How much should I have saved by 50?

enough is enough wrote:

I’ve got a couple of years left in my 40s, and I’m wondering how I’m doing compared to the letsrun community at large. I’ve got a million in various retirement accounts, maybe $300k liquid, about $500k in home equity. Am I about where I should be or way behind for the forum?

Rule of thumb is 8x your salary by age 55 -- that's a minimum.

1) A million dollars in retirement accounts is GOOD, not great by your age, but definitely GOOD. A million dollars only brings $40,000 a year after all if taking the typical 4%. As you are only about 48 though, you've got time to improve upon that, and you will even if you don't add more to it.

2) The $300,000 liquid is good, because you COULD use that as an emergency fund in retirement to pay bills if the stock market drops a lot, giving your stocks a chance to recover, BUT there might be better uses for this money right now. You said you have $500,000 in home equity. Do you still have money left to pay on it? Would this $300,000 pay it off? I would do that (and did) by age 50 if I were you. Then build that liquid stash back up before you retire.

3) I could next to care less about your home equity. Really only matters if you are going to sell and buy something much cheaper so that you get income out of it. Other than that, it's just a number that means nothing.

So, compared to most people, you are doing great. Compared to actually wanting to have either an early retirement or a retirement that is glorious, you are doing OK and need to keep at it.

Flagpole wrote:

enough is enough wrote:

I’ve got a couple of years left in my 40s, and I’m wondering how I’m doing compared to the letsrun community at large. I’ve got a million in various retirement accounts, maybe $300k liquid, about $500k in home equity. Am I about where I should be or way behind for the forum?

Rule of thumb is 8x your salary by age 55 -- that's a minimum.

This is a good marker.

If I were doing your retirement plan on the back of a cocktail napkin, I'd say that you'd want to accumulate 25 times your household income by age 65. A 4% annual return would then provide 100% of your current income at retirement indefinitely.

Of course, that doesn't factor in a myriad of variables: inflation will result in you needing more each year. Investment return might be better or worse. You might need more or less in retirement. A major negative financial event early in retirement might reduce your savings. And as many seniors discover, as they get older they slow down and spend less.

But, after the dust settles with all those variables and with a decent financial advisor or your own market skills, 25x your income should be in the ballpark.

Of course, you can hire one of my fellow CFPs and they'll put this in a beautiful 30-page retirement plan for you and calculate how much to need to save each year to reach that goal, plus a comfortable safety cushion. For many people or even most people, the expense and guidance is well worth the cost. I'd suggest a CFP that charges a fee. It doesn't guarantee competence, but it's a higher level of fiduciary responsibility.

Flagpole wrote:

I could next to care less about your home equity. Really only matters if you are going to sell and buy something much cheaper so that you get income out of it. Other than that, it's just a number that means nothing.

Uh, home equity is super relevant. Assuming you pay off a 30 year mortgage around the time of retirement (pretty typical), that's a massive monthly expense you no longer have. And many, perhaps most people, do decide to downsize in retirement. If your kids are grown, why do you need 4-6 bedrooms? It also provides a safety valve in that even if you don't plan to downsize, you can if necessary. You could even do a reverse mortgage (not usually recommended, but again, it provides additional security).

That is just silly. People should have 8x if they essentially do almost nothing. I have 20x my last salary in my 401k and I am not 55. My 401k is only 50% of my total net worth. Putting 5% in a 401k with employer match gets you 10-15x salary at 55.

This question is meaningless unless we know:

1. When do you plan to retire?

2. How much do you want to have at the time of retirement?

3. Do you plan to stay in the same home after retirement?

4. If you plan to move, is it to more expensive or less expensive location?

5. How much are you saving now, and how much do you plan to save until retirement?

6. How much does it cost to keep your healthy?

I am 38 years old my current Net worth is roughly $800k and growing. I am guessing by 40 years old I should be worth a million and by 50 my goal is around $5 million. My wife and I each have master's degrees and 2 children. The goal is view your net worth similar to training for a race I always look at ways to promote and grow. My wife's views are very similar.

Nice humblebrag this thread is

Backpacker wrote:

STEVE THE ADDICT^^^^^^ wrote:

I have about the same amount of assets as you/net worth but I'm a lot younger. It dont matter. Let me ask you this, can you take the money with you when you die? No. Why are you so obsessed with "retirment savings?" Are you a sheep? Are you waiting until you retire until you give yourself permission to enjoy life? Tomorrow ain't guaranteed, buddy.

Saving some is good.

But you have to do stuff when you are young. I never understood that thinking to save for retirement and start doing stuff then. If you haven't done it earlier you won't start when you are retired.

Is this a straw man argument? In real life, how often do you meet someone that is that frugal they aren’t doing anything and saving all for retirement? Many people save for retirement, but they aren’t holding off everything.

Or, are you saying that you don’t understand why some people save any amount of money for retirement? That we should spend all of our money that we make now?

If that’s the case, I think saving some of your money feels less stressful and I’d feel more secure. It puts my mind at more peace by saving some.

Also, if you make enough money, it feels very wasteful to spend all of it on vacations or things as more you do it, there’s less of return from doing it. So, if you make more money, it just feels wasteful.

Investing money can be really enjoyable too. All you’re doing is parking your money in investments and overtime, it should grow. Like, I had a great year last year where I’ve made more than 3 times more than my annual income just by investing. It’s not going to be like this every year, but over time, it should continue to grow. So, eventually, you can grow your money to the point where you can make more money by just investing than working at all. And if you can invest a lot early in your career and keep at it, you can get to the point of making more money from your investment than working early. If you’re willing to move to somewhere with lower cost of living once your investment is big enough, then you can choose to do whatever you want in your free time not having to work.

I’m considered frugal by my peers as I save quite a bit and invest. But I still spend plenty. If I talk about number of cars that i have owned, and only talk about, people would think I’m a big spender. I just choose what I choose to spend my money on, but continue to save and invest a lot.

Where do you live? How much is your property tax? Do you have a bunch of expenses beyond food?

My parents live in small town Iowa with their house paid off and tiny property tax. I imagine they need less saved than someone living in Manhattan.

curiousYank wrote:

This is Fidelity basic recommendation to retire and live with same lifestyle- Aim to have saved at least 1x (times) your income at 30, 3x at 40, 7x at 55, and 10x at 67

How is this figure calculated? Would this include:

Savings accounts, IRAs, Thrift Savings Plan, house value, other things?

Does this depend upon how much you will make from your retirement pension? Someone who retires at 90% will need a lot less than someone who retires at 50%.

Obviously. And those numbers are way too low. Experts know that if they tell the truth, it will be too overwhelming and people will just give up and save nothing. You should absolutely be able to save 30x you salary at age 55 if you include 401k, savings, and home equity.

Big Timer wrote:

Obviously. And those numbers are way too low. Experts know that if they tell the truth, it will be too overwhelming and people will just give up and save nothing. You should absolutely be able to save 30x you salary at age 55 if you include 401k, savings, and home equity.

most of the financial calculators i've bothered to check out exclude home equity in their calculations, and they do so because they figure that you still need to live somewhere in retirement and it is not a liquid asset.

I checked out the fidelity site for their retirement calculation and it has some interesting recommendations, such as their recommended multiples are based on an assumed retirement age of 67 (save more if retiring early, less if later), and doesn't include any consideration for pensions nor one's frugality. It's a starting point from which the individual could tweak towards their own unique circumstances.

Dumb not to consider home equity. If I have $2M and you have $50k and we are both 55. I am in better shape if tge rest of our investments are equal. I can sell tomorrow for $1.8 if I want to get out in a hurry and then I have another $1.8M that you don't have. Or I can stay in the house and take out $1M in a loan and live off of that.

fisky wrote:

If I were doing your retirement plan on the back of a cocktail napkin, I'd say that you'd want to accumulate 25 times your household income by age 65. A 4% annual return would then provide 100% of your current income at retirement indefinitely.

You don't need your retirement income to last indefinitely. Most people don't live beyond age 90. So if your income lasts for 25 years, that is probably sufficient. 35 years, if you plan to live to the century mark.

I understand your point and it is definitely a consideration in determining one's financial standings in retirement.

The above average home equity would be considered as a reserve in case of emergency (you would have to sell it to access its value). But the presumption is that you would still need to live somewhere in retirement, and furthermore, it would be presumed that you would live at the quality of life you had become accustomed to.

In the case of the Fidelity formula, what little i know about it *and that;s not much), they would put a premium on your home value if you planned to live more frugally in retirement than you do now, and you then they would recomment a smaller multiple of your annual salary be used than the ones they listed.

Don't get me wrong, the sizable home equity is a positive, and would be considered as added security. But when that client walks into their office and they start crunching the numbers, they are going to address it as how much you will need to live off of, and if you are going to stay in that same house, the value of it is not going to be a factor, It would only be a factor in considering your available emergency funds, should you ever need them.

Happy saving!

Depends on where you live wrote:

Where do you live? How much is your property tax? Do you have a bunch of expenses beyond food?

My parents live in small town Iowa with their house paid off and tiny property tax. I imagine they need less saved than someone living in Manhattan.

Yeah, it’s all about how much you spend. These silly formulas based off what you make are only relevant if you are a spender.

At any rate, I make a decent middle class income and I’m frugal as anything, but I have barely cracked the 2 comma club in my 401K at 57. But I also know I could retire pretty comfortably... only have to make it to 70 when SS will be enough to provide all my necessities. A simple lifestyle has some advantages.

You keep using the term home value and value while I am referring to home equity. As I said, if my neighbor and I have $2M houses and mine is paid for while he only has $100K of equity, you are silly not to consider the equity. We both stay in the house. I have no payments while he pays $5K per month for the rest of his life.

fidelitysticks wrote:

curiousYank wrote:

This is Fidelity basic recommendation to retire and live with same lifestyle- Aim to have saved at least 1x (times) your income at 30, 3x at 40, 7x at 55, and 10x at 67

How is this figure calculated? Would this include:

Savings accounts, IRAs, Thrift Savings Plan, house value, other things?

Does this depend upon how much you will make from your retirement pension? Someone who retires at 90% will need a lot less than someone who retires at 50%.

Did you miss the word 'basic'? Just in retirement accounts here.

That is silly also. If I have $2M in home equity and $4M in stocks and $200k in the bank and a $75k yearly pension, my retirement funds are meaningless.