra cash every month that can be saved for retirement. Also don't neglect managing any debts that are costing you a fortune in interest charges, since these ultimately crimp your net returns on your entire financial picture.

Wherever you are right now, taking any sort of improvement-oriented action is better than taking none at all.