How Much Should You Have in Retirement Savings? (by age)

In this post, we use the "4% withdrawal" approach to retirement planning to approximate how much you should have in savings at each age. And, given how much you actually have, what percent you should save going forward.

Have You Saved Enough for Your Retirement?

Have I saved enough for my retirement? Am I on track? These are critical questions for those hoping to retire in comfort. In the previous series, we calculated the percent of your salary that you should save each year. In this series, we provide some benchmarks to monitor your progress along the way.

Retirement Savings Targets as a Multiple of Salary: Benchmarks, by age

Retirement Savings Targets as Multiple of Salary

This post is designed for those who do not expect to receive a pension or Social Security -- regardless of salary level. Otherwise, see with Social Security, or higher income earners.

Without Social Security or a Pension, You'll Need ~19 Times Your Salary to Retire Comfortably at Age 65!

As you can see from the chart above (click to expand), no matter when you start saving, by the time you're 65 you'll need about 19 times your "then-current" salary in retirement savings! That is, assuming you want to maintain
the same standard of living in retirement that you could afford during your working years. Then-current just means it's times your salary at that time, not your current year's salary.

If you wanted 100% of your salary, the 4% guideline would recommend that you accumulate (100%/4%=) 25 times your salary. However, since we're assuming you only spend 75% of your salary, including what you spend on taxes, you'll need "only" (25 x 75%=) 18.8 times your salary. If that seems like a lot, remember that you could possibly spend 30 years or more in retirement. So, if your money was not invested and not earning a return you could need even more! (Note: For more on the 4% withdrawal approach, see Assumptions below.)

The Glide Paths: How Much Should I Have Saved for Retirement by Age 35, 40, 50 & 60?

The blue line shows the idealized retirement portfolio growth for a person who started saving for retirement at age 30. We already know that this person should be saving almost 21%/year based upon the results from What Percent of Your Salary Should You Save for Retirement?.  (see assumptions below)

As you can see from the graph, if you start saving at age 30, the targets are:

• about 1.5x (times) then-current salary by age 35
• 3x salary by age 40 
• 7.5x salary by age 50, and
• about 15x then-current salary by age 60.

Regardless of When you Start, You'll Want About 15x Salary at Age 60

If instead of starting to save at age 30 you start at age 35 (the red line), the target at age 40 is 2x salary instead of 3x salary. However, over time, the lines converge. Regardless of when you start saving, you'll need about 19 times salary at age 65; and, you'll need 14-15 times salary at age 60.

If You Already Have Savings, Hop on a Glide Path at Any Time

The previous series assumed you were starting from scratch.  However, you can hop on these "glide paths" at any time. For example, suppose you are 35 years old, have been saving only sporadically, but have just received an inheritance. As a result, you now have 1.5 times your salary in savings.

To see where you stand, find your age on the horizontal axis and then check to see where your savings put you relative to the benchmarks. One and a half times salary puts you right on the blue, "starting at age 30," glide path, and you'll want to save 21%/year from this point forward.

If, at age 35, you have 2x your salary in retirement savings, you're almost up to the green, "starting at 25," glide path and will only need to save 16%/year. If your assets are between 1.5 & 2 times your salary, your annual contribution should be between 16% and 21%.  (See below for a more precise estimate.)

The Real World May, No WILL, be Different!

Remember, these are benchmarks! In the real world, your retirement portfolio will not consistently deliver 5% real returns year after year. The "glide paths" in this chart show what would result if it did in order to give you a benchmark.

What If I'm Eligible for Social Security?

See with Social Security, or higher income earners. If you are eligible for Social Security but want to include it at a reduced amount, My SIMPLE Retirement Savings Calculator will not calculate what you should have now, but will calculate how much you should save going forward.

Some Key Assumptions (short version)

I've assumed that you:

• Invest a constant percentage of your then-current salary each year until retirement
• Earn a pre-retirement real (i.e., after-inflation) rate of return of 5% -- after taxes & expenses.
• Retire at age 65, receiving 75% of your current annual income (inflation-adjusted) in retirement
• Follow the "4% Withdrawal" guidelines, starting by withdrawing 4% of your assets your first year in retirement.

For a more detailed discussion of the 4% withdrawal approach and my assumptions, see Assumptions for the 4% Withdrawal Retirement Graphs.

For an estimate more tailored to your specific circumstances, and to get a better feel for the impact of some of the variables, I encourage you to enter your own data into My SIMPLE Retirement Savings Calculator.  Specifics of your situation, such as your pre-retirement investment returns and expected spending level in retirement, could make a significant difference. However, the graphs give you a better feel for the "big picture."

Related Posts

Other Easy-to-use graphs based on these same concepts:

• How Much Will You Need to Retire? An interesting overview showing the impact Social Security has on how much money you will need on your retirement date.
• What Percent of Your Salary Should You Save For Retirement?, by starting age: w/o social security; a companion post to this one.
• What Percent of Your Salary Should You Save For Retirement?, by starting age: for typical worker
• What Percent of Income Should Higher Income Earners Save For Retirement?
• How Much Should You Have in Retirement Savings? - ave income with Soc Sec, by age
• How Much Should You Have in Retirement Savings? - higher incomes with Soc Sec, by age

My SIMPLE Retirement Savings Calculator an interactive calculator version of the spreadsheet used to generate the graphs
A Personal Strategic Planning Example: a process for establishing life priorities.

Start Retirement With a 4% Withdrawal Rate A discussion of the 4% withdrawal concept, from Time Magazine. For a more detailed discussion, see Wikipedia.

For lists of other popular posts and an index of posts, by subject area, see the sidebar to the left or the blog header at the top of the page.

Copyright © 2012                         Last modified: 12/1/2020

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