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!
I’m in a similar place to you, and I’ve resigned to it being an impossible feat. I’m pretty close to the number for 40, but the curve is flattening. There’s no way I retire at 65 with enough to survive to 80.
Those numbers were established during boomer economy years and assume a few things that aren’t true anymore:
- infinite 7-9 percent stock market growth, but the modern market crashes every decade or so now.
- linear year over year wage increases that outpace inflation. Really is either flat wages or OP situation of huge jumps. The former makes saving impossible, the latter throws the x percent by decade curve off.
- you should count your home equity in that number, but fewer people own homes, or are underwater on them for far longer.
- the x/decade number assumes a certain amount of income from social security, but that’s likely to be stolen by the time we retire.
- those numbers were made before the entire American population was crushed with debt. Student loans and medical, even just modern insurance premiums dig deep into the ability to hit retirement goals.
Basically, good luck OP. We’re all going to work till we die.
Yeah, boomer math was my #1 theory for why this isn’t working. This sounds like post WWII advice in a post 9/11, post financial-crisis, post-pandemic world.
You omitted post-college affordability and post housing affordability.
The housing issue is actually so bad it’s making things simpler; people will just save for retirement instead as housing isn’t even in the same galaxy as most people’s wages.
“Higher ed” will probably go the same direction and just be reserved for a few elites. Since degrees don’t guarantee you much over experience the equation of self/vocational education will become the model (my nightmare is public education disappears and you have to go to your corporate “college” program.
The people I know who’ve given up on housing affordability unfortunately are not shifting in to retirement. They’re so hopeless they blow their money on hobbies because they don’t foresee any possible path to homeownership or retirement and value a few bucks here and there on discretionary spending more.
infinite 7-9 percent stock market growth, but the modern market crashes every decade or so now.
My savings into index funds has seen an average growth of 9% a year for the past three years. 11% since the start of this year. Granted I jumped in at the bottom of the corona dip.
Yeah, and you’ll lose a shitload when the next crisis pops off in a few years, taking a few more years to recover that loss. The 401k management firms only ever seem to rebalance quarterly or semi annually, so there’s no way to react to those downturns in time to mitigate.
I got hit by 9/11, 2008, and Covid, plus I’ve seen my SS benefits reduced a couple times.
React? You’re not supposed to react, that’s how you lose money. When the next crisis hits it just means I get more for the same price.
