Retirement Savings by Age

By Chris Duderstadt

January 25, 2022

Retirement Savings by Age

Key Points – Retirement Savings by Age

  • Your Desired Retirement Savings Amount Depends on Your Desired Retirement Lifestyle
  • Think of Your Financial Plan as a Spending Plan
  • What Are the Primary Expenses to Be Accounting for in Your Spending Plan?
  • 6 minutes to read

How Much Should You Have in Retirement Savings by Age?

The beginning of a new year is always a popular time to get organized. Whether it’s getting back on track with exercising, eating healthy, or rebalancing your portfolio, bettering yourself can be such a satisfying feeling. However, that satisfaction rarely ever comes easily. That’s especially true when it comes to living your one best financial life in retirement. A question we often hear is “How much should I have in retirement savings by age X?” And as we’ll find out through this article, that’s probably not the right question to be asking.

Your Desired Retirement Savings Amount Depends on Your Desired Retirement Lifestyle

One of the main takeaways in our recent article, 7 Ways to Build the Best Retirement Plan, was that forward-looking comprehensive financial planning is a fluid process. It can often be an eye-opening experience for prospective clients when they begin to realize that you can’t just create your retirement plan and expect to stay on track with it without making adjustments leading up to and throughout retirement.

It would be great if there were universal benchmark dollar figures for retirement savings that everyone knew they had to reach, but that’s simply not the case. After all, there’s no easy button for retirement planning.

While we’ll run through some scenarios to help in this article to get you thinking about how much you should have in retirement savings by certain ages, that’s not the question you should be asking right off the bat. The first question you need to ask is, “How much money do I need to save to have the retirement lifestyle that I want?” And the answer depends on the lifestyle that you want in retirement and the resources that you have currently.

Creating a “Spending Plan”

To live the lifestyle you want to live in retirement, it’s important to think of your financial plan as a spending plan. Our CERTIFIED FINANCIAL PLANNER™ professionals have met with countless soon-to-be retirees and retirees who have been over saving or under saving. Make no mistake—saving the right amount for your retirement can be a fine line to walk.

The people who under save tend to have a false sense of security with their spending. They can then be blind-sided by things they didn’t account for in their financial plan, such as taxes and inflation. On the flip side, there are people who just try to save as much as possible. While it’s important to feel financially secure, it’s all for not if you are sacrificing experiences that you enjoy.

That’s why we’re stressing the importance of determining how much you need to live the lifestyle you want in retirement. The only way that you get the clarity or the answer to your question is by creating your spending plan. We need to go into the future to get an answer for today.

Things to Account for in Your Spending Plan

When it comes to retirement savings, don’t just assume that 80% of your take home pay today is enough to cover your retirement. You need to have an idea of what you want to do in retirement and how much that will cost. Of course, things like traveling and second homes can immediately come to mind when thinking about possible retirement perks. But there’s so much more to think about. Health insurance will likely be one of your biggest expenses in your spending planning. And as mentioned earlier, you can’t forget about taxes and inflation.

While making sure you and your spouse can have clarity, confidence, and control throughout retirement is priority number one, legacy planning should also be considered for your spending plan as well. The odds of you and your spouse passing away at the same time are quite low. If you should happen to pass away before your spouse, keep in mind that your spouse will then become a single tax filer. It’s also important to many of our clients for their children and grandchildren to be in good hands financially once they pass on.

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A Hypothetical Breakdown of Retirement Savings by Age

Speaking of children and grandchildren, this retirement savings by age rundown can be extremely beneficial to them as well. Let’s take a deep dive into retirement savings by age in Figures 1 and 2.

Retirement Savings by Age

FIGURE 1 | Retirement Savings by Age Table

Retirement Savings by Age

FIGURE 2 | Retirement Savings by Age Graph

The left column of Figure 1 shows that a couple making a combined $87,499.97 at age 25 will grow to $900,000 by age 65 with a 6% rate of return and without making any 401(k) contributions. In the right column, you have the couple that is saving $5,000 per year solely in 401(k) contributions. We must remember that retirement marks the point where your money needs to start working for you. Ideally, you should have 10 to 12 times your salary saved by your retirement age. Let’s look at how it can be accomplished with a baseline 4% withdrawal rate.

Think of it as a multiple of your income at that time. Some people say that 80% of your spending is what you’ll spend in retirement. Then, you take your salary times 80% times 12. Take your spending today while you’re working and lob off maybe 15% of that. Now, you’re at 85% or somewhere in that retirement spending zone. Figure out how much other fixed income you’ve got from Social Security or maybe a pension or rental income. Subtract that amount and then take the remainder and multiply it by 20 to get you to your 4%.

Bringing It Back to the Spending Plan

Going back to Column 2 in Figure 1, we outline how saving $5,000 a year for a couple starting at age 25 can grow to $900,000 by age 65 by using a 4% withdrawal rate. That will be the money that’s working for you in your retirement. Now that we have the retirement savings total of $900,000, let’s bring the spending plan back into this.

Let’s say that you in your spouse have a life expectancy of 90. That’s roughly 25 years of needed income. If that couple wants to have $8,000 a month ($96,000 a year), the $900,000 in retirement savings can help do exactly that. If each spouse has $30,000 in Social Security, that leaves a $36,000 income gap per year to cover. Take $900,000 divide it by 25, and what do you get? Boom, $36,000.

Of course, this is just one hypothetical scenario and there are several variables to account for. Our Retiring with $1 Million video provides an in-depth breakdown of how four different couples can retire with $1 million, so we encourage you to watch that as well to gain even more perspective on retirement savings by age.

Probabilities of Success

As we wrap up this article, we want to share some background from a Trinity University study on safe withdrawal rates. While we used 4% in our scenario, please remember that safe withdrawal rates are dynamic and depend on your unique situation. In Figures 3 and 4, you can see that using closer to a 3% withdrawal rate at ages 25 and 30 for this future retiree has a 100% probability of success if the portfolio is 50% or more in stocks.

Retirement Savings by Age

FIGURE 3 | 40 Year Retirement Horizon | RBC Wealth Management

Retirement Savings by Age

FIGURE 4 | 35 Year Retirement Horizon | RBC Wealth Management

Now, fast forward to this future retiree being into their mid to late 30s. While it’s understandable to not be terribly excited about being “over the hill,” Figures 5 and 6 highlight how their 40s certainly aren’t that bad if they’re staying in the ballpark of a 3% to 4% withdrawal rate. Even being more bond-focused at this point of their career doesn’t look too bad.

FIGURE 5 | 30 Year Retirement Horizon | RBC Wealth Management

Retirement Savings by Age

FIGURE 6 | 25 Year Retirement Horizon | RBC Wealth Management

As this future retiree moves into their mid to late 40s and early 50s, they’re likely embarking on the second half of their career. That retirement horizon is finally starting to get a little bit closer. Anywhere in the 3% to 5% range appears to be a safe spot for this retiree whether they’re heavy in stocks or bonds. The probability of success is almost at 100% across the board, as you can see in Figures 7 and 8.

FIGURE 7 | 20 Year Retirement Horizon | RBC Wealth Management

FIGURE 8 | 15 Year Retirement Horizon | RBC Wealth Management

Reach Out to Us with Your Retirement Savings by Age Questions

While that safe withdrawal rate zone increases as you approach retirement, it’s still crucial to select the rate the works best for you. There are oftentimes way more questions than answers regarding retirement savings, but it is possible to find your unique answer. Our founder and CEO, Dean Barber, likes providing various analogies to help explain the complexity and importance of the retirement planning process. Here is one of his medical analogies for you to highlight how there are several questions that need to be asked first to get your answer to how much you should have in retirement savings by age.

“It would be like saying, ‘OK doc, I have a headache. Give me something.’” Dean said. “If you’ve had that headache for three weeks, you need to have an MRI. You just want a pill to cure what’s wrong and don’t want to do any tests, though, because that takes too long. It’s the same thing with determining your spending plan. You need to step into the future and imagine life without a paycheck. What do you want to do?”

You can start to see what your spending plan will look like from the comfort of your own home with our financial planning software. Get started today by clicking the button below.


If you have questions related to retirement savings by age, view our calendar and schedule a complimentary consultation or 20-minute ask anything session with one of our CERTIFIED FINANCIAL PLANNER™ professionals today. We can meet with you in-person, virtually, or by phone.


Investment advisory services offered through Modern Wealth Management, Inc., an SEC Registered Investment Adviser.

The views expressed represent the opinion of Modern Wealth Management an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Modern Wealth Management does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.