Hi everyone! I wanted to have a post about how much you should have saved for retirement at various ages. There seems to be a lot of information out there on the interwebs regarding this question for a “normal” retirement date but what if you’re trying to retire way earlier? This site actually does a great job of telling you what you should have if you plan to retire at 65. I’ll do a quick recap of what the site says for “normal” retirement at age 65 below.

Age 30: Have the equivalent of your annual salary saved.

Age 35: Have 2 times your annual salary saved.

Age 40: Have 3 times your annual salary saved.

Age 45: Have 4 times your annual salary saved.

Age 50: Have 5 times your annual salary saved.

Age 55: Have 6 times your annual salary saved.

Age 60: Have 7 times your annual salary saved.

Age 65: Have 8 times your annual salary saved.

Let’s be honest, this is a nice back of the envelope way to know if you’re on track for retirement without having to figure out what your normal annual expenses are (because we’re assuming you’re already used to living on the salary you bring home every year). This is also accounting for any raises you might get throughout the years as well as your rate of return. The power of compounding interest really comes into play and works in your favor dramatically here.

Now wait just a gosh darn minute! What about early retirement? Well, this is where it gets a little trickier. Not everyone that wants to retire early wants to retire with the same amount of money or in exactly the same time frame. The first thing to do is to determine how much you’re saving each year and how much you’re spending each year. Once you determine how much you’re spending each year (or even how much you think you’ll need to spend every year once you retire), times that by 25. This number is how much you need to have to have a safe withdrawal rate of 4% per year. There’s been a ton of research on safe withdrawal rates over the years so I’m not going to go into details about it here.

So once you determine your living expenses each year, how much you’re saving each year, and how much you want to end up with once you decide to pull the plug, you’ll need to figure out how long that will take you to do with your specific savings rate. A great app for doing this (which I’m not being paid to endorse) is Savings Calculator by TSoftOne. You can read my previous blog post about it here. So what does all of this mean? Well, I’ll use myself as an example. I want to have to have $958,000 by the time I’m 46 years and 4 months old (so very end of 2032 for those of you just joining me). My living expenses now aren’t necessarily that high but I’m concerned that in 15 years my cost of living may have increased due to inflation so I’m trying to be forward thinking in that regard. As of just a few minutes ago I have investments in the range of about $47,200 and wanting to save $28,000/year. I went ahead and pulled $4,000 from my savings account to put in my Roth IRA because I wanted to make my monthly automatic investments a simple $2,000 instead of $2,333.33.

So what does all this mean? How much should you have at varying ages if your have my EXACT retirement goal situation? This is where that handy dandy savings app comes in because it will actually go through and tell you what you should have at various years which I will list below for my personal situation.

Year 1 (age 32): $80,131

Year 5 (age 36): $241,553

Year 10 (age 41): $531,110

Year 15 (age 46): $962,505

Now, if you have a similar desired time frame and savings rate for early retirement, you can use this model and it should be a good estimate of everything for you since I was using an estimated 8% rate of return every year. If your savings rate, spend rate, and desired end number are different than mine, then I highly suggest using a retirement calculator of some sort. I’m partial to the one I recommended earlier in this post (which is only for android phones, by the way), however there are a ton of retirement calculators out there that you can use if you’re willing to do a little google searching to find them.

If you’re able and willing to throw some rental real estate into the mix, this could definitely help you retire even earlier because that is consistent monthly income that would make it so you would have to save even less! So, if you were to have a fully paid off rental property that was bringing in $500 net after expenses every month, that comes out to $6,000 a year that you’d be bringing in. That means that your end retirement goal would need to be $150,000 less to meet your year spending habits at a 4% safe withdrawal rate! So it’s definitely something to also consider when you’re trying to determine your needed retirement number. This is definitely something I’ll be looking into as I’d, ideally, like to retire years sooner than the above model. However, we’ll just see how that goes!

I hope this post was helpful and I hope you’ll stay tuned for my future posts!

I like your meticulous and yet practical approach towards retirement planning. The list of how much savings should be at every five years intervals can be taken as a thumb rule. Thank you for sharing such useful information.

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