“Financial rules of thumb are just that. If you follow them, you have the satisfaction of knowing that you’ve taken action – but they do not guarantee you’ll get the results you desire,” says Dan Kadleck, writing in Time.
Fidelity offers some actual savings guideposts:
- At age 35, you should have saved an amount equal to
your annual salary.
- At age 45, you should have saved three times your
- At 55, you should have saved five times your salary.
- When you retire at age 67, you should have eight
times your annual pay in savings.
For many, though, the “shoulds” aren’t as simple in the doing as they sound. In fact, when Morningstar analyst Christine Benz polled the firm’s older individual investor clients, she found that many had done it the hard way, following a “Keith999” pattern rather than the common-sense Fidelity guideline:
“In my 20s I spent, in my 30s I spent more, then in my 40s I began saving about 6% of salary, early 50’s about 12%, and the last 10 years I/we saved 20% of two salaries. The last ten years probably represent over 50% of the total saved.”
As Time concludes, saving early is the only true silver bullet. And, if you’re in that magical “sweet spot”: of ages 30-45, you’ve got power today that cannot be duplicated in later years.
The Center for Retirement Research estimates that the savings rates required for workers to achieve 80% of their preretirement income if they retire at 65, are as follows:
- 15% for those who begin saving at age 25
- 24% for those who start at 35
- 41% for 45-year-olds
- After that? Let’s just say the percentage savings
requirements turn daunting.
Here at Worley Erhart-Graves Financial Advisors, we’ll be focusing our blog on different generations, so that there should be helpful information that hits everyone’s “sweet-spot”. We know the “shoulds” are not simple and they’re certainly not easy. But keeping our eyes (and yours) on the only true silver bullet is where the rewards lie – timely, consistent savings and investment.
Content was prepared by a freelance journalist on behalf of Worley Erhart-Graves Financial Advisors.