How Much Should You Have Saved for Retirement by Age?
How Much You Should Save for Retirement by Age
Let’s take a look at how much you should have saved for retirement by ages 55, 60 and 65. As we get into this study and the data supporting these numbers, I’m going to predict that you might be thinking one of two ways. Either you’re thinking, “I don’t think I have enough right now,” or you’re thinking, “I think I’ve got enough, but I’m just curious to see how I compare to what the average is, or to compare to what other people are doing.”
There’s a famous quote backed by science that goes, “Without vision, people perish.” A vision, or hope, is what sustains us along the way, but it’s also what gets us started in the first place. You’ve already been thinking about and starting to plan for your retirement and your future because you’re reading this right now. As we’re planning, what we’re doing is planning for the future outcome that we hope to achieve.
My goal is that however you might be feeling, you can leave this video with a little bit more hope than when you clicked play.
Pulling from a Study By T. Rowe Price
One last thing to keep in mind – this study comes from T. Rowe Price, and they’re making assumptions using some rules of thumb. As Sean from our office says, “Rules of thumb are great in the absence of a plan.” Your plan is different from anyone else’s. This study and the data that we’re going to look at is meant to give you an idea. If you watch this and you don’t continue planning for your specific situation, then it’s not going to be helpful.
After the data, I’ll show you a sneak peek of our favorite retirement planning software that you should be able to get access to for free. Now, let’s look at the data.
Amount Saved for Retirement by Age 55
Let’s first look at a 55-year-old. Here are the assumptions that T. Rowe Price is making – the 55-year-old is going to be working another 10 years until they retire at 65. The savings benchmark ranges, these are going to be based on individuals or couples with incomes from 75 to 250,000. So I’ll show you each one of those so you can kind of match up what you might be compared to here.
So here are some of the assumptions that T. Rowe Price is making. This is a married couple, dual income. It’s not going to factor in social securities, house values, other assets, or even debt. What this is doing is showing how much you should have saved based on a multiple of income by these certain ages. For a 55-year-old, let’s say we start with this person who has an income of 75K per year. According to T. Rowe Price, the multiple that they should have saved is five times or 375,000.
If someone’s making an income of $100,000, then it should be six times. If you’re making $250,000 a year dual income by age 55, their recommendation is seven times income. You might ask well, why is it that the multiples higher for the person who’s making more? Usually the cost of living is likely higher for people with higher incomes. As you get into retirement ages, social security makes up a larger portion of income for people that have a lower income, so social security makes a bigger piece of the income pie.
Amount Saved for Retirement by Age 60 & 65
Let’s move on to the age 60 people and what the multiple would be. That multiple goes up for older folks as well because – according to this assumption for T. Rowe Price – at age 55, you’ve got 10 years left of savings before 65 when you start actually taking income over here. As you get older, the multiple is naturally growing or needs to be larger as you get close to age 65. For age 65, the multiples would be eight and a half percent to 11.5% depending on what the income is.
Seeing this so far, you’re either feeling good or you’re feeling bad, or maybe you’re indifferent, but however you’re feeling right now, don’t let it go to waste. You can either use the positive expectation of feeling like you’re doing better than average by looking to the future to start planning out that dream retirement even more and get more detailed with your specific situation…
Or, if you’ve got the negative emotion right now, you can use that to get serious about your own situation and gain more clarity using that DIY retirement planning software that we like a lot. In my opinion, it is one of the best consumer facing planning softwares out there that makes it easy enough to use by yourself just to get a better picture.
Take whatever energy you’re feeling right now and keep moving forward with your retirement planning.
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Disclosures: Securities offered through LaSalle St. Securities LLC (LSS), member FINRA/SIPC. Advisory services offered through LaSalle St. Investment Advisors LLC (LSIA), a Registered Investment Advisor. Streamline Financial Services is not affiliated with LSS or LSIA. LSS is affiliated with LSIA.