The Most Important Retirement Table You'll Ever See

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It’s actually not that difficult to determine how much you should have saved up for retirement at a particular age.

You may have more than one goal for your investments. For most of us though, there’s one overarching investment goal. That’s saving enough to fund a nice retirement; at the very least, we’d like to maintain the standard of living we’re enjoying during our working years.

A recent survey by insurer and mutual fund company Northwestern Mutual indicates that the average person thinks a $1.46 million nest egg is the magic number. And that figure certainly seems reasonable enough. After all, this amount of money can reliably generate on the order of $60,000 worth of annual income. Paired with whatever retirement benefits you’re due from Social Security, that would leave you about as well off as most other people are these days.

Problem? Saving up nearly $1.5 million can be such an intimidatingly big goal that some people may not even bother trying. It’s just a lot of money to amass on nothing but an ordinary income — even if you’re investing your savings well.

Maybe saving up for retirement doesn’t have to be overwhelmingly daunting. By breaking up your long-term goal into a smaller and more manageable pieces, you’re not only more likely to achieve it, you’re more likely to try reaching it in the first place. That’s the first big hurdle to clear.

Here’s a closer look at how much you’ll ideally have saved up at different ages en route to retirement.

Think in terms of milestones

Maybe $1.46 million is the right number for you. Or, maybe it isn’t. As was noted, most people’s chief goal in retirement is simply being able to maintain the standard of living they’ve enjoyed while they were working. You might be able to do so with less than $1.46 million. Perhaps it will require more.

For this reason, rather than focusing on reaching a specific dollar target, let’s make the matter more relative. Let’s instead lay out your ideal savings target as a multiple of your current wages at a range of ages.

Here’s the range of retirement savings — as a multiple of your current yearly income — that mutual fund outfit T. Rowe Price suggests you should be sitting on at various stages of your work life while making your way toward a presumed retirement age of 65.

Goal 30 35 40 45 50 55 60 65
Minimum Goal     1.5 2.5 3.5 4.5 6 7.5
Target 0.5 1 2 3 5 7 9 11
Stretch Goal   1.5 2.5 4 6 8 11 13.5

Data source: T. Rowe Price

If you’re on track with your retirement savings, then congratulations!

Conversely, if you’re not quite to where you need to be, don’t beat yourself up too much. Most people aren’t. Most people won’t end up catching up either. Fund company and retirement plan administrator Vanguard reports the average account balance for 65-year-old (and up) participants in its 401(k) plans is only $232,710, while the median balance is a much smaller $70,620. Even those folks earning in excess of $150,000 per year only boast average 401(k) account balances of $340,245, and presumably these accounts represent the biggest chunk of their retirement savings.

That doesn’t mean they can’t or won’t have an enjoyable retirement. Still, one can’t help but wonder how many of these investors didn’t save all they could when they could have simply because they didn’t have manageable milestone amounts to aim for in the interim.

The retirement savings X factor

But what if it all still seems too far out of reach? That is to say, you fear you’re just so far behind where you need to be by now that it feels like you’ll never get to where you want to be by then?

Don’t be discouraged! There’s an important detail you might not fully appreciate about how this works. That is, although there may be no getting around the fact that you’re behind on your savings, you don’t necessarily have to close the gap with nothing but your work-based wages. There comes a point when the average annual returns on your investments will exceed any amount of money you could realistically add to these accounts from your salary.

The graphic below puts things in perspective. While the start may be slow, presuming you’re earning the average annual market return of around 10% on your retirement savings, once you reach the last one-third of your accumulation and growth time frame things really start to take off.

The bulk of this savings’ growth from that point is no longer coming from newly deposited capital. It’s coming from gains made on the account’s past capital appreciation. That’s how even investing just $7,500 per year for 20 years should leave still leave you with a solid stash of nearly $500,000 when all is said and done. That’s not bad for just $150,000 worth of contributions of your own money.

Your retirement account’s value won’t move quite this smoothly in the real world, of course. The stock market is much more volatile than this particular image suggests, up far more than 10% in some years, and outright down in others. This image is for illustrative purposes only. Besides, you’ll want to pare back your exposure to stocks as your retirement nears.

The graphic’s overarching point is still clear, though. That is, doing something is better than doing nothing, and doing it sooner is always better than doing it later. Even something seemingly small now can have a surprisingly big impact down the road.

Whatever you’re able to do, you’re better off focusing on milestone goals rather than an arbitrarily big future goal. If nothing else these income-based savings milestones can tell you if you need to be doing something differently before it’s too late to matter.