How Much Should I Save For Retirement By Age? 💰 Does Kiplinger's Retirement Method Work?

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How Much Should I Save For Retirement By Age? Pros and Cons of This Common Analysis.

Age Targets: How Much Should You Have Saved for Retirement By Now?

Link to excel doc shown in video (Please note the document is for educational purposes only but interesting nonetheless:) https://www.dropbox.com/s/0fjn22gcs0f63ll/Retirement%20savings%20by%20age.xlsx?dl=0

Free financial calculator tools shown in video:
https://www.fncalculator.com/

Per the Kiplinger Article:

Retirement planning can be intimidating at any age — even more so early in your career. When retirement seems so far in the future, it’s hard to plan for it with so many competing priorities in the present. For example, in addition to your regular bills, you may have student loans to repay. Or you may be trying to save money to purchase a home or save for your kids’ college education.

Use these savings benchmarks to get more comfortable with planning for retirement. Then go beyond the rule of thumb to fully understand your potential retirement expenses and income sources. Beyond your savings, think about what you are saving for and how you envision spending your time after years of hard work. After all, that’s the reason why you are saving in the first place.

Link to article can be found here: https://www.kiplinger.com/article/retirement/T047-C032-S014-age-targets-how-much-should-you-have-saved-by-now.html

Other related articles:

https://www.cnbc.com/2018/09/20/david-bach-heres-how-much-you-should-have-saved-at-every-age.html

https://www.investopedia.com/retirement/how-much-you-should-have-saved-age/

Comments

emikami1 says:

I like most of your videos but this is one is head and shoulders above them. You rock!

I like your approach in assuming no real return during retirement to calculate how long

your money will last. The rate of return on bank CD's and treasuries is sometimes above

inflation rate and sometime below it for an extended period of time. Thus even this number

is not an absolute but it sure is better than what many people use. Biggest problem with

the 4% rule is that people misapply it. 4% rule was only based on the probability of

a balanced fund lasting 30 years if a person took out 4% initially and increased the

initial withdraw by inflation every year there after. It wasn't 100% success rate based

on historical data for 30 year time period. So at age 65, it might not be a bad approach

as most people don't live to be age 95 anyway and Social Security might cover the shortfall.

But as people try to apply it age younger than age 55, it becomes increasingly more

difficult to rely on Social Security to rely on any misapplication to the 4% rule. By

applying a simple division, it solves most of the temptation of following the FIRE

movement in an unrealistic way.

The expectation of Social Security not being there is a reasonable approximation for many people.

Slowly cutting benefits by tinkering with inflation adjustment and to compensate for longevity

is pretty realistic. But even if those gradual adjustments are made and the system survives,

we already see medical costs continuing to increase beyond inflation and medicare itself is

in much worse shape than Social Security. So when you combine the reduction in Social Security

benefits and the increase in expense like medical, housing, food, transportation, and energy,

you might as well start with no benefits from Social Security as a starting place. Those

basic necessities tend to inflate faster than government published inflation rate so you

do need to be conservative when making longer term projections.

Itzik beja says:

You put give great information, thank you!

Hans Gruber says:

MIke, great stuff. Little bit different question. I make too much to open Roth directly, but can do so by opening a traditional IRA and then via a "backdoor" convert to Roth. As a CPA can you tell me if the conversion is a taxable event? What would be the tax impact? I've got people telling me that it is and is not taxable, so looking to someone who may actually know the tax impact. Thanks!!

Hans Gruber says:

MIke, great stuff. Little bit different question. I make too much to open Roth directly, but can do so by opening a traditional IRA and then via a "backdoor" convert to Roth. As a CPA can you tell me if the conversion is a taxable event? What would be the tax impact? I've got people telling me that it is and is not taxable, so looking to someone who may actually know the tax impact. Thanks!!

RealLife Money - Weekly Financial Videos says:

Mike! Great video and something to definitely talk about. I agree a salary increase of 5% per year is not realistic. 2% is probably more real. You make great points and I think we should understand this sooner rather than later!
Average rates of return are actually misleading which really opened my eyes (example: 50% return one year and -50% next year the average might be 0% but you will not have the same money as we started!) I had a video on that actually.
Why we should probably aim for a higher amount than we think 🤔 Losing money sucks!

Dave R says:

Good video mike,even though the badass didn’t make an appearance he’s my favorite!I’d rather be the guy who saved to much then the guy who’s short but it’s not always easy to do.Living on less and holding back instant gratification isn’t easy.Have a good weekend!✌🏻

Will says:

I'm just curios to know whats in your steam library, haha.

Mixel Plick says:

Great video…and the perfect argument to be a dividend growth investor. No worries about the 4% withdraws, no worries about a protracted retirement, no worries about fluctuations in the market, no worries about recessions, and no this times or that times your salary savings.

Ken Lynch says:

Excellent vlog. that should be "required viewing" for all under 35. . Fortunately I had the math skills & foresight to work numbers in a similar fashion back in 1965 (before computers).

Cynthia Keene says:

We love your videos. Thanks.

Cynthia Keene says:

Question Mike. If you're withdrawing 4% of your $980k a year and making 4% on your investments that you're withdrawing from, how many years will it last?

kermit says:

I think replacing one's annual income with 4% of one's investments is a bit misleading…wouldn't it be more accurate to focus on replacing one's annual expenses with 4% of their investments?

Daniella Deba says:

Love your videos Mike, thank you for all the information!!! I’m really interested to know how do you invest between retirement accounts and post-tax brokerage accounts? My age is close to yours and I am currently investing in retirement account up to my employer match and invest the rest of my savings in post-tax brokerage account. I don’t know when I will retire and I like to have that flexibility with investing more in non retirement accounts. What is your approach for investing between retirement and non-retirement accounts?

Dan Brad says:

I think a 2% raise a year is a lot more accurate. Great info, thanks!

JD Thompson says:

I think these models have some flawed assumptions – first and foremost that everyone will want to work until age 65. I’m not even talking FIRE but let’s say 55-60 for retirement goals. To compensate for that you could start by ramping up the x salary numbers so if your retire target is 60 move the higher end amounts for 65 to 60. If it’s 55 move 65 targets to 55. Anything earlier than 55 would need many more considerations and hyper savings rates with likely very high earnings very early in life.

On the other hand, I think anyone who saves at the required rates to achieve a lifestyle at the same level as the year they retire won’t likely be living the lifestyle of their entire salary to begin with… especially if they are debt free including mortgage debt, no longer supporting kids, no longer paying FICA taxes, saving 15-50% of income for retirement, etc. when they retire. For example if you make $125,000 at retirement you may well be living a lifestyle you are happy with on just $50-70k after taxes. So that’s one big flaw I see in assuming you will need your last working year’s gross income to maintain the same lifestyle in retirement. You do need to factor in some extra dollars for health insurance and deductibles/out of pocket costs for any retired years prior to 65. Lots of variables but good to at least get a rough number and goals when young to motivate your savings.

wsgriffi says:

Mike, I have been looking at retirement for a while now and you are correct about getting out of debt is the key. Also look at your expenses. I started tracking all of our spending several years ago and projected what they would be when I retire. It turns out that we will only need ~65% of my salary to cover expenses after retirement. This is allowing me to be able to retire a lot sooner than 65. I may be able to retire at 58. A big savings is not having to save for retirement and no mortgage is huge. I wish I had started looking at retirement sooner. Thanks

JD Thompson says:

Would you assume no Social Security if you were 55 or over now? Or are you saying that for a person in 20s-40s?

Money and Life TV says:

Link to excel doc shown in video (Please note the document is for educational purposes only but interesting nonetheless:) https://www.dropbox.com/s/0fjn22gcs0f63ll/Retirement%20savings%20by%20age.xlsx?dl=0

Free financial calculator tools shown in video:

https://www.fncalculator.com/

Money and Life TV says:

Smash that LIKE button if you are getting fired up for retiring sooner rather than later. Thanks for the continued support everyone!

Money and Life TV says:

Do you think these age based retirement targets are helpful? What would you add to this retirement planning rule of thumb?

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