It is well-established that the earlier you start saving for retirement, the better. However, the big question for many investors is: “How well am I doing?” This article will show you some rough milestones to reach.
Do not be discouraged if you are behind for these goals. View them as a "checkpoint" and adjust your savings and spending habits to work towards a goal. Also, Keep in mind that you may need to save more or less than these amounts based on your objectives, lifestyle, and income needs when you do eventually retire.
Age 30 Goal: The Equivalent of One Year’s Salary
This is a lofty goal these days. It is common for some 30-year-olds to have close to one year's salary in debt due in large part to student loans. However, the younger generation should not be discouraged, and with some discipline and planning, most can manage their debt whiling saving to build wealth for the future.
Age 40: Savings Equal to Triple Your Annual Earnings
The average American currently saves about 3.5% of their income. Can you save 3.5% of what you earn at 25 or 30 and build a six-figure retirement fund by your 40th birthday? Perhaps; if you are an absolute investing wizard or start your career with a salary more than $100,000. In most cases, saving and investing 10-15% of what you earn annually will be crucial in planning to reach this goal. (1,2)
Age 50: Retirement Savings Equal to Triple Your Annual Earnings
Slow, steady, and consistent investing wins over the long haul. Building up to $250,000 or more in retirement savings can be a challenge given many factors such as raising children, divorce, periodic unemployment, or health problems. A balance between discretionary spending habits and a disciplined approach to contributing to your retirement funds will likely get you to this goal. (1)
Age 60: Savings & Investments Eight to Nine Times Annual Earnings
Amassing $500,000 or more in retirement assets (in today's dollars) should be a priority and the end goal in sight. Even if you have not managed this, other resources may help you generate retirement income in the years ahead including Social Security benefits and possibly home equity, executive compensation, or business proceeds to make your financial future promising. (1)
Bottom Line: Plan to Save & Invest 10-15% of Your Annual Salary
View retirement contributions as paying your future self. The best approach is to put these deposits on "auto pilot" each and every month. This will hold yourself accountable to ensure you are making proper and consistent contributions.
Through recurring contributions to tax-deferred retirement savings accounts such as a 401(k) and/or IRA, you will be able to make saving and investing a regular process. Trust me, your future self will thank you!
1 - cheatsheet.com/money-career/how-much-money-should-have-based-on-age.html/ [9/20/17]
2 - businessinsider.com/how-much-you-should-have-saved-every-age-2017-9 [9/18/17]
This post has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. Your Financial Roadmap, Inc. is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.