Ok, from many years of grad school interspersed with years of working for nonprofits, I am not the proud owner of zero in savings and tens of thousands of in debt. Fortunately, I got my tiny condo cheap many years ago and it’s now probably worth $120K more than I paid for it. So…assuming I sell it (I don’t want to rent it out as I likely will move far from it next year), just how much in savings should a 40-year old single hombre have by now to retire at 65? Or is there a median? Or an amount by income quintiles? I never understand the calculators out there on this. Essentially, I’m wondering how much of this windfall makes up for the complete lack of savings and nasty debts I now have.
Start acquiring a taste for cat food now, my friend. How many thousands is tens? With only fifteen years to accumulate savings, what kind of income are you expecting to draw from?
It doesn’t make up for it at all, unless you’re planning to live in a cardboard box when you retire.
Remember, the fact that your house/condo is now worth $X more than when you bought it doesn’t do you any good if the house/condo you buy to replace is also $X more expensive than it used to be.
Here is a retirement calculator that allows you to input variables like your currrent savings, your planned annual savings, and your age to calculate how much you need to save per year to achieve the income you desire at retirement.
When I was 40, I had already paid off 5 years on my 20 year mortgage and had a few thousand in savings as well. Plus all my working life I’d had index-linked pensions.
Apart from the mortgage, I’ve never been in debt. (I don’t like paying interest.)
As Early Out said, the house doesn’t help (unless you downsize, but you said it was tiny).
Why not work out a plan to repay your debts and start saving too?
That’s why my post didn’t have, like, percentages or anything in it. I’m not so good at math. I am, however, good at putting into my IRA, have state retirement, and am something of an heiress. None of those are good advice for the OP, though.
You have time, but you need to put LOTS away in a good investment system starting now. I was in a similar situation when I hit 40. I gave up working happy and started accepting jobs that paid better. 17 years later I’ve managed to put away about 350K and should hit 500K by 65 and have about 250K in equity by then. Maybe not the best plan but its what I have to work with. Before the stock crash I already had hit 500K+ and am in a rebuilding phase.
Time flies after 40. If SSN doesn’t evaporate, I’ll be fine.
There is no correct amount to have saved by now. There is no correct amount needed for retirement. We do these threads often and find out regularly that there are wildly differing standards when it comes to savings, investments and retirement needs. What kind of income will you have for the next 25 years? How much would you like to save/invest during that time? Lots of people can create a fortune in 25 years. Many more can’t manage to hang onto a dime. Others simply work hard, do the best they can, and manage to retire decently. The retirement calculators are generally inaccurate. They make assumptions that may not apply to you, and they’re usually offered by companies/organizations who want to nudge you into seeing things their way (i.e., that you should invest with/through them as your only means of financial salvation). Medians and averages are likewise misleading, and every piece of advice you’ll get can easily be challenged by another source.
Really, reading a lot about saving, investing and money management is key, and don’t believe the first, second or third source you read. It’s absolutely astonishing, in a society that grasps relentlessly for more more more, that we don’t actually spend much time instructing students about financial management.
You’re going to have to make a number of assumptions about your future earning and spending habits, as well as your anticipated life span, and figure out a retirement calculator. They’re not that hard but they will require you to plug in a number of estimated values.
What do you expect to be spending on housing? Buy, rent? More or less than you do now?
Do you plan to be supporting only yourself? A spouse? Kids?
What’s your salary relative to your tens of thousands in debt? Could you pay it off if you wanted to but you just overspend, or do you scrimp and save just to make it to the next paycheck?
How long do you think you’ll live? A valid question- if you’re so unhealthy you expect to drop dead the day after you retire, you’ll probably be fine. Anything else, you might be in a bind.
Don’t expect anyone here to be able to give you a number to shoot for. You’re going to have to figure it out on your own. That said, I guess the only real answer to your question “how much should I have saved by now” is “more than you have”.
I’d say you need to start saving NOW. I am younger than you are, and have a net worth over 1 million… I don’t have a car or tv and have been living in low tax places. My goal is 3 million at 60. Move to a low tax state if you can. Did you end up with a degree that will get you a high-paying job?
Incidentally, my net worth is zero, but I just found out that I don’t need to save for retirement, assuming my job, company pension + social security stick around.
I personally prefer this calculator as it runs your portfolio against ALL of the stock markets and gives you an idea of how your money would survive against those markets.
Big assumptions, however, as I wouldn’t count on any of the three as sure things.
Honestly for the OP: work on paying down that debt. As others have said, the equity in the condo isn’t useful unless you sell it and move - to where?. Good chance it’ll be paid off well before you retire and then you can put the payments toward building up the savings.
But - work on the debt now, and as that reduces, use the reduction in monthly expenses (e.g. cc payments were 400 a month, now 300, you’ve freed up 100 bucks a month) to go toward retirement.
We’ve got less than a million in “net worth” at 49 years old. and I wish we had a lot more. Yeah, we’ve got 15 more years to save for retirement, but that all assumes we’ll remain employed. And we have a specific financial need (need to have money put aside to help support Dweezil) that you don’t. We also will have the option of downsizing; we moved up to a larger house so we’d have room for Dweezil as an adult, but we can always trade that in on a 3 BR condo.
I hate, hate, hate retirement calculators. They always seem a horrible fit to me. In reality, I seem to be quite content with a very low-cost style of living whereas those calculators always seem to think I need $100,000 a year to merely survive. They also make assumptions about lifespan I think may not apply to me - I show every indication of taking after dad’s side of the family, where people routinely live into their mid to late 90’s as healthy, independent old folks. With that in mind, I can’t assume I can retire at 65 and be dead by 85 - if I retire at 65 I could be alive 35 years later.
With that in mind, years ago I got out of debt, then took the money I had been spending in interest and socked it away. Unfortunately, I’ve been through some rough times the last two years and have had to survive rather than save, but the strategy turned out to work anyway, as I’m still out of debt and have proved I can definitely down-size my lifestyle and remain content (the big loss being flying - that’s expensive no matter how you look at it).
So I’ve decided that I’m not planning to retire at 65. I am planning to work until at least 70 (assuming I remain healthy) and even then perhaps only semi-retire and not completely retire until 80 - I’d rather work more years first then retire than to retire, run out of money, then have to go back to work at 90. Or worse, be out of money and unable to work at that point.
Which is not to say this is the plan for everyone - just that it’s an example of how family history might impact your decision making.
Right now, part of my long-term plan is to go back to school and start another profession so I can up my income and resume saving/investing - the biggest obstacle is people who say “But, oh, you’ll only have X years until your 65 and retire!” Um, no, I’m not retiring until after that. Well, sure, I could become ill or disabled, but that can happen at any age. Well, that and getting the funding to go to school again - THAT’s a problem right now. It’s not just a matter of finding financial aid of some sort, I need enough money coming in to support both me and my husband while I’m going to school.
The factors that need to be considered in retirement planning are:
-Expected rate of inflation
-Rate of return on money saved
-Desired retirement income (do you want to maintain your current standard of living, or are you willing to accept a less costly lifestyle?)
-Years until retirement (25)
-Life expectancy (average life expectancy for a US male is around 75 years, but that’s just an average)
Just to toss out a data point, if you made the following assumptions:
Retirement income: Equivalent of $40,000/yr (gross)
Inflation: 3.5% / year
Rate of Return: 6% / year
Life Expectancy: 75
you’d need to have amassed around $850,000 in savings (pre-tax) by the time you turned 65 and were ready to retire. If you bump the life expectancy up to 80, you’d need about $1.2 million at age 65. Certainly, you should be conservative and try to save more than whatever targets your assumptions spit out.
Thanks (to some of you) for your posts. To answer some questions: once I finish my degree I guess I’ll be able to land jobs that (start) in the $60-80k range. Essentially, I gambled that several years of decreased income and increased debt would pay off with a $15-20k increase in annual salary for the remaining 25-30 years.
I’m aware that the windfall of the equity is not real until I sell, but I don’t see how lucking into six figures of equity (after just 8 years of owning) isn’t worth something. No?
I am, however, good at putting into my IRA, have state retirement, and am something of an heiress. None of those are good advice for the OP, though.