So, one million isn’t enough for you, right? I know it’s not enough for me. I know I need much more than that. Will $2 million cover you in retirement? If so, are you on the right path to meet that goal? About how much money should you have at your age?
| Age 21: $0 | Age 32: $77989 | Age 43: $279236 | Age 54: $798538 |
| Age 22: $4441 | Age 33: $89449 | Age 44: $308808 | Age 55: $874847 |
| Age 23: $9282 | Age 34: $101941 | Age 45: $341042 | Age 56: $958025 |
| Age 24: $14558 | Age 35: $115557 | Age 46: $376177 | Age 57: $1048688 |
| Age 25: $20310 | Age 36: $130399 | Age 47: $414475 | Age 58: $1147512 |
| Age 26: $26579 | Age 37: $146576 | Age 48: $456219 | Age 59: $1255229 |
| Age 27: $33413 | Age 38: $164209 | Age 49: $501720 | Age 60: $1372641 |
| Age 28: $40861 | Age 39: $183429 | Age 50: $551316 | Age 61: $1500620 |
| Age 29: $48980 | Age 40: $204379 | Age 51: $605375 | Age 62: $1640117 |
| Age 30: $57829 | Age 41: $227214 | Age 52: $664300 | Age 63: $1792169 |
| Age 31: $67475 | Age 42: $252105 | Age 53: 728529 | Age 64: $1957905 |
Age 65: $2138558
Assumptions:
You put away $4250 per year (notice you have to save a lot more than when you are saving for a measley one million $)
You earn 9% on your investments (yeah, I cranked it up 1% from last time)
If you want to get a good retirement planning tool, consider getting the Flexible Retirement Planner, its completely free.
Observations:
Notice how the money takes on a life of it’s own as you get older and your investment balance increases? Your individual contributions tend to matter less and less as you get closer to age 65. I love compound interest.
sweet, i’m 13 years ahead of schedule. does that mean i’ll be able to retire when i’m 51? assuming i keep putting money away faster than this chart recommends, i should be able to retire when i’m in my 40’s right?
Wow, I wonder how to make myself 24 again . . . ;)
I suppose you could REALLY take care of yourself so that you are physically in the shape of a 24 year old….. :)
If you could do that, you could live longer and just work a bit more. For every year you go past 65, you basically can subtract one year off where you are now. (You just need the 44 years of compounding. It doesn’t really matter what years of your life you tie to those 44 years, although the younger the better)
As a 21 year old, I find this chart a little amusing. It’s nice to see that I’m a couple of years ahead, but surely no one actually saves like this. I hope to earn more and hence be able to save more thirty years from now than I will be able to do immediately after I graduate. I’d classify this as for entertainment purposes only.
E.C.,
Nobody saves like this? It’s $4500 a year. A lot of people save like this. And as they get older, it’s even easier to save $4500 a year. I currently save $12,000 per year without even breaking a sweat. Sure, at 21, it might seem a little daunting but I know that once you are out of college and gainfully employed, it shouldn’t be a big deal at all, especially if you get hired by a company that does any employer matching.
Hazzard
I agree it’s only for entertainment purposes since inflation has been neglected.
Assuming 3% inflation pa your spending power will halve about every 18 years. So instead of $2m you really need $4m if 18 years from retirement. And more if you’re younger.
If instead of a 9% pre-inflation return you used an after inflation return of 5 or 6% then the results would make sense. However to offset this it’s OK to assume that savings are a fixed percentage of income to keep contributions the same in real terms.
Does this net worth number assume you are counting any equity in a primary residence?
It’s really up to you. The idea here is that if you want to have $2M saved by retirement you can either count all of your assets, or just your cash investments. I think it really depends on the individual. I know that I’m going to need at least $2M to feel comfortable in retirement. I’d prefer not to have to liquidate all of my real estate etc in order to achieve the interest income from the total. If you want to liquidate everything and rent, I suppose you could count your equity. This was just intended to give you an idea of what milestones you might want to shoot for if $2M is your goal.
Oh Peter, I was feeling so good about myself until I read your comment.
This is a good chart. I think people could actually save that much each year and this is a good representation of how much money they could have in retirement. Also, I think if you look at the actual stats for savings of the average american at specific ages they are much much worse than your table.
Wow, I was really beating myself in the head with the net-worth number I had. I as Nov.7.09 My net-worth is 90k. I have 1.910 million more to go!
My ideal retirement goal is 40 million dollars. Once I achieve it, I just pass it on to my kids.
Haha if you find a way to hit $40 mil tell me how to hit one… I promise I wont tell.
9% these days is a very optimistic estimate at this day and age. I think you’re lucky to average 6-7% in the current market investing in mutual funds and bonds. Also, if you plan to live another 30 years after retiring $2m with no interest is only $65k/yr. Hopefully your retirement money will still be working after retirement. Living where I live (SoCal), that will not get you very far considering the cost of living here. $3million is a goal that I need to aggressively pursue in order to be able to take care of myself and wife, but at this point in our lives I am lucky that I am currently on pace with this chart to retire with $2m. I will keep this site on hand to make sure I stay ahead of it. :)
Where would 9% come from? I know it is an average, but here is two facts, as food for thought:
– Only 202 of the 500 biggest companies in the United States in 1980 were still in existence 20 years later.
– On December 29, 1989, Tokyo’s Nikkei stock average reached its all-time peak of 38,915.87. Twenty years later, the Nikkei has never again reached that level — and, in 2009, reached a new low of 7,054.98.
9% on investments? What parallel universe is this author living in…
Stocks have returned 0% since 2000. Long range bonds are averaging 2 to 5%. What investment, precisely, is he recommending that is going to get you 9%, safely, from ages 55 to 64 … where YOU NEED TO BE conservative…. ???
Crazy. Bogus model.