How much do you need to retire at 35

Are your retirement savings on track? That question is on a lot of Americans' mind these days. Along with the overall stock market, retirement savings have taken a big hit this year as the S&P 500, just to cite one key measurement, is down about 12%, going into Monday.

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Retirement accounts have shrunk under the weight of worries about war in Ukraine, inflation and interest-rate increases.

So, asking if you are saving enough for a comfortable retirement isn't an harmless exercise like checking baseball standings in May. Instead, it can be heartburn inducing.

Knowing how much to save for retirement is a key question in planning. Yet many people don't know how to figure out the right amount of retirement savings. Many don't even try, even though knowing that number is vital to their financial health.

Retirement Savings Tool

But here's a practical, fast way to get an idea of whether your retirement savings are on track. And it's easy to use.

It approximates the figure you'd come up with if you went the longer route of making a budget, calculating how much your expenses will be each year in retirement, then multiplying that by how long you expect to live in retirement — let's say 30 years.

Even then, you've still got to figure out how much of that total you need at any given age preretirement. That's a lot of number crunching.

For additional advice about retirement planning, check out IBD's special section that outlines tips and tricks for boosting your retirement savings:

• View Full Special Report: Supercharge Your Retirement
• Retirement Preparation Is In Crisis Mode: How Can Americans Repair It
• How To Play Catch-Up With Retirement Savings
• 8 Ways To Save That Do Not Include 401(k)s

We can save you all of that effort. Instead of going through that long, painstaking process, all you need to do is see if your retirement savings match a specific multiple of your yearly income in our easy-to-use table lower in this report.

That multiple changes, depending on your age. It also changes based on your income. We make it simple to check.

Retirement Savings Goals By Age, Income

How do you know if you have enough retirement savings so far? And what exactly does "enough" retirement savings mean? It means your savings are big enough to have at least an 80% chance of lasting 35 years after you retire at 65, says J.P. Morgan Asset Management, which crunched the numbers.

"Twenty percent of the time something bad happens like a severe stock market downturn, said Katherine Roy, chief retirement strategist for J.P. Morgan Asset Management. "Then you would need to course correct. You can do that by taking steps like boosting your savings rate or cutting your retirement spending. That way, you avoid running out of money in the long run. But 80% of the time, you would not need to make any changes to avoid running out of money."

J.P. Morgan also assumes that you invest your savings 60% in diversified stocks and stock mutual funds plus 40% in diversified bonds and bond funds in the years before retirement.

After retirement, J.P. Morgan assumes your asset mix is 40% diversified stocks and 60% diversified bonds.

In addition, J.P. Morgan assumes that your:

• Nest egg averages 6.7% average annual growth preretirement over the long run

• Nest egg averages 6.0% average annual growth over the long term post-retirement

• Retirement savings rate is 10% of your gross pay until retirement, including any company match that you happen to receive

• Age is 65 at retirement and that your spouse never worked and is 63

How Much To Save For Retirement

So how much do you need? Here's an example: If you are 35 years old and your annual income is $50,000, you should have 0.9 times your annual income in retirement savings.

The multiple of 0.9 times is the same as 90% of $50,000, which is $45,000. That's how much a 35-year-old earning $50,000 a year needs to have saved to be on pace to build the right size nest egg by retirement at age 65, according to J.P. Morgan's research.

What about at other ages? At various ages, your nest egg should be this many times larger than your household income, as shown in the following table:

By age, say, 45 with yearly income of $80,000, your target multiple rises to 3.2 times your income. So if you multiply $80,000 by 3.2, or by 320%, your retirement savings should total $256,000 by that point.

Some financial firms recommend aiming for specific multiples of your income by different ages. But they don't adjust savings targets for income levels. That one-size-fits-all calculation is very easy. But it doesn't give you as precise a bull's-eye as J.P. Morgan's more nuanced — but still simple-to-use — method.

Are Your Retirement Savings On Track?

Adjusting for income as well as age matters because two people who are the same age can have different incomes. And Social Security benefits differ, depending on your earnings over the years. The higher your annual earnings before you retire, the smaller your benefits will be relative to your preretirement earnings.

For example, if your preretirement household annual income was $50,000, Social Security benefits will now replace about 66%, according to J.P. Morgan.

If your preretirement income was $250,000 a year, Social Security will replace only 20% of it.

What if you're not on track to save the right amount for retirement? This IBD report describes practical money-saving tips — each can save you $10,000 a year. You can shift that money into your retirement savings. Another IBD report explains additional tips, each of which can save you $500 or more.

Fitting The Retirement Savings Puzzle Pieces Together

Which income-multiple targets should you aim for at various ages? Your goal is to ultimately replace as much preretirement income as you'll need in retirement in addition to whatever you get from Social Security. That means at age 35 you need 1.7 times your annual household income saved if your household income is $80,000.

If your household income is $100,000 by age 35, you need 1.5 times that income in retirement savings. You'll need retirement savings of 3.2 times your household income if you make $300,000 at age 35.

At age 50, your retirement savings multiple ought to be 4.1 times your household income if that income is $80,000. The multiple is 7.1 if your age-50 household income is $200,000, and it is 8.0 if your household income is $300,000.

And at age 65, those multiples are 6.9 for $80,000 of household income, 9.3 for $100,000 of income, 11.1 for $150,000 of income and 13.7 for $300,000 of income.

Prior versions of this story were published April 29, 2020 and May 21, 2021.

Follow Paul Katzeff on Twitter at @IBD_PKatzeff for tips about personal finance and strategies of the best mutual funds.

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