This isn’t really a “how rich are you” question as it is a “how well do you save” question. I just went through our finances today and was happy to see that we’ve crossed the threshold.
The formula is annual income (pre tax) divided by 10, then multiply by your age. You can include assets (like home equity) but not inheritance (since that has nothing to do with your saving/investment habits).
So if you make $30K and are 32 years old, that target number would be $96,000.
If you make $75K and are 42 years old, that target number would be $315,000.
If you make $105K and are 50 years old, that target number would be $525,000.
I’m 46 and am actually short of my target due to a late start on my career, while my wife is well ahead of her number being able to start right out of college with no debt. Combined we are pretty much right at the target (using my age). But, ya know when you make $9 an hour…; )
The more interesting question in my mind is what are you saving for?
I know a lot who save almost everything they make and wonder why they don’t just enjoy the money they have now. I think it often becomes such an obsession, a numbers game that they can’t actually answer that question.
The more interesting question in my mind is what are you saving for?
I know a lot who save almost everything they make and wonder why they don’t just enjoy the money they have now. I think it often becomes such an obsession, a numbers game that they can’t actually answer that question.
As I home in on 50, I realize I need to open the purse strings more, though even now we live happily. I don’t need to blow $$$ on gold toilets. Using the formula I am nearly double where “I should be” but part of that is because I intend to retire the first day I can (in 7 years), so the money needs to fund that slightly longer retirement. But I would rather have too much than too little.
I’m 69 years old, retired for 8 years, well off and happy. I would say that at 30 I was under the target because I had just started saving.
By 50 I was right on target. By 60, ahead of the target. And now, I’m gooooooooooooooooood!
For people like LiteMike. I hope you all can adapt to living on whatever the reduced social security will give you. You can keep partying on 3 or 4 hundred dollars a month, right?
The more interesting question in my mind is what are you saving for?
I know a lot who save almost everything they make and wonder why they don’t just enjoy the money they have now. I think it often becomes such an obsession, a numbers game that they can’t actually answer that question.
As I home in on 50, I realize I need to open the purse strings more, though even now we live happily. I don’t need to blow $$$ on gold toilets. Using the formula I am nearly double where “I should be” but part of that is because I intend to retire the first day I can (in 7 years), so the money needs to fund that slightly longer retirement. But I would rather have too much than too little.
Sitting in nearly the same spot as you. I don’t think you have saved to much. Maybe that formula works if your working till 75 or something. I am 60 and done and possibly as early as 57 or 58.
This isn’t really a “how rich are you” question as it is a “how well do you save” question. I just went through our finances today and was happy to see that we’ve crossed the threshold.
The formula is annual income (pre tax) divided by 10 times your age. You can include assets (like home equity) but not inheritance (since that has nothing to do with your saving/investment habits).
So if you make $30K and are 32 years old, that target number would be $96,000.
If you make $75K and are 42 years old, that target number would be $315,000.
If you make $105K and are 50 years old, that target number would be $525,000.
I’m 46 and am actually short of my target due to a late start on my career, while my wife is well ahead of her number being able to start right out of college with no debt. Combined we are pretty much right at the target (using my age). But, ya know when you make $9 an hour…; )
I don’t get it. At 65 and a 100K you would only have 650K.
If a person is planning to live on their savings only, the AGE * income/10 = savings calculation is probably a good measure for how well their saving are progressing. Considering most people (if you listen to the media), are way, way under that number, it doesn’t look good for most people. The Slowtwitch cohort is probably not a good representation of “most people”.
My savings are not my only retirement support so my figure is about 1/2 of the recommended number using the calculation. I have used the “three legged seat” method as I was taught that system when I left the Navy (an investment rep hired to scare sailors into reenlisting instead of leaving the service). In that system a person is advised to have no less than three sources of income. One source is not a retirement; a seat with one leg is not restful. Two sources is marginally better but still is not restful to sit on. Three legs (sources of income), will be stable and allow a person to retire comfortably. Four legs or sources of income will allow for a relatively prosperous retirement. I have developed 4 sources and that system worked well, my retirement gross income will be about 10% more than my current gross working full time.
To me the most important factor is age; the earlier a person starts planning, investing and saving the better. I started basically when I joined the Navy; by enlisting in the reserves after I left active duty I kept the retirement value of that time. I then started my next career which had a 401K and a pension system that I invested in. Both of those are good and are solid “legs” for my retirement along with my reserve retirement income. Add to that social security (questionable in the long term but will be available for at least 5-10 years of my retirement according to current prognostications), I have my 4 legs.
The more interesting question in my mind is what are you saving for?
I know a lot who save almost everything they make and wonder why they don’t just enjoy the money they have now. I think it often becomes such an obsession, a numbers game that they can’t actually answer that question.
So I can stop working in my late 50’s and do what I want. I enjoy the life I have now and don’t need more junk.
Its a terrible formula. I think it is just a formula to kick younger people in the pants to get them to save but that is about it.
As other people said as you get older, 50-65 age it doesn’t work well. But it doesn’t work well for late career starters, for example doctors. After schooling and residency, they have a ton of debt and just starting their real jobs by age 30-35. Same with business owners.
I currently have y in savings and I need z to live on
X has no bearing on z
If I make 500k a year (I don’t) but I only need 50k a year, the idea that how much I should have saved is related to current income not current need is pretty silly.
I currently have y in savings and I need z to live on
X has no bearing on z
If I make 500k a year (I don’t) but I only need 50k a year, the idea that how much I should have saved is related to current income not current need is pretty silly.
most people who make x end up with a life style based on x income rarely do people make x and live off x/5
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