Retirement Savings by Age

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There are a lot of YouTube videos that discuss how much you should have in retirement savings by age. Americans have a need to compare themselves to others in their age group to gauge how they are doing financially. One thing I have learned is that everyone’s situation is different. When I see a video of a retiree going over their monthly spending budget it never comes close to my own. Most of the time the budget is much bigger than the one that I am working with. A lot of it depends on what your annual income was before you retired, when you retired, and your lifestyle. My average income during the last 10 years of my working career was about $66K per year. This turned out to be my best earning years.

I went from best earnings to an average of $15K per year when I entered early retirement. But I was preparing for this possibility for a long time. One thing I did was put more money into a non-retirement account than they normally recommend. The idea was that I could live off the interest and dividends without relying on my tax deferred retirement savings. My taxable income is just under the standard deduction, so I don’t have to pay any federal taxes while I’m in early retirement. With some budgeting and lifestyle changes, so far this plan has been working. You only need around $250k in savings with a 6% return to generate $15K per year.

While I still take a small $300 per month from my tax-deferred retirement account, the account is still able to grow. Net worth is not really applicable to retirement planning because you need a place to live, so you can’t include equity in your home. On paper my home has been one of my best investments. The value has increased by 105% in the past 13 years. That’s an average of 8% per year. If I decide to downsize it gives me a lot of options. Having may different assets makes net worth look more impressive, but the number can fluctuate by thousands of dollars each day. Forbes says you need 11x your salary at age 60 to maintain your lifestyle in retirement. If I include my non-retirement savings, I am close to this number. For now, I try to live within the conservative budget I established when I started my early retirement 4 years ago.

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