How to Determine Your Ideal Retirement Savings at 30 and Beyond

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Figuring out how much money you'll need for retirement can be challenging, particularly in the early stages of your career. Fortunately, there are some helpful retirement planning benchmarks to help you determine whether you're on the right track.

The best guidance is usually to save as much as you possibly can if you're in your 20s and just getting started and then begin looking for a better way to track your progress over time as you grow older. Certain benchmarks, including those provided by Fidelity, T. Rowe Price, and J.P. Morgan Asset Management, can help you determine how much you should have in your retirement accounts by age 30 and beyond. 

The Fidelity Benchmark 

Fidelity Investments conducted an analysis to estimate the ideal retirement savings amounts at certain ages. The company estimated how much you'll need to have put aside to maintain your same comfortable lifestyle during your retirement years if you want to retire at age 67.

Fidelity recommends having saved the amount of your current salary by age 30. This estimate assumes that you save at least 15% of your income each year beginning at age 25, that you invest over half of your savings in stocks, on average, over the course of your lifetime, and that your goal is to maintain your current lifestyle and neither live more simply nor more extravagantly.

Ideally, you'd want to have 10 times your salary saved for retirement to quit working at age 67 using the same set of assumptions.

If your age is ... ... your total retirement savings to be "on track" to retire at 67 should be approximately ...
30 1 times your annual income
35 2 times your annual income
40 3 times your annual income
45 4 times your annual income
50 6 times your annual income
55 7 times your annual income
60 8 times your annual income
67 10 times your annual income

Source: Fidelity Investments

The T. Rowe Price Benchmark

T. Rowe Price takes a slightly different approach when calculating retirement saving benchmarks. The savings multiples start out smaller and increase more rapidly than Fidelity's, beginning at age 50. This system indicates that a 30-year-old would be considered on track if they had saved half the amount of their annual salary, but they would need to have 11 times their salary put aside at the retirement age of 65.

If your age is ... ... your total retirement savings to be "on track" to retire at 65 should be approximately ...
30 0.5 times your annual income
35 1 times your annual income
40 2 times your annual income
45 3 times your annual income
50 5 times your annual income
55 7 times your annual income
60 9 times your annual income
65 11 times your annual income

Source: T. Rowe Price

The multiples vary depending on whether you are single, married in a dual-income household, or married in a single-income household. T. Rowe Price also says to adjust the multiples according to how much, if any, pension and Social Security income you'll be receiving at retirement.

The J.P. Morgan Asset Management Benchmark

J.P. Morgan Asset Management's 2019 Guide to Retirement uses a benchmarking model that assumes an annual gross savings rate of 5% if you make less than $100,000 a year, or 10% if you make $100,000 or more, a pre-retirement return of 6%, a post-retirement return of 5%, an inflation rate of 2%, and a retirement age of 65 for the primary earner and 62 for the spouse. It also assumes you'll spend 30 years in retirement and that you want to maintain the same lifestyle in retirement as you had prior to it.

J.P. Morgan's model uses a series of multipliers based on your pre-tax annual income. For example, a 30-year-old with $50,000 in gross annual income would be on track with 0.8 times their income—$40,000—saved in retirement accounts. The savings factor jumps to 1.2 times income, or $210,000 if their annual gross income is $175,000.

If your age is ... ... and your annual gross income is ... ... your total retirement savings to be "on track" to retire at 65 should be approximately ...
30 $30,000 0.6 times your annual income
30 $40,000 0.7 times your annual income
30 $50,000 0.8 times your annual income
30 $60,000 0.9 times your annual income
30 $70,000 1.1 times your annual income
30 $80,000 1.3 times your annual income
30 $90,000 1.4 times your annual income
30 $100,0000 0.6 times your annual income
30 $125,000 0.8 times your annual income
30 $150,000 1.0 times your annual income
30 $175,000 1.2 times your annual income
30 $200,000 1.4 times your annual income
30 $250,000 1.6 times your annual income
30 $300,000 1.8 times your annual income

Source: J.P. Morgan Asset Management

The 80% Rule

Another gauge used to estimate retirement savings is the 80% rule. This method basically says you should strive to replace 80% of your pre-retirement income.

A simplistic version of this method would involve taking 80% of your annual salary and then multiply the result by 20, for a 20-year retirement. The result is how much you would need in overall retirement savings.

Now divide that number by how many years you have left before retirement, assuming you haven't started saving yet. That's how much you should save each year to reach your goal.

For example, if you're earning $45,000, you'll need 80% of that, or $36,000 a year, in retirement. Multiply $36,000 x 20 years and you get $720,000. If you're 30 years old, have no retirement savings yet, and you expect to retire at age 65, you'd need to save an average of about $20,600 a year for the next 35 years: $720,000 divided by 35.

If you have already been saving for retirement, you would subtract the accumulated amount from the 20-year amount before dividing by the number of years until retirement to determine how much you'll need to save each year going forward. If you've already saved $15,000, you would divide $705,000 by 35 to arrive at savings of about $20,140 a year on average.

Keep in mind that this method provides an estimate of the amount you should save for retirement, and does not consider factors like investment growth, interest income, or dividend income between now and retirement.

But wait, you say: What about inflation? How do I know how much I'll be earning or what my lifestyle will look like just before I retire? Will I have a pension? How much social security income will I receive?

These are all valid questions. At the end of the day, your post-retirement income will include a combination of anticipated pension (if you're lucky enough to have an employer that provides one), social security (assuming the system remains solvent), and investment earnings.

As far as determining your pre-retirement income, if you have a number of years to go before retirement, a good rule of thumb is to use a 2% to 3% anticipated wage inflation figure to come up with an estimate. Once you have that amount you can fine-tune the 80% income target.

Taking all of these factors into consideration to come with a savings goal can sound a little daunting. Luckily, there are a number of free online tools that can make the process much easier.

If you work for an employer that offers a 401K retirement plan, the custodian that manages it may also provide guidance and support.

Retirement Calculators

You shouldn't rely solely on benchmarks to measure your retirement savings progress, but they do provide some guidelines that can be helpful during the early stages of your working life.

The best way to determine your ideal savings rate is to run a basic retirement calculation. It's especially important to rely on more-detailed retirement estimates if you don’t plan on retiring in your 60s because most retirement planning benchmarks use a retirement beginning at the age of 65 or 67 in their estimates. 

Most calculators allow you to input personal variables that can affect the results, such as the age at which you started working and saving, the average rate of return on your investments, whether you also have a pension, and whether you have—or expect you might have—other investments that generate passive income, such as rental properties. 

Taking the Next Steps

Don't panic if your current retirement savings amount falls short of these goals. You can take some important steps to get your plan on the right track.

First, focus on your overall financial wellness and the things you have control over right now. Building a solid financial foundation often means establishing an emergency fund, paying off high-interest debt, and saving at least enough in your retirement plan to capture any employer matching funds.

Next, determine how much you can potentially save. Most financial planners recommend saving 10% to 20% of your income per year for retirement. Aim for as high a percentage as you can reasonably afford and commit to meeting that goal every year.

Participating in automatic rate increase programs that might be offered by employer-sponsored retirement plans is a great way to factor in contribution increases over time and help you bridge any savings gaps.