A personal finance blog that provides historical perspective, emphasizes strategic planning, and uses graphs & spreadsheets to show how financial things work.
Sunday, November 25, 2012
Assumptions for the "4% Withdrawal Rate" Retirement Savings Graphs
The Observations posts based upon the Trinity Study / "4% Withdrawal Rate" guidelines for retirement savings include a short version of the assumptions made. This post discusses the assumptions underlying those graphs in more detail. (See Related Materials below for a list of the posts.)
Thursday, November 22, 2012
How Much Should You Have in Retirement Savings? (by age)
In this post, we use the "4% withdrawal" approach to retirement planning to approximate how much you should have in savings at each age. And, given how much you actually have, what percent you should save going forward.
This post is designed for those who do not expect to receive a pension or Social Security -- regardless of salary level. Otherwise, see with Social Security, or higher income earners.
As you can see from the chart above (click to expand), no matter when you start saving, by the time you're 65 you'll need about 19 times your "then-current" salary in retirement savings! That is, assuming you want to maintain
Have You Saved Enough for Your Retirement?
Have I saved enough for my retirement? Am I on track? These are critical questions for those hoping to retire in comfort. In the previous series, we calculated the percent of your salary that you should save each year. In this series, we provide some benchmarks to monitor your progress along the way.Retirement Savings Targets as a Multiple of Salary: Benchmarks, by age
Retirement Savings Targets as Multiple of Salary |
Without Social Security or a Pension, You'll Need ~19 Times Your Salary to Retire Comfortably at Age 65!
Thursday, November 15, 2012
What Percent of Income Should High-Income Earners Save For Retirement?
Here's another easy-to-use graph that suggests the percent of your income to save for retirement depending upon the age you start saving. It's based upon the commonly used 4% withdrawal approach to retirement savings, and is designed for a high income wage earner planning to receive Social Security in retirement. Earlier posts targeted a typical social security recipient, and those without Social Security.
Most people are not saving enough for retirement! Because of the way Social Security is designed, those with higher salaries need to save an even higher percentage of their salaries than the average person. Waiting too late to start planning & saving for retirement, or not saving enough, can be the difference between having a secure, comfortable retirement and a drastically reduced standard of living.
Some Benchmark Percents of Income to Save for Higher Income Earners with Social Security, by Starting Age
Annual Retirement Savings Percentage Needed (higher income) |
Most people are not saving enough for retirement! Because of the way Social Security is designed, those with higher salaries need to save an even higher percentage of their salaries than the average person. Waiting too late to start planning & saving for retirement, or not saving enough, can be the difference between having a secure, comfortable retirement and a drastically reduced standard of living.
High Income Earners Should Plan to Start Early, and Save A Larger Percent of Their Annual Salary -- Even With Social Security
The previous post in this series benchmarked savings percentages needed for a typical worker with Social Security (and no pension). Unfortunately, the percentage of your salary that Social Security will replace decreases as your salary increases. As a result, higher income earners need to accumulate more years of salary in savings by their retirement date. Therefore, they should plan to save a larger percentage of their income than those with average salaries in order to reach the higher targets.
Thursday, November 8, 2012
What Percent of Your Income Should You Save For Retirement? (by starting age, with Social Security)
Here's an easy to use graph that suggests the percent of your income to save for retirement depending upon the age you start saving. It's based upon the commonly used 4% withdrawal approach to retirement savings, and designed for a typical wage earner who is planning to receive Social Security. Other posts address saving percentages for higher income earners, and those without Social Security. For other situations, see the end of this post.
Most people do not save enough for retirement. Sixty percent of older women have trouble covering their basic monthly expenses. Nearly half of Americans die with virtually no financial assets. Waiting too late to start planning & saving for retirement, or not saving enough, can be the difference between having a secure, comfortable retirement and spending your golden years in poverty.
Most people do not save enough for retirement. Sixty percent of older women have trouble covering their basic monthly expenses. Nearly half of Americans die with virtually no financial assets. Waiting too late to start planning & saving for retirement, or not saving enough, can be the difference between having a secure, comfortable retirement and spending your golden years in poverty.
Some Benchmark Retirement Saving Rates for Typical Employees with Social Security, by Starting Age
Annual Retirement Savings Percentage Needed (w Soc Sec) |
Even With Social Security, You Will Need to Start Early, and Save A Significant Percent of Your Yearly Salary
The previous post in this series showed results for workers without a pension or Social Security. However, about 90% of American workers do have Social Security; it typically replaces roughly 40% of their pre-retirement income (not the at least 70% of pre-retirement income normally assumed to be needed). Even so,
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