How Much Should You Have Saved for Retirement by Age? The Truth Behind the Rules of Thumb
When it comes to retirement savings, most of us want a simple answer. How much should I have saved by the time I’m 40? 50? 60? You’ve probably seen the popular benchmarks floating around 3 times your income by 40, 6 times by 50, 8 times by 60, and 10 times your annual salary by the time you retire at 67. They make great headlines, but here’s the problem: those numbers are averages, not absolutes. They don’t account for your specific lifestyle, goals, or financial situation.
If you’re 40 and making $100,000 a year, these guidelines say you should have around $300,000 saved. By 60, that number should be closer to $800,000, and by 67, about $1 million. That’s not unreasonable advice, but it’s not universal either. For someone with a pension, rental income, or plans to downsize, that number could be too high. For others, especially those retiring early, it might be too low.
Here’s where the problem starts: these rules can cause unnecessary stress. I’ve talked to plenty of people who feel like they’re behind just because they don’t meet these benchmarks. But your number depends on your personal equation when you want to retire, how much you’ll spend, and what income sources you’ll have outside of your portfolio.
Take Emily, for example. She’s 40, has saved $300,000, and wants to retire at 55. Based on the “3x income” rule, she’s technically on track, but her goal of retiring 12 years early means her savings will need to last much longer. On the other hand, Greg and Sherry are both 50 with $400,000 saved but they’ll receive a pension covering 80% of their retirement income needs. They’re in great shape, even though they fall short of the “6x” rule. And then there’s Michael, age 60, who has $500,000 saved but plans to downsize his home and free up $400,000 in equity. That move alone changes his entire retirement outlook.
That’s why retirement planning isn’t about fitting into a formula it’s about building a strategy that fits your life. Here’s the approach I recommend: start by estimating your future expenses. Think about what will decrease (commuting costs, mortgage payments) and what might increase (healthcare, travel). Then, identify non-portfolio income sources like Social Security, pensions, or rental income. These will help offset your total expenses. Once you’ve done that, you can calculate the gap the difference between what you’ll need and what you’ll already have coming in.
Now it’s time for some math. Let’s say your estimated retirement expenses are $120,000 a year, and you expect $60,000 from Social Security and a small pension. That leaves a $60,000 gap. Using the 4% withdrawal rule a common guideline for sustainable withdrawals you’d need a portfolio of about $1.5 million to generate that $60,000 annually without depleting your savings too quickly.
Here’s the step-by-step version of that process:
- Estimate your annual retirement expenses and adjust for inflation.
- Identify non-portfolio income sources (Social Security, pensions, rental income).
- Subtract those from your total expenses to find your annual income gap.
- Multiply that gap by 25 (based on a 4% withdrawal rate) to determine your target portfolio size.
It’s not as flashy as a simple age-based chart, but it’s far more accurate and far less stressful. Retirement planning isn’t about chasing someone else’s number. It’s about finding the number that works for you.
You should always consult a financial, tax, or legal professional familiar about your unique circumstances before making any financial decisions. This material is intended for educational purposes only. Nothing in this material constitutes a solicitation for the sale or purchase of any securities. Any mentioned rates of return are historical or hypothetical in nature and are not a guarantee of future returns.
Past performance does not guarantee future performance. Future returns may be lower or higher. Investments involve risk. Investment values will fluctuate with market conditions, and security positions, when sold, may be worth less or more than their original cost.
