Jed is a growth-oriented investor focusing on advances in technology, health care research, and renewable energy. As a Freelance Writer for Motley Fool Canada, he enjoys being able to use his research and writing skills to help individual investors through their investment journeys.
It should go without saying, but I’m sure everyone who visits the Motley Fool for investment advice hopes to have a comfortable retirement. In order to do that, investors should plan out the steps they need to accomplish prior to retiring.
One of those steps is figuring out how much you should have invested by a certain age. Of course, this number will change depending on your goals and life circ*mstances. However, we’ll take a look at some of the research conducted by different institutions to help you get an idea of what may need to be accumulated.
How much money should you have in the market?
One of the most common guidelines regarding retirement is for investors to have three times their annual salary saved by the time they turn 40. That means if you make $60,000 per year, by the time you celebrate your 40th birthday, your investment portfolio should be at least $180,000. By the time you turn 50, you should have six times your annual salary saved ($360,000 in this example). Finally, by 60, investors should have about eight times their salary saved up ($480,000).
It should be noted that the numbers given above are only a rough estimate for an individual. You should strive for high numbers if you plan to retire with a partner. Although it may seem like a daunting task to save up hundreds of thousands of dollars, consistent investing and good spending habits could help you get there.
If you’re reading this in your 30s and you’re thinking, “Wow, I’m very behind,” there’s no need to panic. Generally, your 40s are your peak earning years. That being said, you will have to really buckle down and get your finances on point if you want to get back on track. That’s simply because you’re fighting time at that point. Investors who get started earlier will have the luxury of time on their hands, allowing compound interest to work its magic.
What stocks should you consider buying for retirement?
If you’re interested in buying shares of different companies to help you reach your investment goals, then I would recommend looking at blue-chip stocks. This is a term given to companies that are well-established and lead important industries. In Canada, investors can consult the S&P/TSX 60. That index tracks the performance of 60 large Canadian companies that lead major Canadian markets.
An example of a stock I would recommend that investors consider buying for retirement would be Fortis (TSX:FTS). This company provides regulated gas and electric utilities to more than three million customers across North America.
Because of the nature of its business, Fortis is able to provide shareholders with a very consistent dividend payment. In addition, Fortis has shown that it can even increase that dividend over time. It currently holds a 50-year dividend-growth streak, the second-longest active streak of its kind (in Canada).
Fidelity's guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Factors that will impact your personal savings goal include the age you plan to retire and the lifestyle you hope to have in retirement.
Nearly 399,000 Americans also have a least $1 million in an individual retirement account. The key to stashing away such sums? Start early and contribute to your retirement plan consistently over many years, Fidelity said.
And if you're aiming for the $2 million club? Well, the number of those who make it is even smaller. We're talking about a sliver of a sliver – somewhere between that 3.2% and the razor-thin 0.1% who've got $5 million or more.
In your 20s, it's important to begin saving for retirement as soon as possible. Aim to have the equivalent of your annual salary saved by turning 30. As you move through your 30s, 40s, and beyond, aim to save three times your annual salary by 40, six times by 50, and eight times by 60.
Fidelity says by age 40, aim to have a multiple of three times your salary saved up. That means if you're earning $75,000, your retirement account balance should be around $225,000 when you turn 40. If your employer offers both a traditional and Roth 401(k), you might want to divide your savings between the two.
Believe it or not, data from the 2022 Survey of Consumer Finances indicates that only 9% of American households have managed to save $500,000 or more for their retirement. This means less than one in ten families have achieved this financial goal.
Yes, it is possible to retire comfortably on $500k. This amount allows for an annual withdrawal of $30,000 and below from the age of 60 to 85, covering 25 years. If $20,000 a year, or $1,667 a month, meets your lifestyle needs, then $500k is enough for your retirement.
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000.
Yes, it's very possible to retire comfortably even if you start saving at 40. Regular contributions to your retirement accounts will go a long way toward making that dream a reality. Take advantage of catch-up contributions after the age of 50.
With this rule, you subtract your age from 100 to get your stock allocation, with the remainder going into bonds. For example, a 40-year-old should have a 60 percent exposure to stocks and 40 percent to bonds, while a 65-year-old should have 35 percent in stocks and 65 percent in bonds.
If your pay at retirement will be $100,000, your benefits will start at $2,026 each month, which equals $24,315 per year. And if your pay at retirement will be $125,000, your monthly benefits at the outset will be $2,407 for $28,889 yearly.
Additionally, statistics show that the top 2% of the United States population has a net worth of about $2.4 million. On the other hand, the top 5% wealthiest Americans have a net worth of just over $1 million. Therefore, about 2% of the population possesses enough wealth to meet the current definition of being rich.
About 26% of U.S. households had more than $100,000 in savings in retirement accounts as of 2022, according to USAFacts, a nonprofit organization that analyzes data from the Federal Reserve and other government agencies.
For example, if you have retirement savings of $1 million, the 4% rule says that you can safely withdraw $40,000 per year during the first year — increasing this number for inflation each subsequent year — without running out of money within the next 30 years.
Can I Retire at 65 With $1 Million? Yes, it is possible to retire with $1 million. Retiring at the age of 65 with $1 million can seem like a lot of money to a lot of retirees. But the truth is, that amount depends entirely on your household, your finances and your needs.
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