By 35 you should have 1.4 times your salary saved?

[maraqxa]

money.cnn.com/2011/05/26/pf/expert/retirement_investing_age.moneymag/index.htm

I was reading this article and it actually made me feel good because I have more than that saved at age 33 but I'm wondering how directionally correct this is?

[RoadToRiches]

Reading this article depresses me...

[maraqxa]

May 27, 2011 18:01:35 GMT -5 RoadToRiches said:

Reading this article depresses me...

Like any other retirement savings article? I think we should just stop reading them all together

[midjd]

I dunno, that seems kind of low to me if you have a low salary... maybe not if you make 6 figures, but 1.4x minimum wage at 35 is not much. But then, I don't think the x% of your salary rules are hard and fast for most people.

[gsbrq]

I got a late start on savings, so I'm not where I'm supposed to be, according to those benchmarks. I figure I might have to keep working part-time after I reach "retirement" age, but it really depends on how my investments do.

I contribute 20% of my gross pay to retirement funds. Not really interested in trying to increase that amount right now, since retirement is only one of my financial goals.

[lurkyloo]

sounds a lot better than the YMoYL (TMND?) model of 0.1 x age x salary...by that metric it should be 3.5x salary!

[formerexpat]

Depends.

A person that started working at 22 years old making $30k a year and got a 3% raise each year until they were 35 [making $44k], that would mean their savings, according to the article, should be $61.7k. That's a savings rate of just slightly over 12% - which seems VERY low to me.

Another person makes $30k a year coming out of college and works their way up to $120k, but just got to $120k on their 35th birthday. Depending on the size and timing of their increases, it might be very difficult for them to have saved $168k.

The first example I gave, but for a person saving 20%, would yield 2.33x their income when they are 35.

I think it's going to be tough for me to get 1.4x by my 35th birthday but that's also because I'm projecting large increases in my income between now and the next 4 years.

I still like the cumulative earnings [gross salary] method and believe that your savings at retirement should equal at least 100% of your cumulative earnings over your lifetime. This gives people credit for saving early and often as they benefit from compounding.

Taking the person who started making $30k and stopped working at 67, getting 3% raises each year, their cumulative earnings would be $2.9m. That should be their savings at 67. A person saving 15% per year starting when they are 22, getting an 8% return will achieve this cumulative earnings test. 20% savings per year at 8% would yield $3.8m, or 132% of cumulative earnings.

[Gardening Grandma]

Well, when I was 35, I had just started contributing to a 401k. I wasvabout 35 when my company began offering one.

[midjd]

My problem with retirement calculators is, I have only been working a couple of years (at age 27) and am still at my entry-level salary. I have the potential to at least double my salary during my career, and would rather use 2x my salary as my target for % of preretirement income, as opposed to my current salary. So even though I'm saving 25%, it still shows my savings as inadequate for the income I want in retirement. Plus, my 457 match doesn't vest for another 4 years... I think I'll be with my current employer that long, but I don't want to count my chickens before they're hatched.

It is hard to gauge what I'll be able to save or what I'll need at this point. (Who knows how much things will cost in 35 years?) So I'm just going to keep trucking along at 25%, add more as I'm able, try to avoid lifestyle creep, and hope it's enough...

[Deleted]

I think you are on the right track midwesternjd. I think articles like this one are supposed to be a wake-up call for the folks who are in their 30s and haven't started to save yet. Most of the retirement calculators I have seen only really account for cost of living adjustments, they don't really factor in career growth.

[BeenThere...DoneThat...]

...for low salary earners, 1.4x might seem low, but I thought a general rule of thumb was 10x your age in assets...

[midjd]

May 27, 2011 20:44:08 GMT -5 BeenThere...DoneThat... said:

...for low salary earners, 1.4x might seem low, but I thought a general rule of thumb was 10x your age in assets...

So $270 for me? Sweet, I got that! I'm RICH!

[maraqxa]

May 27, 2011 20:49:43 GMT -5 midjd said:

May 27, 2011 20:44:08 GMT -5 BeenThere...DoneThat... said:

...for low salary earners, 1.4x might seem low, but I thought a general rule of thumb was 10x your age in assets...

So $270 for me? Sweet, I got that! I'm RICH!

[BeenThere...DoneThat...]

May 27, 2011 20:52:54 GMT -5 maraqxa said:

May 27, 2011 20:49:43 GMT -5 midjd said:

So $270 for me? Sweet, I got that! I'm RICH!

...yeah, LOL... maybe it was 10 grand times your age... since I'm getting older, I can't rightly remember...
;D

[shanendoah]

I'm 35, and I have no where near 1.4x my salary saved (though my salary did jump 20 grand 6 months before my 35th birthday). I also don't have assets of 10k times my age, though that's partly because of the poor housing market. And let's not even think about DH who's been unemployed for 2 years and is now back in school

[gobermitcheese]

So $270 for me? Sweet, I got that! I'm RICH!

This might be better than most if you factor in credit card debt. For some just having a positive networth at 27 is an accomplishment!

[AgeOfEnlightenmentSCP]

Honestly-- sounds low. Ten years of work, and let's say you earn $75K- after 10 years to only have $150K saved is not great. Don't even get me started about how hard it is to save-- it's damn near impossible. Not to be completely depressing, but I reasoned pretty early in life that there's no way I could "save" my way to retirement. I was gonna have to do something else-- I was going to have to CREATE wealth, generate it, multiply it-- "saving" just took too damn long and left me with too little money.

[❤ mollymouser ❤]

When I was 35, I was up to my eyeballs in debt and had 0 dollars saved.

11 years later, I'm out of debt ~ but we don't have 1.4 times my wonderful DH's saved.... but we're working on that.

[qofcc]

Age 35 was when we were up to our eyeballs in debt with the money pit house and 4 kids to support and DH out of work. At 41, I'm still approx 5 years until the other side of debt, but things are rapidly getting better and every year we earn more, contribute a greater % to retirement and spend less and I've put about 1x salary in my 401k.

I wouldn't worry too much about the average of where you should be at 35. More relevant would be the average compared to the people who took the same life path you did. At age 35, you might be a few years out of graduate school and just starting your career and family or you might have 15 years on the job with teenagers at home or you might have 10 years at a high paying job with no kids.

Where you are at 45 or 55 is much more relevant.

[Savoir Faire-Demogague in NJ]

For me, I was 35, 21 years ago, and going through a divorce. Was married for about 12 years and could not manage to save much at all. The typical marriage issues... 3 children, unmotivated wife who was more than satisfied to live pay check to pay check, etc.

At the finalization of my divorce, I owed my lawyer $9000, and had $8000 in cc debt. Had maybe $4000 in assets.

Wasnt until I shed that yoke was I able to do something. 21 years later, I have no debt, $1.3 million assets, full funded retirement plans, niced sized emergency fund, etc.

[cronewitch]

Net worth is more important than how much you saved so far. Getting set up for life is expensive and time consuming but if you don't do it right you might never catch up even if you stockpiled money.
Things like a good education might cost you years of earning as much as you could have working those hours instead and cost you a lot of money. If you financed it you could have a negative net worth from just that. Buying a first home, furniture, car and other start up cost might be cash flow negative too but buying the house could end up being a wealth builder in the long run.

So if someone gets to 35 with money saved they may be actually worse off than someone who set up longer and saved less. I would rather be 35 with a net worth of zero with a high paid job, house I had owned a few years then 35 with a 45K in the bank, no home, no education earning 30K living in a rental.

[maraqxa]

May 28, 2011 11:58:20 GMT -5 cronewitch said:

Net worth is more important than how much you saved so far. Getting set up for life is expensive and time consuming but if you don't do it right you might never catch up even if you stockpiled money.
Things like a good education might cost you years of earning as much as you could have working those hours instead and cost you a lot of money. If you financed it you could have a negative net worth from just that. Buying a first home, furniture, car and other start up cost might be cash flow negative too but buying the house could end up being a wealth builder in the long run.

So if someone gets to 35 with money saved they may be actually worse off than someone who set up longer and saved less. I would rather be 35 with a net worth of zero with a high paid job, house I had owned a few years then 35 with a 45K in the bank, no home, no education earning 30K living in a rental.

That is a good point crone, I think net worth is more relevant as well and retirement should be just a portion of it. We just have to be carefull not to have all of our money sitting in a retirement account that we can't touch until after 59.

[Deleted]

WOW, I am screwed

[maraqxa]

May 28, 2011 12:33:56 GMT -5 TheHaitian said:

WOW, I am screwed

Maybe, maybe not. You guys are pretty young, I didn't get serious until around 4 years ago.

[DVM gone riding]

I like his non-linear equation. I hate it when I read a linear equation, those only make sense if you are over 45. And looking at my own est projections his numbers I think are on target---assuming you are investing in reasonable funds now if you are just trying to "save" your way to retirement then that is a dif story.

[❤ mollymouser ❤]

Note to self ~ stop reading retirement stories that depress me.

[kgb18]

Note to self ~ stop reading retirement stories that depress me.

Ditto. I, too, got a late start with savings. It seems like everytime I start to feel good about where we are, I hear something like this and think, "Oh crap!"

[Deleted]

I am also a late starter at savings. Right now we are only saving 10% of DH's monthly income and I am also sending $130 a month to my Roth. Not that great, but better than nothing right? We just started being able (or getting serious) to save the last few years.

[DVM gone riding]

Wait!! Were we suppose to have "saved" that much or have that much in investments?? Paul's comment made me think again bec no way will I have saved that by 35 (5 years from now) but I might actually have that in investments if the market continues to do good and not crash again. I agree you can't possible save your way to retirement some how you have to invest the money and make it earn something more then basic interest.

[IPAfan]

The funny thing is that I had this much saved by the time I was 25. Because my income is increasing rapidly (I was making very little working 30-40 hours a week at about 11/hr in law school) I may or may not actually have that much saved by the time I hit 33. Seems like between taxes, starting a business, and the increasing cost of raising a family that even though my income is increasing rapidly I'm not able to save nearly as much as I'd like.