What You Should Save By 35, 45, and 55 To Be On Target

Getting started is half the battle when it comes to building retirement security. Setting near term goals are important too. Here's how to do both.

  • Share
  • Read Later
Getty Images

Financial rules of thumb are just that. If you follow them, you have the satisfaction of knowing that you’ve taken action — but they do not guarantee you’ll get the results you desire. Still, in the savings game guideposts can be especially useful. A near-term target will help you get started, and that’s half the battle.

Fidelity Investments recently put together an age-based savings guideline with a range of savings goals. It’s meant to prod individuals into action, which it might—if, that is, the firm’s daunting assumptions don’t discourage them first.

(MORE: Retirement Saving: What Comes Natural is Worst Approach)

Here are the guideposts:

  • At age 35, you should have saved an amount equal to your annual salary.
  • At age 45, you should have saved three times your annual salary.
  • At 55, you should have five times your salary.
  • When you retire at age 67, you should have eight times your annual pay.

Others have tried to divine a finishing multiple of salary that ensures retirement happiness, and generally they are in line with Fidelity’s target. Consultants Aon Hewitt set the goal at 11 times final pay (by age 65).

What Fidelity ads to the discussion are benchmarks to hit along the way. Having near-term targets helps you stay on track—and to take steps to catch up while time is on your side. But there is nothing easy about hitting these targets. Fidelity assumes:

  • You begin saving in a workplace retirement plan, such as a 401(k), at age 25. You save continuously and without interruption until age 67.
  • You start by making an annual salary contribution equal to 6% of pay, and raise the figure by one percentage point each year until you are saving 12% of pay.
  • Your employer matches you at 50 cents on the dollar up to 6% of pay and your portfolio grows 5.5% a year.
  • Social Security is factored in.
  • Your income grows 1.5 percentage points faster than inflation each year.

These assumptions are reasonable in terms of building an illustrative savings model. But consider that almost no one starts saving at 25 and millions suffer some sort of job interruption over a 42-year career. This model also has you saving 12% of pay by age 32. A common rule of thumb is 10% and, again, most folks don’t get serious about saving until they are in their 40s and 50s.

(MORE: Smart-Phone Parental Controls are Nothing to LOL About)

Meanwhile, you will need a healthy slug of stocks to earn 5.5% a year. Yet individuals have been net sellers of stock mutual funds for at least half a decade. Whether Social Security will be available when you retire is an open question. And many peoples’ wages are going down—not up by more than the rate of inflation.

Of course, it would be a mistake to extrapolate the experience of the crisis years indefinitely into the future. Still, this exercise points up the difficulty of reaching retirement security without an early start, or hyper-aggressive saving at midlife. No matter your age, at least now you can see where you stand–and what to do about it.

27 comments
SaraCampos1972
SaraCampos1972

"Whether Social Security will be available when you retire is an open question", really? Social Security will always be around. It is an entitlement that we have all paid for since our first jobs. To think a financial advisor is suggesting that the Federal government may default on an obligation while trying to sell mutual funds of stock is laughable. At the very least, the Federal government can print the money to pay Social Security recipients. Last time I checked, stock investments have no guarantee of principle investment.


Yes, you can and should factor in Social Security payments in your retirement plan. Also be sure to register to vote and always vote against anyone that claims we need to cut social security, while also demanding more tax breaks for wealthy individuals and corporates.


Remember, it is these same financial advisories and CEOs of financial companies that want more tax breaks. Those tax breaks will only come if Social Security is cut back. So they always like to plant that seed suggesting that it might not be around. Well, that is not up to the Million dollar a year CEOs, it is up to all of use American workers and voters. So, in that case you can bet we will still have Social Security when I retire in 20 years.

SimpleHardTruth
SimpleHardTruth

In a few years this country will be 24 trillion dollars in debt. Greece just defaulted. I promise you the USA can default. In terms of social security all they have to do is move the retirement age to 75 for everyone currently under the age of 40. Don't count your chickens just yet.

Tw1stimer
Tw1stimer

@SaraCampos1972  When a person decides to REALLY get serious about saving for retirement, there are a lot of multiples that go into the calculations. Where will you live? Will you work in retirement part time or not at all? How will the state in which you retire treat your retirement income? Will that make a difference in your decision to live in that state? These are some of the things my wife and I are thinking about now and we have about 12 years to go. 

What's factored into the retirement income? Well, in my situation, its my current 401 contributions; military retirement and COLA adjustments; Thrift Savings Plan contributions; value of current home and the resale value; side investments; and finally, social security. Planning for retirement is exactly that. I've been planning to retire pretty much my entire working life. I've made some good moves and some not so good. Life is like the game of Monopoly. Sometimes you go past GO and collect $200, sometimes, you have to pay the luxury tax or you land on Boardwalk with hotels on it. 

Someone mentioned that SS won't be here when we are ready for it. "Current predictions indicate that the Social Security trust fund will run out in 2037 if nothing is done. After this point, retirees can generally expect about 75 cents on every dollar of their scheduled benefits. That's because once the trust fund is depleted, there will be no surplus left." (You can Google 'When will Social Security run out?') So that tells me that SOMETHING will be there, but like I said, I expect to retire in 12 years. So I'll hopefully recoup some of the contributions I gave to that program. 

All this to say take a close look at your situation. Believe it or not, eating out, activities that lead to diseases of choice (smoking, diet habits, etc.) frivolous shopping, and the cable and phone bills all provide things now that could make a difference in the future. I am not suggesting that someone give up the cell phone or switch off cable, but changing plans could put $$$$ in your pocket. In fact, I did that. My bill was $96 a month. I switched to the 145 channel plan and immediately my bill dropped to $33.33. That netted me $62.67. Over a two year contract, that's $1,504.08 - money that I am NO LONGER GIVING TO THE CABLE COMPANY. 

What I'm saying is simple changes could net you big savings. Then, comes the hard part. You'd have to save it so it could make a difference for you. I have saved 15% consistently since 2003. So at a minimum, I will have put away 15% for 24 years. If all goes well, I will meet the projections this article touts, but more importantly, you can meet it too. The younger you are, the more of an opportunity you have to save. I say save, but I mean invest. 

My goal was to have at least six revenue streams in retirement not including another job. I do not intend to work in retirement, but I intend to be healthy enough to be able to if I decide to. Anyway, that's my story. Hopefully, we all will be able to have a happy retirement. Believe it or not, we have more of a role in it than one might own up to. And if SS is not here, hopefully, we will be ok anyway. When I say we, I me us, the readers. 

PaulYoung
PaulYoung

I am Mr. DENISE GARDUNO, a Legitimate And a Reputable money Lender. We lend funds out to individuals in need of financial assistance, we give loan to people that have a bad credit or in need of money to pay bills, to invest on business.Have you been looking for loan? you have not to worry, because you are in the right place i offer loan at low interest rate of 2% so if you are in need of a loan i want you to just contact me via this email Address : fargofinancialfirm@gmail.com
 
INFORMANTION NEEDED FROM YOU..
 
Full Names..........
Country..........
State..........
Sex..........
Age..........
Home address..........
Personal Phone number..........
Home Phone Number..........
Monthly Income..........
Loan Amount Needed..........
Loan Duration..........

courtneybien215
courtneybien215

Hello everyone, My name is Courtney Bieneman, a citizen of USA; am 42 years of age.. I want to use this medium to  inform you all about the goodness of the lord for finally leading me to a really and genuine loan lender named Mr Mason Diego, the managing director of Diego Loan Company after been scammed by other fake lenders, i was hopeless and didn't know who to trust while he came and put a great smile on my face at my greatest surprise. Anyone of you that have also been a victim of scam, you should bother no more cos, i have bring you good news and the only lender you can trust, just contact them now via email:  { diegoloancompany@yahoo.com }  for more info on how to get your loan.  And once again thanks be to Mr Mason Diego for giving me a loan of 154,000.00 USD...

arizona
arizona

@courtneybien215 


How does the lord find the time?


If he'd just stop spending all that time getting awards to celebrities and athletes and leading you to honest lenders, maybe he'd have time to get to those wars in the middle east, and the poverty and famine going on around the globe?

AmericanFool
AmericanFool

A fairly conservative investment portfolio of 60% in an S&P 500 fund & 40% in a total bond market fund should return well over 5.5% annually on average (more like 8% nominal return, 5-6% real return).  A lot of people on the board nailed it - it's best to start young.  I was putting away 15% as soon as I could, and that really helped.  Now I have teenagers and other uses for cash flow, it's hard to put in 15% without some radical changes to an already frugal lifestyle.  Even so, because I started early, I'm well ahead of these saving recommendations, even though it took something like ten years of trying to find the right use for my skills before my career and income gained much traction.  Invest in yourself, think ahead, live below your means, save at least 15% of everything you earn.  It's within your reach.  Even if you are older and have failed to save, this is a good opportunity to rethink your last 20 years to retirement - that's long enough to build a healthy retirement fund.  In the end, nobody will do it for you, you have to make it happen.

laurabilley060
laurabilley060

HOW I GOT MY LOAN FROM A RELIABLE AND GENUINE LOAN COMPANY


Hello everyone,


My name is Laura Billey from Texas USA, 37 years of age , I want to inform you all about the goodness of the lord for finally leading me to a really and genuine loan lender named Mr Mason Diego, the managing director of Diego Loan Company after been scammed by other fake lenders, i was hopeless and didn't know who to trust while he came and put a great smile on my face at my greatest surprise. Anyone of you that have also be a victim of scam, you should bother no more cos, i have bring you good news and the only lender you can trust, just contact them now via: diegoloancompany@yahoo.com for more info on how to get your loan.  And once again..... Thanks Be To Mr Mason Diego of diegoloancompany@yahoo.com  for giving me a loan of 96,000.00USD.

visaguy63
visaguy63

I will be turning 35 in a few months and the only reason I have over 100k in my bank is because I totaled my 97 Ferrari F 355 spider and I was using that car as a backup plan in case I ever needed the money I would sell it but I got cash out earlier this year, on the flip side I am in the merchant service business which is a multi billion dollar industry and I make a healthy six figure a year income and the only debt that I have is my house so I save about 80% every month if I don't spend recklessly however Lamborghini Murcielago has been on my mind for awhile now.

CrimsonWife
CrimsonWife

One's 20's is the best time to save because one generally doesn't have kids at that point in life. Between my husband and me, we saved the equivalent of my entire take-home pay from the time I was 22 until the time I was 28. Thank goodness we did, because after having kids, we had much less disposable income to devote towards our savings goals. Right now our main savings is the equity we are building in our house.

KatieTrondsen
KatieTrondsen

Well said.  I am glad to see I am ahead of what should be put away.  Hubby and I are very diligent in putting away accordingly when the cheques roll in, and then putting away some more in another savings account thats untouchable.  I started saving when i was 24 right after college and landed a great litle job, pays decently and very good benefits.

I've already had some share of illness but with planning anyone can achieve this.  The trick is discipline.  Too many people are foolish with their money and spend every penny they have on clothing, electronics, entertainment, vacations instead of putting away properly. 

One day I know I will have siblings and maybe even my parents come for help when they can't work anymore.  I'm not sure I'd be willing to help them when the time comes, as I've seen how they squandered their income.

aje7861
aje7861

I agree with you 100%. You said exactly what this article said blog.mutualfundstore.com/investing-tips/can-you-afford-35-years-in-retirement/.

JRockBarrington
JRockBarrington

I began saving with my first job as a paperboy and have save at least 10% every year since age 12. I have always bought used cars that i could afford without a loan. I have no recurring credit card debt. Now, i am 50 years old and i can see retiring at age 62 as an actual possibility. Actually, i could retire at 55 but would have to live more frugally than i would like. My dad taught me the value of living below your means. Thanks Dad!!

Lalala
Lalala

Of course, the writer presumes all of us are making over $50K a year and have remained steadily employed, getting raises every year, and all is rosy. Never mind all the downsizing and offshoring and pay cuts and what not that's happening in the real world along with other life changing events like illnesses, divorces and what not. That "should've by now" stuff is not helpful, nor is it realistic.

helenahandbasket
helenahandbasket

We're pretty well off and we are only about where this says we should be because one of us inherited some money from a parent. (We saved money, but not this much.) This seems unrealistic for anyone who didn't graduate with college and grad school paid for (let alone for most people who don't go to college)

JousterJack
JousterJack

I am really screwed then.  I had a mega salary all my life, now pushing 60, but forgot to save a dime. Spent the lot.  I guess no more Lambos, Maui, Luxury Cruises and long ski vacations for me.  Pan handling, here I come.

EricFleet
EricFleet

Savings as a multiple of earnings is absurd. This assumes you spend a large proportion of what you earn. If instead of spending everything you bring in, you learn to be content, when you get raises you can pack more away or give more away.

Instead of a multiple of what you earn, you should focus on multiples of what you want to live on in retirement. If you learn to live on less and don't get spoiled by your income growing, you will be able to retire on less as well.

dwtucker63
dwtucker63

@EricFleet  Sorry Eric, but I think your logic forgets about inflation. These times x numbers are based on what you will need socked away when you retire to support you with no income for 30 years after you retire. Surely we can all live on less in retirement (no kids, no house payments, no expenses) but you can't live for 30 years w/o an income on 1x your last years salary, the math just don't support that.