I'm 45, how much retirement should I have by now?

[Campy1]

Hello,

Just wanted to get some opinions of how much retirement savings a 45 year old should have if they want to retire by 65. Is there a rule of thumb for this?

Thanks

[bjl584]

Quick and dirty answer is when your net worth equals 20 to 25 times your annual expenses you can retire.

[Campy1]

So if I make $100,000/yr times 20 equals $2,000,000.

Also, is the assumption that the $2,000,000 is after taxes are taken out of my 401k or before?

[Petunia 100]

So if I make $100,000/yr times 20 equals $2,000,000.

Also, is the assumption that the $2,000,000 is after taxes are taken out of my 401k or before?

It doesn't matter what you make, Campy. It matters what you spend.

I like to work backwards. I would like to retire at 65. I know what income I need from my nest egg, so know the minimum size it needs to be. Assuming it earns 7% on average, it will double about every 10 years. So at age 55, I need one-half the amount I need at age 65. At age 45, I need one-fourth the amount I need at age 65.

This is rough and dirty, of course. It ignores inflation, but also ignores new contributions, so hopefully those will more or less cancel each other out.

[jpg7n16]

Hello,

Just wanted to get some opinions of how much retirement savings a 45 year old should have if they want to retire by 65. Is there a rule of thumb for this?

Thanks

If you're constantly contributing 10-15% to a balanced portfolio and expecting to earn 8%/year, by age 45 you should have:

Weak pace 1.0x
Average pace 1.5x
Good pace 2.5x
Strong pace 4.0x
Extra strong 5.5x

Where X is your salary.

This would consider all investment accounts (401k, IRA, stock trading account, 403b, etc.)


For an example, say you make $100k. If you have $125k across all your accounts, that is 1.25x your salary. That puts you somewhere on weak to average pace - call it below average.



There's the rule of thumb. But it's probably better to use a retirement calculator. Here are two free calculators I find useful:

AARP Retirement Calculator - How to Retire, Plan for Retirement, What Is Retirement? - AARP
Which I like because it accounts for Social Security, and gives some suggested changes if you're off track. I also like that it allows you to adjust your retirement lifestyle.

Fidelity Investments: MyPlan Snapshot
Which I like because it accounts for how you are invested. I don't like the sound, so I'd prob turn it off. It's not as detailed as the other, but most don't consider investment style, which is really important.

[97guns]

So if I make $100,000/yr times 20 equals $2,000,000.

Also, is the assumption that the $2,000,000 is after taxes are taken out of my 401k or before?

you dont need 2 mil to retire unless your spending is out of control. me, i'd rather reign in the spending than wake up everyday for work, slavery is not my cup of tea.

[chrisburke21]

I agree that the amount you need to retire is based on your spending not how much you earn. The concept of 20x your income is a good savings goal to have. It also depends on what you plan to do in retirement. Do you plan to travel? Do you plan to minimize expenses?

[Srom]

Made me realize I'm in a very bad position... getting back to work

[Goldy1]

I thought I read recently that the amount needed has been overstated. If this national healthcare mess is sorted out and we can get help on that financially I can see retirement much sooner than later.

[Goldy1]

ps
Having a child has complicated that for us also. I mean, you can never really have enough when you have a child. We are middle class and paying for his colege is likely out of the budget. Maybe grandparents can help or we can get some loans.
I personally have a 4 year degree I never used. lol. My hubbie has a trade certificate that took a full time year to obtain and makes 50 or 60 K a year or something like that. He used to make more 10 years ago.

[97guns]

I thought I read recently that the amount needed has been overstated. If this national healthcare mess is sorted out and we can get help on that financially I can see retirement much sooner than later.

you probably did, the gov't wants you to work for ever, its the only way you have value to them. with this new health care bill the people in their earning years will get top heath care, the elderly will be getting minimal care

[PatientSaver]

If you go to www.networthiq.com, you can compare your assets to other members in your age range or by income level or several other variables.

[JoeP]

It doesn't matter what you make, Campy. It matters what you spend.

Agreed, and the earlier you can modify your spending habits, the less impactful it will be when you retire.

For example, once you pay off your house and cars and credit cards, vow to never have those payments again...those expenses are now off the table. Your next (retirement) house should be smaller: you'll be able to pay cash from the equity in your paid-for house and have some left over, your taxes will be lower, your insurance will be lower, your utilities will be lower, the amount of maintenance should be lower.

So what will be your expenses? Use that to figure what you need.