Retirement Benchmarks by Age: 40, 50, 60 (And What If You’re Behind?)

Those “3x by 40, 6x by 50, 10x by 67” charts feel official—until your life doesn’t match the average. In this episode, James shows why age-based savings benchmarks miss the mark and replaces them with a simple, four-step method that fits you.

First, get clear on spending in retirement (inflation-adjusted, lifestyle-aware). Then credit guaranteed income, like Social Security, pensions, annuities, part-time work, help to size the real gap. Applying a conservative withdrawal rate to turn that gap into a target portfolio, and back-solve to today with reasonable returns and annual contributions can help you find security. No fluff. Just a plan you can update every year.

Real-life cases make it concrete: an early retiree whose “confident” multiple falls short, two teachers whose pensions shrink the target, and a late-career saver who unlocks home equity to close the gap.

What you’ll learn:

• Why age-based benchmarks exist—and where they can mislead
• How timing (early retirement vs. later) changes the number
• The role of Social Security and pensions in lowering your target
• When home equity or windfalls can bridge shortfalls
• The four-step method: expenses → income → gap → portfolio math
• Using a withdrawal rate (e.g., 4%) to set a clear target
• How to back-solve to today’s balance and savings plan
• Stress-testing returns, inflation, and timing choices

If generic multiples leave you anxious or overconfident, this conversation trades guesswork for clarity. Translate goals into numbers, see which levers actually move the needle, and build a plan that funds a life you enjoy.

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The strategies, case studies, and examples discussed may not be suitable for everyone. They are hypothetical and for illustrative and educational purposes only. They do not reflect actual client results and are not guarantees of future performance. All investments involve risk, including the potential loss of principal.

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Episode Transcript

SPEAKER_00 (00:00):
If you're in your 40s, your 50s, your 60s, you've
probably seen some of thoseonline charts that show you how
much you need to have saved byyour age.
And if you're like most people,those charts either make you
feel anxious because you don'thave that much, or you do have
that much, but you still don'tfeel quite confident that number
has anything specific to do withyou.
If you're feeling that way,you're exactly right.
And what I want to do in today'svideo is share with you some

(00:21):
general rules of thumb, somehelpful rules of thumb and show
you why they exist, but thengive you a better way of looking
at how much should you have inyour portfolio at certain ages
to make sure you're on track toretire.
So let's start with these rulesof thumb.
In just a second, I'm going toshare with you three specific
examples that show you how theserules of thumb can be quite off
when you used as the solepurpose of understanding how
much you'd have.

(00:42):
But for some basic rules ofthumb, if you're 40, you should
have three times your annualincome saved for retirement.
In fact, you can see that onthis chart right here.
If you're 50, you should havesix times your annual income
saved for retirement.
And if you are 60, you shouldhave eight times your annual
income saved for retirement.
Do some simple math.
If you have$100,000 at age 60,and that's your salary, you

(01:03):
should have about$800,000 savedfor retirement.
Now, if you look all the way atthe end of this graph, you can
see by age 67, you should have10 times your annual salary
saved.
So let's look at an example ofwhere this rule of thumb
actually works before looking atexamples of where it doesn't.
You're 67, you're making$100,000per year, and you want to
retire.
The first thing we need to startwith is after taxes, what are
you actually taking home?

(01:24):
This depends on are you married?
What are your deductions?
What state do you live in?
How much are you saving forretirement?
But let's just assume for simplenumbers,$100,000 is what you
earn and$70,000 is what you takehome after all taxes and
deductions.
Of that$70,000, if you're 65,you might have a good portion of
that covered by Social Security.
Let's just assume$30,000 peryear.

(01:46):
So$2,500 per month of benefitsleads to$30,000 per year.
If you want$70,000, there's a$40,000 gap there.
That$40,000 gap just so happensto represent 4% of a$1 million
portfolio.
So you can see how this rule ofthumb generally works.
What's the after-tax take homepay you might have at your

(02:06):
income level today?
And then how might a portfolioof 10x that amount in retirement
give you the distributionsneeded to supplement Social
Security and meet your incomeneeds for the rest of your life?
So that's why this rule isn't ahorrible place to start, but
it's very cookie-cutter.
They don't apply in allsituations equally.
Example number one of where thisdoesn't apply.
Let's look at Emily.

(02:26):
Emily is 40 and she earns$100,000.
I'm going to pull back up thisgraphic from Fidelity that shows
you, in their opinion, or inthis rule of thumb, Emily needs
to have$300,000 saved.
Well, Emily does have that$300,000 saved, so she's feeling
really confident about herability to retire.
But here's the thing Emily wantsto retire at$55, not at 67.

(02:46):
What happens at$5,000?
Well, Social Security hasn'tkicked in.
That's a lot fewer years thatshe has to compound her existing
$300,000 to be able to be in aposition to create income for
her.
And that's a much longer timehorizon that she needs that
money to last for.
Now all of a sudden, that$300,000 probably is not nearly
enough for her to be in aposition to retire$55,000 if

(03:08):
she's already$40,000.
So one of the main things thatskews this is actually the
timing of your retirement.
The timing of your retirement isgoing to be a big factor in
this.
Let's look at another example.
Greg and Sherry are$50.
I'm going to pull up this chartfrom Fidelity again.
At$50,000, they're saying theyshould have six times their
annual income saved.
Well, if Greg and Sherry aremaking$120,000 per year, then

(03:29):
that means they would need tohave$720,000 saved for
retirement to be on track inthis example.
But Greg and Sherry don't have$720,000.
They only have$400,000.
But here's the thing Greg andSherry are both school teachers.
And when they retire, they'reactually going to have a pension
that's going to cover 80% of alltheir income needs in
retirement.
So they don't need the full 10times their annual salary at age

(03:51):
67 to retire because they have apension that's going to cover so
much of that.
And once you factor in SocialSecurity as well, they're nearly
at the point where they don'tneed much of their investments
to actually live on at all.
So in this situation, we canstart to see that another
indicator of how much youactually need isn't just your
portfolio value and your age.
It's also what outside incomesources will you have, what

(04:12):
non-portfolio income sourceswill you have in retirement to
be able to support your incomeneeds throughout the rest of
your life.
Then finally, the third casestate that we're going to
quickly look at before we walkinto a better formula that will
help you determine how much youneed at whatever age you are
approaching retirement isMichael.
Michael's 60 years old and heearns$80,000 per year.
This fidelity chart says that ifhe's earning$80,000 and he's$60,

(04:33):
he should have close to$800,000or he should have$800,000 in his
portfolio.
But Michael only has$500,000.
He wants to work until 67, buthe feels behind because he sees
this chart and he says, I'm noton track.
But Michael owns a home that heplans to downsize in retirement.
And when he plans to downsizethat home, it's going to free up
about$400,000 of equity for him.
So what he needs to take intoaccount is it's not just his

(04:55):
$500,000 of existing liquidportfolio assets, there's also
going to be an inflow when hedownsizes his home.
Now, in your case, this might bedownsizing a home, this might be
an expected inheritance, thiscould be some other type of
windfall.
But you start to see how thesegeneral rules of thumb can be
helpful, but there's a betterway.
Here's that better way.
Instead of looking at arbitrarybenchmarks or how much should
you have saved at certain ages,here's something that you can do

(05:17):
that's gonna be much more customto you.
Number one, start with anunderstanding of what are your
expenses going to be inretirement.
Imagine your retirement.
What will life look like at thatpoint?
What big expenses might nolonger be there?
That could be things likeretirement savings, mortgage,
family support.
What are the things that areexpenses today that might not be
expenses in retirement?
Now, on the flip side, whatthings might you be doing in

(05:39):
retirement that you're not doingtoday?
Is there extra travel?
Is there extra money set asidefor leisure, for activity, for
hobbies?
What does life look like?
Having an understanding of thatnumber is does not have to be
precise, but having a somewhatclearer understanding of that is
the absolute most importantthing you can do here.
And that's step number one.
What will expenses be in yourretirement?
Step number two is whatnon-portfolio income sources

(06:01):
will you have to offset thoseexpenses?
Let's use an example.
Let's assume for the sake ofsimplicity that you're single,
and by the time that you retire,your social security benefit
will be$40,000 per year.
So$40,000 per year is going togo towards that$100,000 of
expenses.
In retirement, that$100,000isn't just going to come from
one source.

(06:22):
Some might come from pension,some might come from Social
Security, some might come fromyour investments.
The important thing is, does thecombined amount of all these
sources equal what you need itto to meet your income needs?
So you want$100,000 per year.
And by the way, one thing I didnot mention, failed to mention
initially, is that number shouldbe adjusted for inflation.
If you want to spend$100,000 peryear today, but you're only

(06:44):
$40,000, adjust that forinflation.
But to keep this simple, let'sassume that$100,000 is the
inflation adjusted number, and$40,000 is what's coming in from
Social Security.
That's step two, is identifythose non-portfolio income
sources.
Step three is identify the gap.
What's the difference betweenhow much you want to spend and
how much is coming in andnon-portfolio income sources?

(07:04):
That gap here, that's the amountthat must be filled by your
portfolio assets.
So that gap in this example is$60,000.
In other words,$60,000 is theamount you need coming from your
portfolio to supplement SocialSecurity and allow you to live
the retirement you want to live.
So what do you do with thatnumber?
Your portfolio needs to be morethan$60,000 because that's

(07:25):
$60,000 per year.
What you do is you usewithdrawal rate numbers that are
sustainable for whatever theretirement time horizon you have
is.
Meaning that number is going tobe different if your retirement
only lasts for 10 years versusif you expect it to last for 50
years.
Let's use 4%.
4% tends to be a veryconservative rule.
I actually talked to the founderof the 4% rule a couple weeks

(07:45):
back, talking about new researchshowing that you can actually
spend more than that 4% andlikely be just fine over the
course of your retirement.
But let's use 4% because it's acommonly used number, commonly
understood.
So 4% represents the amount Ican take from my portfolio.
And if 60,000 represents thatactual amount, I need to divide
60,000 by 4%.
That's going to give me$1.5million.

(08:08):
That$1.5 million is the amount Iwould need at retirement.
It's not the amount you wouldneed today at$40,000 or$50 or
$60.
That's your retirement amount.
So the final step, step numberfour, is to run a calculation
back into what number do youneed today?
So for example, if I know thatmy retirement is 10 years out
from now and I need$1.5 millionin my portfolio, I can run a

(08:29):
calculation.
You can use a calculator forthis, you can use Excel for
this, you can use financialplanning software for this.
This part's actually relativelysimple.
If I assume that I'm going toget a 7% rate of return over the
next 10 years, which by the wayis just an assumption.
It's not a guarantee.
You can use whatever number youfeel comfortable with, but you
need to start with something.
And then ideally you can test,well, what if that number's 4%

(08:49):
versus what if that number's10%?
How does that range of potentialreturns impact what this looks
like?
But, anyways, 10 years out, Ineed$1.5 million.
I'm assuming my money is goingto grow by 7% per year between
now and then, and I'm investing$10,000 per year every year from
today until the time I retire.
If I run a calculation on that,what that tells me is that

(09:11):
today, 10 years out fromretirement, I would need just
under$700,000 in my retirementportfolio to be on track to make
it.
So what that is, that's a muchmore customized way to determine
how much do you need in yourportfolio.
It's not based upon currentincome.
It's not based on your agealone.
It's based upon where do youwant to be in retirement?
What income sources will youhave to help meet those needs?

(09:33):
What's the gap between thoseincome sources in your income
needs in retirement and whatnumber do you need to have in
your portfolio today, such thatyou'll be on track between
contributions and growth overthe next few years to be where
you want to be in yourretirement years?
So if you're 40, if you're 50,if you're 60, and you're worried
that these benchmarks you seearen't exactly where you are,

(09:54):
don't fret too much.
Run a more custom analysis, runa more custom calculation to say
what do you actually need, notjust based on your income, but
based upon your retirementdesires, where are you today,
and then see if you're on track.