Am I saving enough for retirement?

Question

I'm 34 years old and have saved over $80,000 so far in a 401k, IRA, and Roth IRA. I'm putting 20% into my 401k, my employe is matching 4.5%, so that's around $14,000/yr. I'm also putting $4000/yr into a Roth IRA, and $300/mo into my emergency fund which has almost $18,000 (savings). I'm being very aggressive right now, because I feel like I might be behind on my retirement savings, but it's hard to tell. I've used retirement calculators but never know if I can count on them.

Answer 1

You are doing great so far.... here's the situation for you and all 34 year olds starting now.

investments tend to double every 10-12 years so work it backwords.
to have 1 million at 67
you must have 500k by 56
you must have 250k by 45
you must have 125k by 34
reaching any of these numbers represent the point at which you can stop saving for retirement if you can live on 1 million dollars

is 1 million at 67 high or low
1 million can be expected to generate 60K/year

inflation tends to half you money every 24 years
so at 34 60K/year starts to decline
when you're 58 it would be like living on 30K today
at 67 it would be like living on 23K today

but it doesn't stop there, because your investment stops growing at 67 when you start living on the income but inflation doesn't stop because you will live for another 25 years so your money will halve again, to about 11K when you die..

Now there are other ways to play the investment, and I fully expect social security to contiue in some form so that will supplement your income as well. But you can see the general trend and problems.

also, buying a house is a good idea too becase when it is paid off, you live almost free. but buying a house costs a lot of money and takes away from retirement

children are a large expense too.

The voters have decided that we as individuals should bare most of the burden of retirement and medical expenses and companies are just too happy to agree.

I am saving a little over 42K/year and I'm paying down my house faster. We live modestly but comfortably. But the vast majority of americans can't afford to save like this. Retirement for most people is a thing of the past


As you can see, a million dollars ain't what it used to be....
good luck and keep saving

Answer 2

I want to tell you that you are doing better than most people, because most people don't have a clue and don't have much at all saved when they retire. Why do you see the little old people working at Wal-Mart and McDonald's?

Whether you will have enough is a good question, because a lot can happen in the 30 years or so until you retire. At the moment, there is much evidence that we are entering a recession, so the stock market may tank, the Dollar will be demolished by inflation, and everything may go down the tubes. I am 55, and my self-directed IRA is invested in gold, which I am betting will appreciate against the dollar over the next 10 years. We will see.

Answer 3

Holy crap! That's awesome! You're doing all the right things. I don't know what the cost of living is in your area, but where I live those are some very nice amounts. It looks like you make good money and save it well. You've got a nice emergency fund and are maxing your retirement accounts. Given a bull market, also, those numbers can jump up pretty quickly. Keep up the good work!

As for being behind, I'd say you are close to where you should want to be...perhaps a little behind but way ahead of most Americans. Good for you, but sad that many people aren't as concerned as you are. Many wait until it's too late to try to build their retirement savings.

By the way, if you're going to cut out any savings in order to spend more or pay down debt, I would cut out the $300 first, since it's likely lower yielding and you have a strong emergency fund to cover expenses. However, keep saving that, too, as long as you can.

Answer 4

You're doing well, and as someone else said, are ahead of most people your age. That said, it's really difficult to know precisely how much you'll need for retirement, as it depends on a number of factors, some of which you haven't listed (like how well you intend to live after retirement), and others that are completely out of your control (like the inflation rate between now and then).

The other thing that is important is how much your money is growing in your investments. If your Roth IRA is invested in CD's, for example, you're missing a lot of growth opportunity, and it will hardly matter what you're putting aside, because your lack of growth will kill you.

For most people, I suggest something in excess of $2 million in retirement, but again, that's a very rough number, based upon some assumptions that may not be precise.

I'll be happy to answer in more detail if you like, by email.

Answer 5

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Answer 6

Seems like you are doing pretty well. You have plenty of time before you retire so you should make sure your investments are agressive. Just keep at it and you will retire like a king.

Answer 7

YEAH. Your rich. Unless you live in California - you need a couple million to retire over here!!

Answer 8

retirement? no way... as long as i can!!! its very hard to find a good job now a days
better to have your vacation.
enjoy and relax even for a while