Retirement Savings: Are You On Track? Find Out By Your Age!

Retirement Savings: How Much Should You Save at Every Age

Do you know how much you should have tucked away for retirement by 25? What about 35 or 45?It’s easy to determine when you’ve hit certain financial milestones like building an emergency fund or paying off debt. But what about retirement savings? Deciphering exactly how MUCH you should have saved for retirement seems like a daunting question to answer because everyone’s financial situation and retirement goals are different. So, how can you calculate how much you should have saved? Let’s explore this together!

Are Your Retirement Savings on Track?
Different ideas exist on when to retire and how much should be saved. Using J.P. Morgan Asset Management’s Annual Guide to Retirement, a reliable source that provides benchmarks for retirement savings planning, we can base our numbers on solid assumptions. According to the report, here are the key assumptions taken into consideration:
– Pre-retirement investment return on your portfolio is 5.75%
– Post-retirement investment return on your portfolio is 5%
– Inflation rate is 2%
– Retirement age is 65
– Planning to spend 30 years in retirement
– Annual savings rate of 5% for those earning $90,000 or less per year
– Annual gross savings rate of 10% for those earning over $100,000 per year

It’s interesting to note that six-figure earners in their mid-twenties are expected to save less than those with lower incomes, which challenges the conventional perception of saving patterns.

How Much Should You Have Saved for Retirement?
While your personal financial situation may vary, these retirement savings benchmarks provide a solid starting point for planning your retirement. Let’s break down how much you should have saved at various ages:

By Age 25
At 25, retirement might not be the foremost thought. However, establishing good saving habits early on is crucial for a secure financial future. Your savings target based on your income should be:

Checkpoint (X Current Income) – Retirement Savings Target

By Age 35
Entering your thirties, the focus on retirement typically intensifies. By age 35, your retirement savings target based on your income should be:

Checkpoint (X Current Income) – Retirement Savings Target

By Age 45
In your mid-forties, the urgency to maintain a solid retirement nest egg becomes more pronounced. By age 45, your required savings target should be:

Checkpoint (X Current Income) – Retirement Savings Target

By Age 55
Approaching retirement age, staying on track with your savings is crucial. By age 55, you should aim to hit the following savings target:

Checkpoint (X Current Income) – Retirement Savings Target

By Age 65
Reaching the retirement age milestone, factoring in social security, your required income in retirement is crucial. By age 65, the following savings target should be achieved:

Checkpoint (X Current Income) – Retirement Savings Target

What If Your Retirement Plans Are Unique?
Do you have specific retirement goals that deviate from the normal assumptions? Planning to spend more or less in retirement, or aspiring to retire earlier? Consider revising your retirement savings plan to align with these unique goals. Resources like Todd Tresidder’s book on retirement planning can guide you through customizing your savings plan.

What If You Want to Retire Early?
The FIRE movement, known for Financial Independence Retire Early, provides an alternative approach to retirement planning. Championed by those seeking to exit the workforce earlier, pursuing FIRE requires a different savings strategy. Delve into resources on the FIRE movement to understand the extreme savings commitments required for this early retirement option.

The Bottom Line
Saving for retirement might seem daunting, but segmenting it into age-specific milestones can make it more manageable. Unsure if you’re on the right path? Seeking advice from a financial advisor can help establish tailored savings and investment strategies. Remember, it’s never too late to initiate your retirement savings journey. Consider IRA accounts for freelancers and small business owners to access higher contribution limits and secure your retirement future.