Tina is in charge of the Citizens Wealth Management financial planning and estate planning team, which is made up of CERTIFIED FINANCIAL PLANNERSTM, estate and tax planners, and trust officers. As a strategic partner, she helps clients deal with and grow in new situations.
The idea of being able to spend their days however they want and not having to answer to anyone makes most people look forward to retirement. But how much do you need to retire? Figuring out when to retire requires a careful look at your current salary, investments, how you plan to live in retirement, and other things.
Are you wondering if that magic “10x your salary” retirement number is actually enough? You’re not alone! This popular rule of thumb has been floating around financial circles for years, but the real answer might surprise you
I’ve spent a lot of time researching ways to retire, and I have to tell you that there isn’t a single answer that works for everyone. But I’m going to tell you everything you need to know about this 10x rule and let you know if it might work for YOU.
The 10x Salary Rule Explained
Fidelity, one of the biggest investment companies out there, recommends saving about 10 times your annual income by retirement age. This guideline suggests you should have
- 1x your salary saved by age 30
- 3x your salary saved by age 40
- 6x your salary saved by age 50
- 8x your salary saved by age 60
- 10x your salary saved by age 67
Sounds simple enough, right? But here’s the deal – this formula is based on several assumptions that might not match your life plans.
What Assumptions Are Behind the 10x Rule?
Before you commit to this target, you should know what’s baked into this calculation. Fidelity’s 10x recommendation assumes:
- You plan to retire and claim Social Security at age 67
- You’ll live until approximately age 93
- You’ve invested at least 50% of your money in stocks
- You’ve been saving 15% of your annual income since age 25
- You’ll experience constant 1.5% real wage growth
- You want to maintain your pre-retirement lifestyle in retirement
There’s still a 10% chance that you could run out of money too soon, even if all of these assumptions are true. That’s pretty scary when we’re talking about your golden years.
Why 10x Might Not Be Enough For You
Honestly, retirement planning is super personal. Here are some reasons why you might need MORE than 10x your salary:
1. Early Retirement Dreams
If you’re planning to retire before age 67, you’ll need extra savings. According to the research, retiring at 65 instead of 67 means you should aim for 12x your salary instead of 10x.
Why? Two main reasons:
- You’ll have fewer working years to save
- You’ll have more retirement years to fund
- Your Social Security benefits will be lower if claimed early
2. Luxurious Retirement Lifestyle
Do you want to travel a lot, buy a vacation home, or take up expensive hobbies when you retire? The 10x rule assumes that you’ll keep living the way you do now and not change it.
If you’re envisioning an “above average” retirement lifestyle with more spending than your working years, you might need closer to 12x your salary.
3. Healthcare Concerns
Healthcare costs continue to rise faster than general inflation, and Medicare doesn’t cover everything. If you have health concerns or a family history of longevity, you might need additional savings to cover potential medical expenses.
4. Social Security Uncertainty
We can’t ignore the big problem that Social Security will have to pay for in the future. Benefit cuts in the future are a real possibility, which would put even more strain on your savings.
Why 10x Might Be Too Much For Some People
On the flip side, some folks might need LESS than 10x their salary. Here’s when that might be the case:
1. Planning to Work Longer
If you delay retirement until age 70, Fidelity suggests you may only need 8x your annual income. Working longer gives your investments more time to grow while shortening the period you’ll need to fund.
2. Downsizing Your Lifestyle
Planning to live more frugally in retirement? If you expect to decrease your spending by at least 15% compared to your working years, you could potentially get by with saving less – perhaps closer to 8x your salary.
3. Additional Income Sources
Got a pension? Expecting an inheritance? Plan to work part-time in retirement? These additional income sources could reduce your need for personal savings.
How to Calculate Your Personal Retirement Number
Instead of blindly following the 10x rule, try this more personalized approach:
- Estimate your annual retirement expenses (typically 70-80% of your current income for a similar lifestyle)
- Subtract expected annual Social Security benefits (check your statement on the SSA website)
- Multiply the remaining amount by 25 (this assumes a 4% withdrawal rate)
For example: If you need $80,000 annually in retirement and expect $30,000 from Social Security, you’ll need to fund $50,000 from savings. Multiply that by 25, and your target is $1,250,000.
This method is more tailored to your specific situation than a simple income multiplier.
My Take on the 10x Rule
I think the 10x rule is a decent starting point, but it’s just that – a starting point. Your retirement needs are as unique as you are!
When I work with clients, I always tell them to consider these personal factors:
- Your desired retirement age
- Your expected longevity based on health and family history
- Your retirement lifestyle goals
- Your risk tolerance for investments
- Your other sources of retirement income
- Your expected healthcare needs
Remember, the goal isn’t just to hit some arbitrary number – it’s to create a retirement that works for YOU.
What If You’re Behind on Savings?
Don’t panic! Many people find themselves behind on these savings targets. Here are some strategies that can help you catch up:
If You’re Under 40:
- Increase your savings rate (aim for 15-20% of income)
- Invest more aggressively in growth-oriented assets
- Consider side hustles to boost your income
If You’re Over 40:
- Max out catch-up contributions to retirement accounts after age 50
- Delay retirement by a few years if possible
- Rethink your retirement lifestyle expectations
- Consider working part-time in early retirement
The 4% Withdrawal Rule
Another important aspect of retirement planning is how much you can safely withdraw from your savings each year. The traditional guideline is 4-5% annually, adjusted for inflation.
This means if you have $1 million saved, you could withdraw $40,000-$50,000 in your first year of retirement, then adjust that amount for inflation in subsequent years.
This withdrawal rate is designed to make your money last through a 30-year retirement. But again, your personal situation might require adjustments to this rule.
A Practical Retirement Savings Roadmap
To help you visualize the path to retirement readiness, here’s a breakdown of milestones based on age and salary:
| Age | Savings Goal | Example (Based on $100,000 Salary) |
|---|---|---|
| 30 | 1x salary | $100,000 |
| 40 | 3x salary | $300,000 |
| 50 | 6x salary | $600,000 |
| 60 | 8x salary | $800,000 |
| 67 | 10x salary | $1,000,000 |
Beyond the Numbers: Retirement Happiness Factors
We’ve talked a lot about money, but retirement satisfaction depends on more than just finances. Some other critical factors include:
- Health: Maintaining good physical and mental health
- Relationships: Strong connections with family and friends
- Purpose: Meaningful activities and involvement
- Location: Living in a place that suits your needs and preferences
These non-financial aspects of retirement planning are just as important as hitting your savings targets!
The Bottom Line
So, is saving 10 times your salary enough to retire? For many people following a traditional retirement path with average lifestyle expectations, it’s probably a reasonable target. But your personal situation might call for more or less.
The most important thing is to have a plan and to start saving as early as possible. Even if you can’t hit all these milestones perfectly, any amount you save will help make your retirement more comfortable.
I always tell people – don’t get discouraged by big numbers! Focus on taking small, consistent steps toward your goal. Start where you are, use what you have, and do what you can.
What’s your take on the 10x rule? Does it seem achievable to you, or are you aiming for a different target? I’d love to hear your thoughts in the comments!
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Everyone’s situation is different, so consider consulting with a financial advisor to create a personalized retirement plan.
When do you plan to retire?
If you know the age you want to retire, it will help you understand how much longer you have to grow your savings. If you plan on retiring early, youll need more savings to cover the years you arent working than if you retired later.
How early is early retirement? A recent survey found that the median age workers plan to retire is 65, while the actual median age retirees report retiring is 62. 1 Retiring before this age range could be considered an early retirement. For some, this might even mean stepping away from their careers to retire in their 50s or earlier.
However, retiring early requires thoughtful planning, aggressive savings strategies and a clear understanding of your post-retirement lifestyle and expenses. Retirees must also consider the impact it could have on their Social Security benefits and potential healthcare costs.
What’s your salary and what’s your expected return on investments?
This will help you determine whether you are on track to meet your retirement savings goals or if you need to increase your contributions or make adjustments to your investments. For your remaining working years, youll need to estimate your annual salary, expected average annual raises, inflation rates, investment portfolio performance and other factors.
Is $1,000,000 Still Enough To Retire?
FAQ
How many times salary to retire at 60?
To retire at age 60, a common financial benchmark suggests having 8 times your annual salary saved, though some experts like T. Rowe Price recommend a broader range of 6 to 11 times your salary.
What multiple of salary do you need to retire?
The general rule for a good retirement income is about 75% to 85% of the pre-tax income you made in your last official working year.
How much money do you need to retire with $100,000 a year income at 55?
The rule of $1000 is another quick way to figure out how much you need to save to live comfortably in retirement. This rule states that for every $1,000 per month in income, you need to save $240,000. That means you would need to save about $2. 4 million to generate $100,000 per month in income.
Is 10 times your annual income enough for your retirement?
Saving 10 times your annual income may be enough for some people’s retirement, but not everyone’s. This rule of thumb is based on several assumptions that may not be true for you. You may need to save more or less than this, depending on how you envision your retirement. You may not want to take this common rule of thumb at face value.
How many times a salary should you save for retirement?
Fidelity suggests aiming for 10 times your final salary in savings at the time of your retirement. What works about this formula is that it’s specific to you. But there’s also wiggle room with that number. Fidelity’s guidance on retirement savings would see you meeting different savings milestones over your career. Specifically, they say to save:
How many times a year should a retiree get paid?
Some plans say you should have 10 to 12 times your last year’s salary or certain multiples of your yearly income that go up as you get older. Think about your goals, when you want to retire, your annual salary, how much you expect to be raised each year, inflation, the performance of your investments, and the cost of medical care that you might need.
How much money should a retiree have?
By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you’ll have enough funds. Seamless transition — roughly 80% of your pre-retirement income. This amount is based on a safe withdrawal rate (SWR) of about 4% of your retirement accounts each year.
How much money should a 40 year old have in retirement?
By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you’ll have enough funds. Seamless transition — roughly 80% of your pre-retirement income.
How much money should I accumulate for retirement?
At age 30, some financial professionals suggest accumulating the equivalent of your current annual income. By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you’ll have enough funds.