Average 60-Year-Old Financial Profile: 401(k), IRA, Debt, and Income

Financial stability at 60 is a major concern as retirement nears. Many assess their savings, debt levels, and income streams to determine if they are on track for a secure future. With rising healthcare costs and increasing life expectancy, understanding the typical financial profile at this stage offers valuable insight.

Examining key factors such as retirement accounts, outstanding debts, and income sources provides a clearer picture of financial preparedness. Social Security enrollment and healthcare coverage also play significant roles in shaping long-term security.

Typical 401(k) Balances

By age 60, many have spent decades contributing to their 401(k) plans, yet balances vary widely based on income, employer match programs, market performance, and savings habits. According to Vanguard’s latest How America Saves report, the average 401(k) balance for those aged 55 to 64 is approximately $232,710, while the median is significantly lower at $71,168. This gap highlights the uneven distribution of retirement savings.

For 2024, the IRS allows individuals aged 50 and older to contribute up to $30,500 annually, including a $7,500 catch-up contribution. Those who maximize contributions in later career years benefit from compounding returns. Employer matching programs further enhance balances, with many companies offering a match of 3% to 6% of salary.

Investment allocation also affects 401(k) performance. Many shift toward conservative portfolios, favoring bonds and dividend-paying stocks to reduce volatility. Target-date funds, which adjust asset allocation based on retirement proximity, remain a popular choice. Those with lower savings may maintain higher equity exposure for greater returns, albeit with increased risk.

IRA Holdings

Individual Retirement Accounts (IRAs) provide an additional layer of retirement savings, complementing employer-sponsored plans. By age 60, many hold a mix of traditional and Roth IRAs, each with distinct tax implications. Traditional IRAs, funded with pre-tax dollars, require minimum distributions starting at age 73, while Roth IRAs, funded with after-tax contributions, offer tax-free withdrawals if held for at least five years. The balance between these accounts significantly impacts tax liability, particularly for those with large 401(k) holdings.

The IRS allows annual IRA contributions of up to $7,000 in 2024, with an additional $1,000 catch-up contribution for those over 50. However, income limits restrict direct Roth IRA contributions. In 2024, phase-outs begin at a modified adjusted gross income (MAGI) of $146,000 for single filers and $230,000 for married couples filing jointly. Those exceeding these limits often use backdoor Roth conversions, shifting funds from traditional IRAs to Roth accounts to reduce future tax burdens.

Investment strategies within IRAs often shift as retirement nears. Many rebalance portfolios to reduce exposure to high-volatility assets, favoring dividend-paying stocks, bonds, and annuities for stable income. Some use bond ladders to manage interest rate risk. Given the lack of required distributions for Roth IRAs, these accounts are often preserved for later years or legacy planning.

Debt and Mortgage Status

By age 60, many aim to reduce outstanding debt to improve financial flexibility, yet a significant portion still carries mortgages, credit card balances, and other obligations. The Federal Reserve’s Survey of Consumer Finances indicates that nearly 40% of homeowners aged 55 to 64 still have a mortgage, with an average remaining balance of approximately $150,000. Rising interest rates have made refinancing less attractive, leaving some locked into higher monthly payments.

Beyond housing debt, credit card balances remain a concern. The average credit card debt for this age group exceeds $8,000, with interest rates often surpassing 20% APR. Unlike mortgage debt, which may offer tax deductions, credit card interest is entirely non-deductible. Many prioritize paying down these balances before retirement to avoid diverting savings toward interest payments.

Auto loans also contribute to overall debt. With loan terms now exceeding 66 months and interest rates on used vehicles often surpassing 7%, some may still have payments well into retirement. Leasing offers lower upfront costs but creates an ongoing expense that some retirees find unsustainable. Downsizing to a single vehicle or purchasing a used car without financing can reduce monthly obligations.

Social Security Enrollment

Deciding when to enroll in Social Security is one of the most consequential financial choices at 60. While eligibility begins at 62, claiming early results in a permanent reduction in benefits—by as much as 30% compared to waiting until full retirement age (FRA), which is 67 for those born in 1960 or later. Delaying benefits until 70 increases payouts by 8% per year due to delayed retirement credits, a strategy that can significantly enhance lifetime income. The breakeven point, where delayed benefits outweigh early claiming, typically occurs in the late 70s, making longevity a key factor in the decision.

Spousal and survivor benefits further complicate the timing strategy. A lower-earning spouse may claim up to 50% of their partner’s FRA benefit, but only if the primary earner has filed. For widows and widowers, survivor benefits can be claimed as early as 60, though reductions apply if taken before FRA. Coordination between spouses can optimize household benefits, particularly when one partner has a significantly higher earnings record. Divorced individuals who were married for at least 10 years may claim spousal benefits based on an ex-spouse’s earnings record, provided they remain unmarried.

Primary Income Sources

At 60, many rely on multiple income streams as they transition from full-time employment toward retirement. While some continue working to maximize earnings and delay withdrawals from retirement accounts, others begin drawing from investments, pensions, or annuities.

Earned income remains a major component for those who delay retirement. Many work part-time or engage in consulting roles, leveraging experience while maintaining flexibility. Self-employment is also common, with some turning hobbies or expertise into income-generating ventures. Those earning above the Social Security earnings limit ($22,320 in 2024 for those below full retirement age) may see temporary benefit reductions, though withheld amounts are recalculated into future payments.

For those with pensions, defined benefit plans provide a steady income stream, though fewer private-sector employees have access to these. Pension payouts vary based on years of service and salary history, with some offering lump-sum distributions instead of monthly payments. Annuities also serve as a predictable income source, particularly for those seeking guaranteed lifetime payments. Withdrawals from taxable brokerage accounts, rental properties, or dividend-paying stocks help bridge income gaps before mandatory distributions from retirement accounts begin.

Healthcare Coverage

Healthcare expenses become a growing concern at 60, particularly for those who retire before becoming eligible for Medicare at 65. Without employer-sponsored insurance, individuals must navigate private plans, COBRA coverage, or marketplace options under the Affordable Care Act (ACA). Premiums, deductibles, and out-of-pocket costs can significantly impact retirement budgets.

Employer-sponsored retiree health benefits, though less common than in previous decades, remain an option for some. These plans often supplement Medicare, reducing costs for prescriptions and specialist visits. For those without access, ACA marketplace plans provide coverage, with subsidies available based on income. In 2024, premium tax credits phase out for individuals earning above 400% of the federal poverty level, making careful income management important.

Health Savings Accounts (HSAs) offer another option for managing medical costs. While contributions are only allowed for those enrolled in high-deductible health plans, existing HSA funds can be withdrawn tax-free for qualified expenses at any age. Many use these accounts to cover Medicare premiums, long-term care insurance, or out-of-pocket medical costs in retirement.