How Much To Save For Retirement vs Income

You will need about 70% of your pre-retirement income to maintain your standard of living in retirement. The percentage of your pre-retirement income which social security replaces varies by income level. Social security benefits replace nearly 70% of pre-retirement income for people with career average earnings of $12,341 while it replaces around 23.8% of pre-retirement income for people with career average earnings of $120,418.

Individuals with higher average earnings need to provide more income in retirement and therefore need a higher amount of retirement savings than lower average earning individuals.

Assuming a retirement account needs to provide the required retirement income for 35 years with a 50% probability and a 3% real (adjusted for inflation) return. The account would need to have the following values at retirement.

Pre-retirement Income Account Value Multiple of Pre-retirement Income

$12,341 $7,580 0.61

$22,215 $99,970 4.5

$49,366 $351,000 7.1

$78,985 $670,000 8.5

$120,418 $1,175,000 9.8

1) https://www.ssa.gov/oact/NOTES/ran9/an2017-9.pdf

 

Disclosure:

The information presented here is the opinion of the author and may quickly become outdated and is subject to change without notice. All material presented in this article are compiled from sources believed to be reliable, however accuracy cannot be guaranteed. No person should make an investment decision in reliance on the information presented here.

The information presented here is distributed for education purposes only and is not an offer to buy or sell or a solicitation of an offer to buy or sell any security or participate in any particular trading strategy.

Performance data showing past performance results is no guarantee of future returns.

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