Where should you be – retirement savings-wise – at different ages?

Saving for retirement tends to be a solitary process. While we are encouraged to put away what we can for that future post-work life, there’s little information out there on how much is enough, or what targets we should shoot for at various ages.

Writing in Yahoo! News, author Jami Farkas provides a little bit of clarity on those savings benchmarks.

First, Farkas writes, “the best time to start saving for retirement is when you start earning.” So even in your 20s you should be thinking about putting some of your paycheque towards retirement, Farkas continues.

As you age, those savings targets become more concrete, Farkas notes.

“By age 30, you should have saved an amount equal to your annual salary for retirement,” the article advises. “If your salary is $75,000, you should have $75,000 put away.”

The article suggests this goal can be met by putting away 20 per cent of what you earn, and to “live and give on the remaining 80 per cent.” The article, intended for an American audience, says signing up for any workplace retirement program, like a pension plan or here in Canada, a group registered retirement savings plan (RRSP) is another positive step towards your savings goal.

Saving for retirement in your 30s can “even trump paying down debt,” the article notes.

In your 40s, you should have three times your salary stashed away, the article urges.

“If you don’t have a retirement savings strategy as part of your overall financial plan by this point, don’t delay,” Farkas writes.

A common mistake at this point is growing your lifestyle at the expense of your savings, the article explains – moving into a bigger house or apartment, or upgrading your car. Dr. Robert Johnson of Creighton University states in the piece that “what happens is they are unable to improve their financial condition because they spend everything they make. People are wise to effectively invest any money from a raise as if you didn’t receive the raise. That is, continue to live the same lifestyle you led before receiving a raise and invest the difference.”

If, instead, you were to invest some or all of a raise in your future, it would add up, the article notes. A $5,000 raise invested annually at 10 per cent will yield an eye-popping $822,000 in savings after 30 years, the article explains.

By age 50, the article notes, you need five times your salary in savings. With kids usually gone from your home and their education paid for, this is a good age for catch up if you have fallen behind, Farkas writes. And be sure you are investing in a low-fee savings vehicle, the article adds.

At 60, the article concludes, you should have seven to eight times your salary in retirement savings because you are now five years away from retirement. As well, the article warns, you should consider reducing your exposure to riskier investments, such as equities.

The article notes that those approaching retirement in 2007/8 would have seen their equity investments fall by 37 per cent in one year.

Let’s sum all this thinking up. Start saving for retirement as soon as you start making money. Make it automatic. Don’t forget your savings program in the excitement of getting a big raise and making more money. Don’t put all your savings eggs in one basket, particularly if that basket is full of stocks and no bonds or alternative investments.

The article suggests that a great way to get to the finish line in retirement saving is to join up with any retirement plan your employer offers – often, they will match what you contribute. That’s great advice. But if you don’t have access to an employer retirement program, fear not – the Saskatchewan Pension Plan is available for do-it-yourselfers. Through SPP you can save in a low-fee program that has delivered strong investment returns for over 35 years. Check them out today!

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