You Need This Much Retirement Savings At Your Age And Income

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you-need-this-much-retirement-savings-at-your-age-and-income

Are your retirement saving goals on track? That’s one of Americans’ most vexing financial questions. Along with the overall stock market and inflation, retirement savings have taken a hit the past two years as the S&P 500 is down about 9% from the beginning of 2022.

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It’s only natural for you to wonder if you are saving enough for a comfortable retirement. And knowing how much to save for retirement is a key question in planning. Yet many people don’t know how to figure out the right amount of retirement savings. Many don’t even try, even though knowing that number is vital to their financial health.

Retirement Savings Tool

It’s possible to build a ridiculously complex spreadsheet to measure you retirement savings goals — down to predicting your life expectancy. But who has time for that? Here’s a practical, fast way to get an idea of whether your retirement savings are on track. And it’s easy to use.

It approximates the figure you’d come up with if you went the longer route of making a budget, calculating how much your expenses will be each year in retirement, then multiplying that by how long you expect to live in retirement — let’s say 30 years.

Even then, you’ve still got to figure out how much of that total you need at any given age preretirement. That’s a lot of number crunching.


For additional advice about retirement planning, check out IBD’s special section with tips for boosting your retirement savings:


We can save you all of that effort. Instead of going through that long, painstaking process, all you need to do is see if your retirement savings match a specific multiple of your yearly income in our easy-to-use table lower in this report.

That multiple changes, depending on your age. It also changes based on your income. We make it simple to check.

Retirement Savings Goals By Age, Income

How do you know if you have enough retirement savings so far? And what exactly does “enough” retirement savings mean? Successful retirement savings goals make sure your money has at least an 80% chance of lasting 35 years after you retire at 65, says J.P. Morgan Asset Management, which crunched the numbers.

“Retirement investors have experienced unprecedented volatility in the market throughout the last year, and face uncertainty for the year ahead. However, we feel optimistic for the future of retirement security as legislators and policy makers are emphasizing the need for broader access to retirement plans and an increase in savings rates.” said Michael Conrath, Chief Retirement Strategist, J.P. Morgan Asset Management.

J.P. Morgan also assumes that you invest your savings 60% in diversified stocks and stock mutual funds plus 40% in diversified bonds and bond funds in the years before retirement. After retirement, J.P. Morgan assumes your asset mix is 40% diversified stocks and 60% diversified bonds.

In addition, J.P. Morgan assumes that your:

  • Nest egg averages 6.7% average annual growth preretirement over the long run
  • Nest egg averages 6.0% average annual growth over the long term post-retirement
  • Retirement savings rate is 10% of your gross pay until retirement, including any company match that you happen to receive
  • Age is 65 at retirement and that your spouse never worked and is 63
  • Social Security will cover part of your income needs in retirement

How Much To Save For Retirement

So how much do you need for retirement savings goals? Here’s an example: If you are 35 years old and your annual income is $50,000, you should have 0.9 times your annual income in retirement savings.

The multiple of 0.9 times is the same as 90% of $50,000, which is $45,000. That’s how much a 35-year-old earning $50,000 a year needs to have saved to be on track to build the right size nest egg by retirement at age 65, according to J.P. Morgan’s research.

What about at other ages? At various ages, your nest egg should be this many times larger than your household income, as shown in the following table:

Are You Saving Enough For Retirement?
At this household income:
$50,000 $80,000 $100,000 $150,000 $200,000 $250,000 $300,000
At this age: You’d need this multiple of your income to retire at 65:
35 0.9 1.6 1.5 2.2 2.7 3.0 3.2
40 1.4 2.3 2.5 3.3 3.8 4.2 4.5
45 2.0 3.0 3.5 4.5 5.2 5.6 5.9
50 2.6 3.8 4.7 5.9 6.6 7.1 7.5
55 3.3 4.8 6.0 7.4 8.3 8.8 9.3
60 4.1 5.7 7.4 8.9 9.9 10.5 11.1
65 4.5 6.2 8.3 9.9 10.9 11.6 12.2
Source: J.P. Morgan Asset Management

By age, say, 45 with yearly income of $80,000, your target multiple rises to 3.0 times your income. So if you multiply $80,000 by 3.0, or by 300%, your retirement savings should total $240,000 by that point.

Some financial firms recommend aiming for specific multiples of your income by different ages. But they don’t adjust savings targets for income levels. That one-size-fits-all calculation is very simple. But it doesn’t give you as precise a bull’s-eye as J.P. Morgan’s more nuanced — but still simple-to-use — method.

Are Your Retirement Savings On Track?

Why is it so important to adjust for income as well as age? Two people who are the same age can have different incomes of course. And Social Security benefits differ, depending on your earnings over the years. The higher your annual earnings before you retire, the smaller your benefits will be relative to your preretirement earnings.

For example, if your preretirement household annual income was $50,000, Social Security benefits will now replace about 61%, according to J.P. Morgan.

If your preretirement income was $250,000 a year, Social Security will replace only 20% of it.

Fitting The Retirement Savings Goals Pieces Together

Which income-multiple targets should you aim for at various ages? Your goal is to replace as much preretirement income as you’ll need in retirement in addition to whatever you get from Social Security. That means at age 35 you need 1.6 times your annual household income saved if your household income is $80,000.

If your household income is $100,000 by age 35, you need 1.5 times that income in retirement savings. You’ll need retirement savings of 3.2 times your household income if you make $300,000 at age 35.

At age 50, your retirement savings multiple ought to be 3.8 times your household income if that income is $80,000. The multiple is 6.6 if your age-50 household income is $200,000, and it is 7.5 if your household income is $300,000.

And at age 65, those multiples are 6.2 for $80,000 of household income, 8.3 for $100,000 of income, 9.9 for $150,000 of income and 12.2 for $300,000 of income.


A version of this story was published March 15, 2022.


Follow Matt Krantz on Twitter @mattkrantz

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