Everyone has different financial goals in life. For a long time it was the ambition of many people to have a million dollars by the time they retire. Unfortunately a million dollars isn’t quite what it used to be but it’s still a substantial sum of money.
As I’ve continued to save and invest over the years, I’ve often thought, “hmmm, how much money should I have saved by now?” My target is north of $1 million dollars but it’s still a good frame of reference for me.
I previously asked the question, “What should my net worth be at 30 years old?” It turned out that assuming I was making 9% interest and was not making any further contributions, my net worth needed to be about $62,500 at age 30. Well, using the rule of 72, I can see that at 38 years old, I’d need to have $125,000 set aside by now.
Here are the data points from the previous post:
30: $62,500
38: $125,000
46: $250,000
54: $500,000
62: $1,000,000
It just so happens that I’m 38 years old now and have that figure beat quite significantly. The good news is that I’m also maxing out the 401k contributions, as well as other investment avenues so I can feel somewhat confident that I’ll really beat the $1M mark at age 62 assuming I can earn a solid rate of return (not easy to do these days), and that I don’t experience any major setbacks.
I also may opt to settle for something less than my goal if I stay on track with my current saving and investing. I don’t want to work until I’m 62 years old so we’ll be working hard to pay off our mortgage and avoid all other types of debt so that we have more options to retire earlier than that.
Hazzard – when you say your maxing our 401k contributions – does that mean your maxing out both you and your wife’s contributions? If so then I would think that alone would get you well past $1M well before 62.
We are maxing out mine and doing 10% for my wife. We really should increase hers further but we are also trying to aggressively pay down our mortgage as well. If we see another significant dip in the market (many people think it’s inflated right now), we may increase hers and forgo the mortgage prepayments a bit.
Every day, dozens of readers with a similar question visit my blog to view this post: Net Worth Update.
Anyway, depending on whose data you take, your net worth should be either $51,575 (according to CNN Money) or $298,500 (according to NetworthIQ). So there are a really broad range of answers that you might receive, and I don’t know that there really is a correct answer.
The two comments that I would make are that you can’t go too far wrong if you really have been maxing out your 401(k) contributions. And, I would not rely on a 9% per year return in any of my planning. Broad market indices like the S&P 500 have actually lost ground over the last 10 year period.
But you ask good questions. I think that most people are innately curious not just for themselves, but they secretly want to compare their net worth against others to see how they measure up…