Taking into account that you probably had anywhere from $16,000 – $60,000 (*raises hand*) in student loans, having ANYTHING saved for retirement by the age of 30 would be a miracle.
Nevertheless, here are a few rules you can use to calculate how much you should have saved by ages 30 – 35.
By age 35, you should have saved an amount equal to your annual pay, or about $67,777.50
(Via Fidelity)
Seeing as the average household is about $58,179 by the time you are 25-34 and about $77,376 by the time you are 35 – 44, let’s say you should have about an average of $67,777.50 saved.
(Via NPR)
Strictly speaking, as a freelancer, I find this one hard to use because my average pay so far has been $75,000 a year, working 50% of the time, but there were some years where I worked more and made double.
I’d use about $75,000 as my average “pay” in this case.
Retirement savings versus Net Worth at ages 30 – 35
I suppose you can count retirement savings to be equal to net worth in this case, so let’s see how much you should have as a net worth by the time you’re 30 to 35:
Millionaire Next Door Calculation for Net Worth
FORMULA: (Age x Annual Pre-Tax Income) / 10
- Age = 30
- Annual Pre-Tax Income = $67,777.50 (using our number above)
Net Worth Calculation: ( 30 x $67,777.50 ) / 10 = $203,332.50
NOTES:
I like this one because it’s simple to do, but it is wholly unrealistic in light of today’s student debt.
Without my original $60,000 in student debt, I’d have easily hit those numbers.
Adjusted & Realistic MND Calculation for Net Worth
FORMULA: ((Age – 27) x Annual Pre-Tax Income) / 5
- Age = 30
- Annual Pre-Tax Income = $67,777.50 (using our number above)
Net Worth = ( ( 30 – 27 ) x $67,777.50 ) / 5
Net Worth = $40,666.50
NOTES:
I prefer this one over the original classic of the Millionaire Next Door chart because it takes into account student debt, of which I had $60,000 smackeroos of.
If you didn’t go to college however, the MND one is more realistic for you.
How much do you really need for retirement?
As you can see above, the jump is crazy from $40,666.50 to $203,332.50 at the age of 30, depending on what calculation you use.
I guess the main question is not so much how much you should have saved, but how much you have calculated that you need to have by the time you decide to retire.
FACTORS THAT GO INTO CALCULATING RETIREMENT REQUIREMENTS
- How long do you think you might live? My one side of the family lives into their 90s.
- When do you want to retire? At what age?
- Will you have an employer retirement plan?
- Will you have a government retirement plan?
- How do you plan on retiring? Do you want to travel? Move to a small town? Stay in the city?
- Are you saving alongside someone else who will contribute 50%? (I am.)
- Are you planning on having kids? They cost money you know 🙂
- How much do you think you might make over a lifetime as an income?
- How much do you spend now? How much are you able to realistically save?
These are all very personal questions that only you can answer.
For me, my number is $1,000,000 by the time I’m 55. Should be able to reach it with the way I’m going, if not, sooner by the age of 45 if I can swing it.
