Is your salary multiple on track for retirement?
February 15, 2023 | by FreeRetireCalc
Saving for retirement is an essential aspect of personal finance, and the earlier you start, the better. One way to measure your progress towards retirement is by looking at your retirement savings as a multiple of your current salary. While these are general guidelines, you should always consult with a financial advisor to determine the best retirement savings strategy for your specific needs.
At Age 35: Save at least 1x your salary
By age 35, you should have saved at least one times your salary. If you haven't started saving for retirement, it's important to start now. To catch up, you can take several steps:
- Increase your retirement contributions - If you're not already contributing the maximum amount to your retirement accounts, consider increasing your contributions. Even a small increase can make a big difference over time.
- Lower your expenses - Cutting down on your expenses can free up more money for retirement savings. Consider ways to reduce your monthly bills and living expenses, such as refinancing your mortgage, downsizing your home, or cutting back on discretionary spending.
- Look for additional sources of income - Consider ways to supplement your income, such as starting a side hustle or freelance work. You can use the extra money to boost your retirement savings.
At Age 45: Save at least 3x your salary
By age 45, you should have saved at least three times your salary. If you haven't reached this milestone, you still have time to catch up. Here are some tips:
- Take advantage of catch-up contributions - Once you turn 50, you can make additional catch-up contributions to your retirement accounts. For 2023, the catch-up contribution limit for 401(k) plans is $6,500, while the catch-up contribution limit for IRAs is $1,000.
- Consider delaying retirement - If you're not on track to reach your retirement savings goals by age 67, you may need to consider delaying retirement. Working longer can provide you with more time to save for retirement and can help you maximize your Social Security benefits.
- Seek professional advice - A financial advisor can help you create a customized retirement plan based on your goals, risk tolerance, and financial situation. They can also help you identify areas where you can save more money and invest more wisely.
At Age 55: Save at least 6x your salary
By age 55, you should have saved at least six times your salary. If you're behind on your retirement savings, here are some tips to help you catch up:
- Work longer - Continuing to work can provide you with additional income and more time to save for retirement. You may also be able to delay taking Social Security, which can increase your monthly benefit.
- Reduce your expenses - Cutting back on your expenses can free up more money for retirement savings. Consider downsizing your home, reducing your monthly bills, and eliminating discretionary spending.
- Invest more aggressively - Investing in higher-riskassets like stocks and mutual funds can potentially yield higher returns over time. However, it's important to consult with a financial advisor to determine the best investment strategy for your specific needs and risk tolerance.
At Age 65: Save at least 8x your salary
By age 65, you should have saved at least eight times your salary. If you're not on track to reach this milestone, here are some tips to help you catch up:
- Delay taking Social Security - If you delay taking Social Security until age 70, you can increase your monthly benefit. This can help provide you with more income during retirement.
- Consider part-time work - Working part-time can provide you with additional income while also allowing you to continue to contribute to your retirement accounts. It can also help you delay withdrawing from your retirement savings, allowing your investments more time to grow.
- Consider downsizing - Downsizing your home can reduce your living expenses, freeing up more money for retirement savings. It can also provide you with additional funds to add to your retirement savings.
No matter what age you are, it's never too late to start saving for retirement. By following these recommendations and consulting with a financial advisor, you can catch up on your retirement savings and achieve your retirement goals.
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