If so, we have a pair of checkpoint charts that might interest you.
It’s often hard to know how your savings plan shapes up. There are times you feel like everything is on track, but then other periods when you might feel some anxiety. Please don’t get too discouraged if you think you are a little behind.
Ruminating over the “woulda, coulda, and shouldas” of the past never does anyone good! Taking steps to shore up your financial situation today is the productive approach. We are fond of making adjustments, then looking toward the future.
As with any illustration, such as the two tables below, you should always study them with a grain of salt. They are just guidelines.
Disclosures aside, if you go to the intersection of your approximate income and age, you will see a target multiple of income. That figure is a checkpoint you can use to get a sense of if your retirement savings plan is adequate. Of course, your situation may be vastly different, and we are happy to discuss it with you if you would like.
More importantly, we want to help you take stock of whether you are saving enough and if you should consider increasing your retirement plan contributions.
Income Multiple Checkpoints
Our assumptions for arriving at these multiples include:
- Annual gross savings rate of 5%
- Pre-retirement portfolio of 60% stocks and 40% bonds
o A less-risky post-retirement portfolio of 40% stocks and 60% bonds
- Annual inflation of 2.3%
- Retirement age for the primary earner of 65 and 63 for the spouse
- Retirement length of 35 years
High earners might require a higher savings rate to maintain their lifestyle. Social Security likely won’t cover as much of your anticipated expenses compared to lower-income individuals and couples. These can be complicated calculations, so please reach out to us if you want to review the variables and how it all applies to you.
There’s more to consider: We must crunch some numbers if you were to start saving today. The intersection of your age and income in the below table is the percentage of your current income you should contribute annually going forward, assuming you have $0 saved for retirement today.
Savings Rate Checkpoints
Bottom line: The quicker you begin aggressively saving for the future, the less is needed to fund your retirement. More time in the market means compounding works even more in your favor.
Some of those annual savings rates might seem daunting! Take heart. Even starting with a small 1% rate can make a substantial difference down the road. Getting in the habit of socking away money for tomorrow is the most important thing. As time goes on, you can make it a goal to increase your savings rate—consider upping your rate every six months and when major life events happen.
Please let us know if we may help you with any questions. Thanks for taking a look!
Your ISC Financial Advisors Team
Source: JPM Guide to Retirement