Saving Enough For Retirement?

401k Retirement Infographic by Personal Capital

in Retirement Planning by

Curious to know how much you need to save for retirement? Wondering how much the average 401k balance is? Will $1 million last long enough in retirement? Find out these answers and more by taking a look at this infograph we put together to help you visualize the importance of retirement savings.

401k Infographic by Personal Capital
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42 comments

  1. Lori

    Seriously ???????? $140,000 annual budget in retirement. Most people don’t make that in their best working year. Stop the scare tactics and use some realistic numbers.

    Reply
    • Financial Samurai

      Inflation is scary indeed.

      Reply
      • Financial Samarai contrarian

        only if you are assuming inflation will be 14% as it was from 1979 to 1981. If your house is paid off when you retire then you will not need $140K annually to retire.

        Reply
        • andrew vinoj

          Actually if u plan to retire in 20 years that 140k will be of worth 64k current value if u plan to retire in 25 years it will be worth 53k, and some extra money will not hurt.

          Reply
          • Brett

            The calculations already account for inflation. So whenever you choose to retire, that $140k will be worth as much as $140k is today.

        • Contrary Contrarian

          Don’t forget about health care expenses!!!!! By the majority average American’s are over weight and out of shape and have a diminishing health outlook.

          Reply
      • Brett

        Inflation is already accounted for in these numbers. So that $140k annual budget is inflation adjusted.

        Reply
        • Bryan Allen

          Actually, the numbers do not account for inflation. 4% of 3.5 million is 140k. You’d be taking out 140k in first year of retirement, which would be equal to an inflation adjusted amount of today’s dollars, based on your retirement year.

          It’s a pretty conservative number when you consider that it would only be 58k in today’s dollars, assuming 30 years until retirement, which is close to the current average American household income.

          Reply
    • This Guy

      That’s why they provided a graph for various budgets. Look at the line representing your expected annual budget.

      Reply
      • Bex

        My current salary is less than $40k/year and I’m contributing a little of that to retirement savings…so there is not even a figure near my lifestyle….

        Reply
    • Investor

      If you’re in your mid 20s now, the poverty level at your retirement will be $80k-$100k with average inflation. $140k won’t be much in 40 years.

      Reply
    • JM Villegas

      that 4% rule is accurate, but remember that there’s still taxes in a 401k, Traditional IRA or a pension. ANY QUALIFIED ACCOUNT. You need to have what we call a 3-legged stool. Social Security (which avg. $1650 annually), Your qualified account and any cash you’ve saved. Also, if you retire before 66, Social Security will penalize you 25% of what you are supposed to receive and they also deduct $1 for every $3 you take out of a qualified account.

      Reply
  2. Ditiris

    Whether $140K is a lot as target retirement income all depends on when you’re going to retire and what you assume for the rate of inflation. For 10, 20, 30, and 40 years from now, assuming a target of 80% of your salary, with 3% inflation, those numbers correspond in today’s dollars to a salary of $130K, $97K, $72K, and $54K now, respectively.

    That is, someone making a gross salary of $54K today, who wants to retire 40 years from now at 80% of their current salary, would have a target retirement salary of $140K. Similarly, someone making a gross salary of $72K today, who wants to retire 30 years from now at 80% of their current salary, would have a target retirement salary of $140K. And so on.

    The numbers are not unreasonable, or a scare tactic, in my opinion.

    Reply
    • Brett

      The calculations already account for inflation. So whenever you choose to retire, that $140k will be worth as much as $140k is today.

      Reply
  3. Jim

    They provided a graphic above for comparisons of less than 140k desired per year for retirement. 50k (the lowest the graphic goes) would require approximately 1.25 million in your 401k at the time of retirement.

    Reply
  4. KS

    The article would be more clear if the $140k annual spending were clarified. The median annual US spending per consumer unit (ie family) is about $50k. For a 40 year old (median age of labor force), that becomes $130k at age 60 after 3.2% inflation (the average over the past century).

    It would also be helpful to note that the consequence of not saving for retirement is substantially dropping annual spending, which is what most retirees do.

    Reply
    • Anonymous

      This model is over simplified. It doesn’t let you factor in social security income, which would be easy to do, and it doesn’t let you factor in whether house is paid for or not.

      Reply
      • Hostler

        If you are seriously considering retirement savings, you would be a fool to pay off your house if the tax advantages stay the same, and interest rates are below 9%, the long term overall stock market return. Cash liquidity is king especially in retirement. Plus house expenses never disappear anyways so long as there are taxes and maintenance needs, which all homes require.

        Reply
  5. Marc D Guerra

    This is Great information. Unfortunately most people are ignorant to these facts. Education can fix ignorance. Thank you or your effort to put this out there. There will always be those that when truth is revealed will categorize it as Scare Tactics. Looking forward to future information like this.

    Reply
  6. Bex

    Overall this infographic basically says we’re all screwed.

    Reply
    • Mel

      Bex, it looks like your age and your willingness and ability to save at all means you’ll be fine. Time is on your side.

      Reply
  7. RWG

    I always question how they come up with the rule of thumb that you should plan to spend 70-80% of pre-retirement income during retirement years. If I take a very quick glance on how much my family is spending, our top 3 categories are housing (mortgage), child care (we have 2 young kids and both of us work full time), and savings (general savings, kids’ college fund…this does not include 401k which is already accounted for by the time we get to take home pay). These 3 by them self make up easily over 50% of our expenses. I expect that the house is paid for by the time we retire. We’d still have maintenance and property taxes, but a big drop in housing. We certainly will not be paying child care and in theory you shouldn’t have to be contributing to savings at this stage of life….you’re now starting to use the nest egg that you spent 40 years building. So, let’s say all other categories stay the same and that leaves 40% of current take home pay. Can inflation and presumed increases in medical costs really get you all the way back to 70-80%? I’m sure that financial experts want people to be conservative in their assumptions and hopefully have more than they really need, but 80% has always sounded too high to me.

    Reply
    • MG

      BINGO!!! Nearly 75% of my income goes toward – retirement savings, tuition savings, mortgage, and child related expenses. I’ll have none of those expenses when I retire. The 70-80% number is ridiculous.

      Reply
      • Genti Cici

        The not having a mortgage doesn’t ring true for many. There are many people that buy homes well into their 40s or even 50s and take a 30 year mortgage, thus they’ll still have it well into 70s or later, if not paid earlier (which most don’t).

        In terms of savings, many save 5-8% or less into their retirements, so not a huge drop when you won’t save it again.

        Healthcare costs will def go up in retirement, and if not paid by government, will have to be taken into consideration. Travel related costs usually go up too.

        Finally is a good thing to have extra income and not find a thing to do with it, than not have enough income and not finding a way to increase it.

        For most americans, the saving too much is not the problem, the saving too little is, so if some people are doing OK and saving for college tuition, fully funding retirement and also funding other savings, remember that you’re in the minority, most people won’t be able to do even half of the things they’re doing as they’re unprepared and solely hoping in a (Social Security) system that not only is not guaranteed, but even when it works as designed barely covers your most urgent needs (average current Social Security payment is just $1300/month today).

        So 70-80% of income replacement is a good number to aim for most people that don’t save much, but if you currently saving 20% or more (and plans to have a paid off home by retirement) that number can come down to 50% or even less, just remember that that is not most people. Most people have barely saved to cover 1-3 years in retirement and the aim is to plan for 30+ and the GAP is huge. Articles like this are not purposed to terrify people into saving way more than they’ll need, but show how poorly prepared most people are for the years that are supposed to be Golden.

        Reply
    • juan

      Actually, the single biggest expense for most is taxes.

      Reply
  8. Brad

    So what if your not able to max out your 401k or IRA every year or any year for that matter what happens?
    I plan on living off the interest of my retirement savings while letting the nest egg keep growing.

    Reply
  9. Stephen Johnson

    What people fail to realize is that a retirement investment strategy assumes you’re going to make more money throughout your life. $140K is a year is not unreasonable, if you consider where you will be at that time personally and professionally.

    Also, people are basing the figure on the lifestyle they live now. I don’t know about the rest of you, but I plan on actually enjoying my retirement. If you’re content with living the same lifestyle you live now, forever, then so maybe the 70-80% figure is not accurate. But most people plan to do things such as travel, buy vacation properties, start up a hobby during their retirement – which all cost money.

    Reply
  10. Buddy

    Does everyone here realize you will be forced to take distributions from your retirement accounts starting at age 701/2!!!

    Reply
    • JM Villegas

      Actually, you are allowed to start taking out (penalty free) at age 59 1/2. it is MANDATORY that you would have started taking out your RMD (required Minimum Distribution) before 70 1/2 or there is a stiff 50% penalty.

      Reply
  11. Maxx

    The fact that this site tries to scare people about Social Security says to me that it is not a very trustworthy site upon which to base actions. Social Security will be there well beyond the boomer lifetimes. Social Security does not have a “gloomy” future, providing that the extremist Republican Tea Party, Tea Baggers or whatever the hell they call themselves this week are not elected. This means kicking out the McConnells and Boners and taxing the rich at progressive percentages of the 1950s or at the very least middle class percentages of today on ALL income, including investment. At the moment the Republicans are stealing from the poor and giving to the rich and that must change or none of us will have any retirement income.

    Reply
    • Brian

      Seriously? The US budget breaks down as follows: 24% Social Security, 22% Medicaid, 19% Defense, 12% Safety Net Programs, 8% benefits for fed retirees/veterans, 6% interest on debt, 3% infrastructure, 2% Science/medical research, and 1% international. What part of the 3% left are the Republicans stealing from the poor to give to the rich? Maybe the Democrats should stop allocating money for programs we can’t pay for?

      Reply
      • JM Villegas

        Corporations have set themselves up (thanks to the Republicans) to send their profits to oversees countries who do not tax them, thus avoiding $70 Billion in taxes to the US that’s rightfully ours. This is where the money is at. They don’t mind making money here, but they should pay their fare share of 35%, which they are not.

        Reply
    • Paul m.

      Wow. What a blend of ignorance and fanaticism. You deserve to be miserable now – and your retirement.

      Reply
  12. mack

    It would be nice to see a full scale by year of retirement, project for the next 10 years and 5 years each year.
    to me this would be a great help, for example if you put 100.00 a month for retirement what would your yearly income be at 20,25,30,35 and 40 years. I can see this and use some realistic numbers. for income starting at
    $20,000.00 to $100,000.00 I also think more people will start a 401 account or others. My experience talking with a financial planer,was always more than retirement , I want take one step at at time clearly understand what my options are for retirement and then open the door for other subject maters if needed, and if costs is involve that should be stated first.

    Reply
  13. Jack

    If money is your highest concern, THEN DON’T MAKE BABIES!! Otherwise, if you don’t have kids and you still can’t save, then you’re not only broke but you’re dumb.

    Reply
    • Mel

      But they’ll support you in your old age. Priceless.

      Reply
  14. snowman

    all you need is a good balance in saving for retirement, which means pay yourself first. Start saving what every the company will match, then add 2-3 percent every year. Just remember it falls on you, if you are retirement poor

    Reply
  15. mtnman

    It’s never too late to start saving either. Don’t give up just because you are getting off to a late start. My wife and I once had a lot of money from owning our business, but we made some major mistakes. We sold our business; but instead of investing, we played and “retired” for several years. Now, we’re in our low/mid 40’s and we had to start over again. We now both have professional careers, no kids, and an annual household income of $200,000 per year. We’re maxing out our 401k plans now ($18,000/year/account). We also each receive a company-funded pension plus company contribution of 9% per year to our 401k. It’s estimated that we’ll have roughly $4.0 million at retirement (age 65). So, it’s never too late to start saving. Something is better than nothing; 401k contributions will save you money in taxes; and you don’t want to be forced to work (e.g. Wal-Mart greeter) when you’re in your 70s and 80s…that would be terrible – not what retirement is supposed to be.

    Reply
    • Gregg

      mtnman: Lesson – it’s never to late if you’re well off to have a wealthy retirement. Thanks for the swell advice….

      Reply
  16. Joe Statistician

    If you are 25, and making $35,000 a year, and you continue to work reasonably hard and honestly till you are 65, it is more than reasonable that you will average annual raises of 3% throughout your career. At that rate you will be making about $115,000 by the time you retire. If you marry someone in a similar career path, your family income will be about $230,000 per year.

    Childcare expenses will probably not factor into your expenses at that age, your cars will also most likely be paid off, and your home may also be paid off by then. If you factor in a house mortgage payment and what you are saving for retirement, 30%-40% of your after tax income is not an unreasonable amount. That will leave you with approximately $165,000 – not that very far off from the $140,000 mentioned in this article.

    These are not just hypothetical numbers – I am about 50 and my wife and I do make about $200,000, having gone through a career path scenario much like the one I described above. If you then want to maintain a standard of living in retirement that you are by then used to, the numbers suggested in this article are spot on. Not everyone will have the same circumstances of course, and you need to tailor your savings goals to fit your desires – but having a goal and a plan in place is absolutely necessary.

    Reply
  17. Dawn

    Don’t forget you may become a widow or widower before retirement. So there goes that income. I hope the house is paid off by then. Also if you remarry before age 60 you loose your spouses social security. We all just need to do the best we can with what we have. I’ve seen lots of people who have saved for retirement all their lives and then died shortly after so enjoy your work and have some fun along the way. Just don’t spend it all.

    Reply
  18. Paul DeVetti

    Unfortunately this is simply another retirement calculator that is designed more to scare someone than to help them. (For the record, 4% of $4.5MM is $140,000………so in principle…..you will never lose your principle)

    Facts are:

    1. Inflation has averaged less than 3% over the past 30 years-2.58%
    2. Over the past 60 years the S&P has shown a 5.8% return
    3. Most people will move into a new tax bracket when retiring, and have smaller budgets without sacrificing lifestyle. (Think about your take home pay and deduct everything you are spending that you will not spend when retired. Higher taxes, retirement savings, unreimbursed work expenses such as gasoline, clothing, etc.) Good rule of thumb is about 66% of pre retirement take home pay.
    4. Working to be debt free by retirement is one of the best strategies.
    5. Social Security will be available and is mostly tax free.
    6. Your spending needs decline over time. (Three stages of retirement are “go-go”, “slow-go”, “no-go”.
    7. Much of your planning depends upon how much you intend to leave in your estate. (This is the bane of the companies who create these non realistic calculators…..they want your investments)

    While there is a need to save and to start saving early, with proper planning and realistic goal setting, you can go far in making yourself Retirement Ready! Good luck!!

    Reply

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