On Retirement Savings
On Retirement Savings
I'm almost 40 and according to the wisdom found everywhere on the internet, I don't have enough saved for retirement. Which worries me because I've been saving for as long as I've had a proper job with access to a retirement vehicle. But also because the internet wisdom doesn't make sense or sound feasible.
According to what I've read, you're supposed to have:
- 1x your income when you're 30
- 3x your income when you're 40
- 6x at 50
- 8x at 60
- 10x when you retire
I'm almost 40 and I have just barely over 1x saved. So it feels like I'm 10 years behind. However, my income has grown substantially over the course of my 30s, more than doubling. So accounting for growth in income, I do have almost 3x my salary in my late 20s. But similarly, the above advice could be interpreted as needing 6x the income you had when you were 30 by they time you're 40. And by that metric, I'm doing even worse!
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This advice is kinda strange in my opinion .The easiest way for me to think of it is that 4% withdrawals are considered safe and you could do them forever. So take the income you want in retirement and multiply by 25. That's what you'd ideally have saved. You probably need less considering you don't live forever and you'll likely collect social security or some other pension.
You can't do 4% withdrawals forever, especially not inflation adjusted. That number is intended to have a 95% chance of success in a 30 year retirement. If that fits your situation, then it's a good number to use.
I personally use about 3.5% because I want some longevity insurance. My mom's parents lived into their 90s, so a 30 year retirement is cutting it a bit close, and I want the option to retire early.