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On Retirement Savings (sh.itjust.works)

submitted 11 months ago by [email protected] to c/[email protected]

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I'm almost 40 and according to the wisdom found everywhere on the internet, I don't have enough saved for retirement. Which worries me because I've been saving for as long as I've had a proper job with access to a retirement vehicle. But also because the internet wisdom doesn't make sense or sound feasible.

According to what I've read, you're supposed to have:

1x your income when you're 30
3x your income when you're 40
6x at 50
8x at 60
10x when you retire

I'm almost 40 and I have just barely over 1x saved. So it feels like I'm 10 years behind. However, my income has grown substantially over the course of my 30s, more than doubling. So accounting for growth in income, I do have almost 3x my salary in my late 20s. But similarly, the above advice could be interpreted as needing 6x the income you had when you were 30 by they time you're 40. And by that metric, I'm doing even worse!

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[–] [email protected] 21 points 11 months ago (1 children)

Income is the wrong focus for retirement, and I'd be suspicious of any benchmarks that talk about replacing income. Spending is the number you need to pay attention to, because you're not going to be paying as much in taxes, and you're not going to be saving for retirement after you retire. Those tend to take a pretty big bite out of your nominal working-life income, and the difference can make retirement seem like an even bigger hurdle than it actually is.

[–] [email protected] 5 points 11 months ago

Exactly. Many expenses will go way down, especially if you retire at normal retirement age and take Medicare, assuming you have a mediocre health plan at work.

You can estimate how much money you'll have at retirement with any investment calculator, or you can DIY with a spreadsheet using the FV() formula. Just be careful to take inflation into account (somewhere around 6-7% returns in the market is reasonable). Then look at Social Security or whatever your country offers to get an idea of the rest of the picture (SSA has an estimator).

That said, nobody ever complained about having too much saved, so just make sure your analysis encourages you to save instead of coast.