"Am I saving enough for retirement?" It’s one of the most common questions we hear from clients, and it’s a critical one to address. While every situation is unique, having general benchmarks can help guide your progress.
Here’s a simple rule of thumb for savings milestones by age:
By age 30: Save 1x your annual salary
By age 35: Save 2x your annual salary
By age 40: Save 3x your annual salary
By age 50: Save 6x your annual salary
By age 55: Save 7x your annual salary
By age 67: Save 8-10x your annual salary
These benchmarks provide helpful reference points to ensure you’re on track for a secure retirement. But how do these numbers translate into retirement income? The general rule of thumb is that you can withdraw about 4% of your savings annually without significantly impacting your principal. For example, if you’ve saved $1 million, you can expect to generate approximately $40,000 per year in income.
Planning for retirement starts with asking, “How much income do I want in retirement?” Once you have a number, divide that by 4% to determine the total savings you’ll need. For instance, if you aim for $60,000 in annual income, you’d need about $1.5 million saved.
If you’re behind on savings, there are steps you can take to catch up. For those over 50, catch-up contributions to retirement plans, such as 401(k)s or IRAs, can help close the gap. If you have additional cash flow, consider investing in a taxable brokerage account for supplemental savings.
Another option is to work a little longer. While not always ideal, extending your career to age 70 can enhance your retirement outlook significantly. Working longer reduces the number of years you’ll need to draw from your retirement portfolio and allows for additional savings and investment growth.
Retirement planning is a journey, and there’s no one-size-fits-all solution. If you need help navigating your savings strategy or determining if you’re on track, our team is here to provide personalized guidance.