How Much Money Should You Have Saved by Your Age?

If you haven’t set anything aside yet, being as young as you are gives you more time to get on a good glide path, as long as you start prioritizing your retirement savings.

The problem isn’t that nobody knows the answer, it’s that so many people and institutions know and are eager to tell you, but their formulas rarely if ever agree with each other!

What the Millionaire Next Door’s “Wealth Equation” does well and where it’s less accurate

The Millionaire Next Door’s Wealth Formula

How did they come up with this formula? Says Stanley, “The Wealth Equation was developed from national surveys of households with incomes of $80,000 or more. The typical millionaire is in his/her late 50s.

This Wealth Formula does well in the following general situation:

• You’re old enough to have had some time to save and invest for retirement

• Your income is high enough to let you to set aside at least 10% of your income

• Your income hasn’t recently increased by a large factor.

The Wealth Formula overestimates what you “should” have accumulated if any of the following is true for you:

• You’re in your 30s or younger.

• You make so little money that putting food on the table and keeping a roof over your head already strains your finances.

• Your income recently doubled or tripled relative to what it was before.

The Wealth Formula underestimates what you “should” have accumulated if either of the following is true for you:

• You’re planning to go from a frugal lifestyle pre-retirement to joining the jet-setting crowd once you retire.

• You want to leave your kids or a favorite charity a huge bequest.

Fidelity adds to that your expected Social Security benefit and average spending patterns in retirement vs. pre-retirement.

Other Wealth Guidelines

How I Assess if I’ve Saved Enough for Retirement Given my Age

As is the case with every personal finance question, an accurate answer as to whether or not you’ve saved enough given your age must start with, “It depends…”

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