Retirement Checkpoints: How Much Do I Need to Save for Retirement?

The most frequent question I hear when talking to clients and potential clients is, “How much do I need to save for retirement?” The answer is, “More than you think!” And there are some checkpoints along the way that you can measure your progress against. That’s what we’ll talk about in Episode 83 of the What the Wealth Podcast.

Your Retirement Framework

Our retirements are lasting longer. Some of us are retiring earlier than the traditional retirement age of 65, and we’re living longer thanks to advances in technology and healthcare.

How long our retirement will last is just one of the variables when it comes to retirement planning. Pensions, Social Security, if you’ll continue to work in some capacity, how your health will hold up, and taxes, just to name a few. No one has a crystal ball. But we still need to have some guideposts to let us know if we’re on track when it comes to saving for retirement.

Rowe Price recently published a nice chart showing benchmarks for retirement saving. I thought the chart was a little too detailed, so I distilled it into four retirement checkpoints.

Checkpoint #1: Age 35

When you reach your mid-30s, you should have two times your salary saved. For most people, this means you started saving in your 20s. This is critically important. If you start saving in your 20s, your money has 40 or so years to grow and compound.

In that time, the market will have countless highs and lows, but history shows that having a 40-year runway will set you up with a very healthy retirement income.

Checkpoint #2: Age 45

If you have a family, things are ramping up in your mid-40s; you probably have a mortgage, you might have kids in college or kids soon to be in college, and possibly financial obligations to aging parents.

By this age, in order to be on track for retirement, you should have four times your salary saved. You still have a good twenty years or so of compounding to work in your favor.

Checkpoint #3: Age 55

When you reach your mid-50s, you’re in the retirement red zone, ten or so years away from retirement. At this age, you should have eight times your salary saved. If you’re not there or you want to retire early, you need to start supercharging your saving well above and beyond the recommended rates of 10-20%, closer to 30-40%.

The good news is these are likely your highest earning years, and there are catch-up provisions for 401(k)s and IRAs.

Checkpoint #4: Age 65

By the time you’re bumping up against retirement, you should have 12 times your salary saved. This is the money you’ll be living on for the next 20 to 30 years or even longer. Really, 30 years? Yes, statistically, a married couple in their 60s today will see one of them live into their 90s.

Your Plan

Again, there are a lot of variables in play when it comes to retirement planning. As things stand, Social Security will run out of not money but its surplus by 2033. If Congress doesn’t act to prevent this, we could see Social Security payments cut by 25% would, of course, have an enormous impact on retirees and retirement plans.

But when we create a retirement plan, we put various scenarios into play, those variables we discussed earlier, and stress test the plan against them. These four checkpoints and the right retirement planning techniques can help ensure you have the kind of retirement you’ve dreamed of.

If you have questions about your portfolio or retirement plan, reach out to me at Jonathan@whatthewealth.com or call the office at 865-251-0808.

And check out my new YouTube channels. The videos are short, walk and talks, where I take a stroll and talk about whatever’s on my mind. I also have a Paradigm Wealth Partners channel and have recently created an Instagram page.

Listen to the Full Episode:

What You’ll Learn In Today’s Episode:

Why many people probably don’t have enough saved for retirement.
The first main checkpoint and when you should actually start your retirement savings.
The second checkpoint and how much you should have saved.
The third checkpoint and the most important thing to be focusing on at this time in order to make up for lost time.
The importance of having more saved than you may think you will need.

Ideas Worth Sharing:

“My advocation is to start in your 20s, save as much as you can so you have a 40-year runway for your money to grow and compound for you.” – Jonathan Bednar
“When you look at history and use history as our guide, having money that compounds over a 40-year time period really sets you up in a position to turn that savings on for retirement income.” – Jonathan Bednar
“If you want to retire early, you need to be supercharging your savings. You need to be saving above and beyond what the normal recommended rate is.” – Jonathan Bednar

Resources In Today’s Episode:

T. Rowe Price
What The Wealth?! by Jonathan Bednar