Last week, a chart was circulating the internet helping to illustrate how much you should have saved for retirement based on your age (See Below).
Like many rules of thumb, it can serve as a guide but it lacks several key assumptions. It doesn’t factor in pensions, annuities or real estate. The biggest flaw deals with a term called replacement income, this chart assumes that you will be able to live off of about 80% of your pre-retirement income. You would only know that if you dug into the research that is mentioned in the footnotes.
And in our experience, how much income a retiree needs to live on each year varies greatly.
This chart is probably most helpful for younger savers (50 years and less) and who do not expect much in the way of a pension and have no idea what their retirement income needs will be.
