this post was submitted on 14 Oct 2023
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On Retirement Savings (sh.itjust.works)
submitted 1 year ago by [email protected] to c/[email protected]
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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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[–] [email protected] 8 points 1 year ago* (last edited 1 year ago) (2 children)

The FIRE way is 25x the salary you want to have in retirement. If you're in the US, make an account with the SSA to check your estimated social security benefits. Take the number with a large grain of salt.

Truth be told, it's all pretty bleak. I save and invest 50% of my income but when I do the numbers for retirement I'll still be retiring ~65. Personally I'm a skeptic and don't factor in social security, though. The depressing reality is if you're saving for retirement then you're already better off than most.

[–] [email protected] 1 points 1 year ago

I think that talking about the "salary" you want in retirement is misleading. When you're working, you have a top-line salary that's really easy to access and pin your concepts of lifestyle to, but actually has very little to do with your lifestyle. Example: if you've got $100k salary, you're probably paying something like $30k between federal, state, and SS taxes. If you're maxing your retirement contributions, there goes another $20k, and you're only taking home $50k.

If you're saving 50% of a $100k top-line, including that 401k contribution, then you're probably living on something more like $30k after taxes, and it's a lot easier to save enough to pay yourself $30k than $100k. If you're living on $30k/year withdrawals from savings, you're not going to pay taxes. You're not going to need to save $50k/year. You only need to replace that $30k, and 25*$30k is just $750k.

The 25x rule includes $0 social security. Reasonable for FIRE people, who may aim not to work enough to qualify for SS, but if you will, then you can calculate the savings equivalent to your estimated income. eg, if they say you'll probably qualify for $1500/month = $18k/year, that's equivalent to 18k*25 = $450k savings.

[–] [email protected] 1 points 1 year ago (2 children)

How is that possible? Savings rate is the only variable that matters and 50% should be well into early retirement range. Normal retirement is more like 20-25%.

Try this calculator https://networthify.com/calculator/earlyretirement

[–] [email protected] 1 points 1 year ago

Normal retirement is like 10-15%, depending on lifestyle in retirement and whatnot.

Really retirement is pretty much anything above that.

[–] [email protected] 1 points 1 year ago

I made a very lengthy reply here using the example of $30k/year actual salary. Ultimately it hinges on this assumption from the calculator you linked: "Your current annual expenses equal your annual expenses in retirement". I think I will need higher annual expenses than what I have now.