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Common thinking on what you need for retirement in 2015 is $400,000 - $1,000,000 for middle class families. Depending on Social Security and Pension income you may need less. See Retirement.

Inflation 3% (See charts for average inflation)

Savings: - Amount accumulated in portfolio at 7% return. (See charts for average return)
contribution/yr $10,000 $15,000 $20,000 $25,000 $30,000
25 yrs $632,490 $948,735 $1,264,980 $1,581,225 $1,897,471
40yrs $1,996,351 $2,994,526 $3,992,702 $4,990,877 $5,989,053

Of course it's not that simple. Savings and income will vary your life style and age. DINKs (Dual-Income, No Kids) will have a different savings pattern than the average family.

The value of compounding
The take away here is to start saving for retirement as early as you can.
Three hypothetical examples
1. Start early invest for 10 years and let it ride.
2. Wait 10 years and and continue to invest for 20 years.
3. Start early and continue to invest.

Growth Rate=8.00% *
Age Amount
Invested
Total Value Amount
Invested
Total Value Amount
Invested
Total Value
30 $10,000 $10,000 $5,000 $5,000
31 $10,000 $20,800 $5,000 $10,400
32 $10,000 $32,464 $5,000 $16,232
33 $10,000 $45,061 $5,000 $22,531
34 $10,000 $58,666 $5,000 $29,333
35 $10,000 $73,359 $5,000 $36,680
36 $10,000 $89,228 $5,000 $44,614
37 $10,000 $106,366 $5,000 $53,183
38 $10,000 $124,876 $5,000 $62,438
39 $10,000 $144,866 $5,000 $72,433
40 $156,455 $10,000 $10,000 $10,000 $88,227
41 $168,971 $10,000 $20,800 $10,000 $105,286
42 $182,489 $10,000 $32,464 $10,000 $123,708
43 $197,088 $10,000 $45,061 $10,000 $143,605
44 $212,855 $10,000 $58,666 $10,000 $165,094
45 $229,884 $10,000 $73,359 $10,000 $188,301
46 $248,274 $10,000 $89,228 $10,000 $213,365
47 $268,136 $10,000 $106,366 $10,000 $240,434
48 $289,587 $10,000 $124,876 $10,000 $269,669
49 $312,754 $10,000 $144,866 $10,000 $301,243
50 $337,774 $10,000 $166,455 $10,000 $335,342
51 $364,796 $10,000 $189,771 $10,000 $372,169
52 $393,980 $10,000 $214,953 $10,000 $411,943
53 $425,498 $10,000 $242,149 $10,000 $454,898
54 $459,538 $10,000 $271,521 $10,000 $501,290
55 $496,301 $10,000 $303,243 $10,000 $551,393
56 $536,005 $10,000 $337,502 $10,000 $605,505
57 $578,886 $10,000 $374,502 $10,000 $663,945
58 $625,197 $10,000 $414,463 $10,000 $727,061
59 $675,212 $10,000 $457,620 $10,000 $795,226
Total Saved $100,000 $200,000 $250,000
An excel spread sheet you can use to change the numbers.

* Some fiancial planners still use 10% growth. The 25 year averages are down because of the 2008 recession. See chart below. I think 7 or 8% are more conservative number to use for expected growth.

† - The net present value of $10,000 today is more than $10,000 10-20 years from now, but with current inflation rates < 3% it wasn't worth trying to compensate for that.

See Retirement for how much you need to retire.


In Stein-DeMuth "Yes, You Can Get A Financial Life!", they list the following saving stages.
Figure 7.3: Recommended Annual Contributions to our Withdrawls from Savings for One-Child, Median-Income Family to Maintain an Even Lifestyle when Buying a House.

They say you would spend most of your savings on a house at age 35, then start saving for retirement. They will bump up retirement savings at age 50 when kids are gone.
In a email to me, DeMuth said the above assumed that Social Security was going to provide a significant part of your retirement income so you could put off savings.
He said however, you should always take full advantage of retirement savings accounts at any age: capturing 401k employer matches and funding IRAs/401ks (or Roth IRAs/Roth 401ks) to the limit -- even at the expense of postponing a home purchase or having children. The tax-deduction and long-term tax-free compounding is hard to beat.


Saving to buy a house Expenses to drop
U.K.-based real estate agents and property consultants Strutt & Parker singled out six expenses young couples should drop in order to afford a deposit on a home,
According to Strutt & Parker’s list, 
Giving up one night out a week could save a couple, $8,000  per year.
 Eliminating takeout meals could save $3,500 
Bringing lunch from home —  could tack on an additional $3,400 
Forgoing an annual vacation - $900
Lottery tickets   - $1,100
annual phone upgrade - $200
Totaling $84,000 over 5 years

How much do you need for retirement:
In Yes, You Can Still Retire Comfortably!, 2006 Ben Stein and Phil DeMuth say,
You'll need 12 to 16 times your final salary to maintain your standard of living. However hey are assuming no social security or pension. (see Social Security funding below)
e.g. if your household income was $80,000 you'd need from $1 - $1.3 million.
The tables from their book are at www.stein-demuth.com.
If you get $35,000 from social security, then you need $540,000- $720,000 in savings.

Consumer Reports says people with between $400,000 and $1 million in savings were just as happy as those with more. See retirement.

In the Stein-DeMuth book (above) they list the saving progress chart below.
It assumes you start saving in your early 20s and retire at 70 with no social security or pension, live on 80% of your pre-retirement income and live to 100. % of current salary going to savings.
Multiple of Current Salary You Should Have in Savings
Risk Age 25 Age 30 Age 35 Age 40 Age 45 Age 50 Age 55 Age 60 Age 65 Age 70
Conservative 0.1 0.4 1 1.6 2.6 4 5.9 8.7 12.1 16
Moderate 0.05 0.33 0.7 1.2 2 3.1 4.7 7.1 9.9 13.1
Conservative plan would take you to age 105, Moderate to age 100.

You should always be saving the maximum amount from all tax-advantaged, employer-subsidized savings plans, such as Keogh and 401(k)s.


Social Security funding: As a result of changes to Social Security enacted in 1983, (The full retirement age for people born after 1960 was raised to 67) benefits are now expected to be payable in full on a timely basis until 2033. After that, the trust fund will be exhausted and incoming payroll taxes will only bring in enough to pay for 77 percent of scheduled benefits.
There are several ways to fix this so social security is viable for the next 75 years. Lawmakers have proposed raising the full-retirement age, reducing benefits for wealthier retirees (known as means testing) and raising payroll taxes.
Sources: Trustees Report Summary 2014 | SSA.gov

The Social Security (SS) Cost-of-Living Adjustment (COLA) is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). For the last 20 years it has been pretty close to the regular CPI. See Social Security COLA in Retirement.
and See: Consumer Price Index For Urban Wage Earners And Clerical Workers (CPI-W) | Investopedia
and Social Security Benefits Rising 1.7% For 2015, Top Tax Up 1.3% - Forbes

While advocates for the elderly argue CPI-W understates the true increase in costs the elderly face, deficit hawks have pushed for linking COLAs to an even lower measure of inflation known as the chained CPI.


Links:
Investing
Retirement

last updated 18 May 2015