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On Retirement Savings (sh.itjust.works)

submitted 2 years ago by akilou@sh.itjust.works to c/personalfinance@lemmy.ml

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I'm almost 40 and according to the wisdom found everywhere on the internet, I don't have enough saved for retirement. Which worries me because I've been saving for as long as I've had a proper job with access to a retirement vehicle. But also because the internet wisdom doesn't make sense or sound feasible.

According to what I've read, you're supposed to have:

1x your income when you're 30
3x your income when you're 40
6x at 50
8x at 60
10x when you retire

I'm almost 40 and I have just barely over 1x saved. So it feels like I'm 10 years behind. However, my income has grown substantially over the course of my 30s, more than doubling. So accounting for growth in income, I do have almost 3x my salary in my late 20s. But similarly, the above advice could be interpreted as needing 6x the income you had when you were 30 by they time you're 40. And by that metric, I'm doing even worse!

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[–] nottelling@lemmy.world 0 points 2 years ago (1 children)

I'm in a similar place to you, and I've resigned to it being an impossible feat. I'm pretty close to the number for 40, but the curve is flattening. There's no way I retire at 65 with enough to survive to 80.

Those numbers were established during boomer economy years and assume a few things that aren't true anymore:

infinite 7-9 percent stock market growth, but the modern market crashes every decade or so now.
linear year over year wage increases that outpace inflation. Really is either flat wages or OP situation of huge jumps. The former makes saving impossible, the latter throws the x percent by decade curve off.
you should count your home equity in that number, but fewer people own homes, or are underwater on them for far longer.
the x/decade number assumes a certain amount of income from social security, but that's likely to be stolen by the time we retire.
those numbers were made before the entire American population was crushed with debt. Student loans and medical, even just modern insurance premiums dig deep into the ability to hit retirement goals.

Basically, good luck OP. We're all going to work till we die.

[–] Thorny_Insight@lemm.ee 0 points 2 years ago (1 children)

infinite 7-9 percent stock market growth, but the modern market crashes every decade or so now.

My savings into index funds has seen an average growth of 9% a year for the past three years. 11% since the start of this year. Granted I jumped in at the bottom of the corona dip.

[–] nottelling@lemmy.world 0 points 2 years ago (1 children)

Yeah, and you'll lose a shitload when the next crisis pops off in a few years, taking a few more years to recover that loss. The 401k management firms only ever seem to rebalance quarterly or semi annually, so there's no way to react to those downturns in time to mitigate.

I got hit by 9/11, 2008, and Covid, plus I've seen my SS benefits reduced a couple times.

[–] Thorny_Insight@lemm.ee 0 points 2 years ago (1 children)

React? You're not supposed to react, that's how you lose money. When the next crisis hits it just means I get more for the same price.

[–] tburkhol@lemmy.world 0 points 2 years ago

Income is the wrong focus for retirement, and I'd be suspicious of any benchmarks that talk about replacing income. Spending is the number you need to pay attention to, because you're not going to be paying as much in taxes, and you're not going to be saving for retirement after you retire. Those tend to take a pretty big bite out of your nominal working-life income, and the difference can make retirement seem like an even bigger hurdle than it actually is.