Here are just the number for all of you degenerates who just want some milestones for your spreadsheets.
Average total retirement savings by age:
- <35 - $49,130
- 35-44 - $141,520
- 45-54 - $313,220
- 55-64 - $537,560
- 65-74 - $609,230
-
=75 - $462,410
Average 401k balance by age:
- <25 - $5,236
- 25-34 - $30,017
- 35-44 - $76,354
- 45-54 - $142,069
- 55-64 - $207,874
- 65 and older - $232,710
And retirement savings targets from various advisors:
Fidelity:
- 1x by 30
- 3x by 40
- 6x by 50
- 8x by 60
- 10x by 67
Rowley:
- 1x by 35
- 5x by 50
- 7x by 70
Anyway, do you like metrics like these?
How am I supposed to read those savings targets?
Generally I like metrics to see how I compare, but those US-only ones are pretty useless.
I believe that’s usually expressed as mutiples of your annual income with the general idea being that if you hit those benchmarks you should be able to maintain your current quality of life in retirement. So if you make 50k euro, Fidelity would want you to have 50k total savings by age 30, 150k by age 40, 300k by age 50, etc. People in the US generally plan on a 4% safe withdrawal rate. So the 10x savings that the Fidelity chart recommends at retirement age would provide a safe 40% of your prior income withdrawal with social security making up the rest.
I personally express my own savings goals in terms of desired retirement income since earned income can vary quite a bit. In which case if I wasn’t counting on social security I would want to have 1/(4%) = 25 x my annual retirement income before retiring. 25x is definitely a big mltiplier, but if your actual spending level is significantly lower than your current income level, it’s a lot more attainable than it initially sounds.
I mostly like how this article frames time to retire based on savings percentages. It’s worth a read. https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
It’s also averaged across the US, so it’s doubly useless. I mostly posted it as an interesting anecdote.
But if you want something similar, just look up average retirement savings in your country. The income multiplier should work across countries though (the 1x, 3x, etc).
That said, if your goal is early financial independence, you probably have better metrics anyway. I just use stuff like this to pad out my milestones, since it’s fun to have more things to celebrate.
If you want something more generally applicable (e.g. calculate time to financial independence), I’m happy to make a post about what I’m doing.
Ah ok, gotcha. I’ve set my own milestones based on a relative savings rate in such a way that x% monthly savings equate to y years of earlier retirement. Never thought of doing it in terms of multiples of annual income since those include my savings rates, and my actual cost of living are significantly below my income.
Yeah, the multiples thing is not a great way to estimate early retirement because it assumes your retirement spending is directly related to your employment income. That’s true for many people with traditional retirement plans though, and it’s certainly easier than estimating expenses, so I guess there’s merit to it.
Anyway, I just think it’s an interesting set of milestones to track. Like, “oh, I’m where I should be at X years old, so I’m Y years ahead of ‘normal’ retirement.” But it doesn’t impact my retirement planning one bit though.
Well, that’s depressing. Both because the average retirement savings rate is so low overall and because my savings total is more appropriate for someone a decade younger.
That said, I’ve been hoarding cash and stocks to pay off my house, and the goal is within sight in less than 18 months. I feel like having no house payment (and no debt otherwise) will have a much greater effect on both my ability to save as well as my sense of security.
When my only regular non-discretionary expenses are food, utilities, insurance, and property taxes, I’d be able to live off of a minimum wage job indefinitely if I needed to. Not that I will, but it’s nice to know a corporation no longer owns me.
Yeah, owning your house certainly has value, regardless of the financial impact. Life is all about trade-offs, and it’s why I have an e-fund despite investing probably having the better expected outcome.
And the average savings rate is also depressingly low. I’m actually closer to an average retiree than a young hire in terms of total savings, yet I don’t feel anywhere close to retirement (and I’m retiring fairly lean @ ~$50k expenses). I just don’t see how it works for the average person, and maybe it doesn’t, and people just have to drastically adjust expectations in retirement.
I think it’s a decent metric. The important thing to know is that no single guide is going to work for everyone, everyone has to adjust it to their situation.
Me, for example, I have a 401K balance of zero. Every time I leave a job, I roll that over into my IRA, then into my Roth. I just like having control over my accounts; 401Ks have too many restrictions. But to each his own.
Same, I convert to Roth a little at a time to control taxes. I’m in the 12% bracket, so I convert up to the end of that bracket at the end of the year.
That said, 401l does have some advantages over an IRA, such as backdoor-Roth compatibility, legal protection from lawsuits, and the loan option. I don’t need any of that, so I roll out ASAP.
So for those kinds of metrics, I just use the aggregate of all of my retirement accounts, so IRA, 401k, HSA, and taxable brokerage. I’m assuming most people only use their 401k or aggregate as well.
