Targets for retirement savings

**disneysteve** · 12-21-2011, 09:23 AM

Originally posted by Bob B. View Post

I was listening to Clark Howard's fill in on the radio last night, and I think he said that by 30 you should have 1/2 of your annual salary saved, by 40 250% and at retirement 12X your salary, but I wasn't sure I caught that quite right.

The usual advice is that by retirement, you should have 25X your expenses (not your income). That allows for a 4% withdrawal rate the first year adjusted annually for inflation. Doing that gives a high chance of not outliving your money.

As for the milestones along the way, there are some formulas for that but I can't quote any off the top of my head. I think it partly depends on your career. If you have a job that you started right out of high school, you'll be in a different place at age 30, for example, than if you went to college and grad school before entering the workforce.

**97guns** · 12-21-2011, 10:02 AM

Originally posted by Bob B. View Post

I'm 39, and I have 150% of my annual salary saved for retirement. Is there a certain target that I should be shooting for? That is - by 40 years old, I should have X% of my annual salary saved for retirement, by 50 years old I should have Y% of my salary saved...

I was listening to Clark Howard's fill in on the radio last night, and I think he said that by 30 you should have 1/2 of your annual salary saved, by 40 250% and at retirement 12X your salary, but I wasn't sure I caught that quite right.

Thanks for any insight.

i retired 2 years ago when i was 39. i didn't know what kind of % i had saved but figuring it now it was 7x my yearly wage. if i had planned to live off that money with it just drawing interest i dont think it would be possible. my key to early retirement was making that 7x wages earn more money, now 2 years later it has doubled up to 14x my wages through rehypothecation.

**riverwed070707** · 12-21-2011, 10:13 AM

I've always hear 1x your salary by 30 as a general rule of thumb. I haven't heard of percentages beyond that.

**MonkeyMama** · 12-21-2011, 12:11 PM

Here is a compound interest calculator:

Compound Interest Calculator

Put in current retirement balance, how much you are contributing on an annual basis, and expected rate of return on investments.

See if you are on track for 25 x income. 25 x *expenses* may be fine. 25 x *income* is certainly more conservative. If nothing else, using both figures gives you a range, and gives you some wiggle room for inflation and the unexpected.

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There are several problems with a "rule of thumb by age" kind of approach. Some have been mentioned.

#1 - Someone who graduates college and figures out what they want to do at age 30 versus age 22 - BIG DIFFERENCE.

#2 - The problem I found with this in younger years is my income went up so fast. So, I might have hit "1 year retirement" goal 5 years in a row. Every time I met that goal, I got a 10% raise. Back to square one every single year. If you are making $100k at 30 but you were making $30k when you were 25 - obviously you haven't saved as much as you would have if your starting pay was $100k. (This is precisely why there is the recommendation to use expenses as a guage - assuming your expenses are more steady and predictable).

In addition to this, at some point the power of compounding takes over and your savings may be growing more than the amount you even put in. Just to point out that it is more of a curve than a straight line. Which I do think was accounted for in Clark Howard example, but is often not accounted for in these rules of thumb.

#3 - Of course, how much you have saved at any given point in time depends on stock market fluctuations.

Targets for retirement savings