Achieving Financial Security: 10x Retirement Savings Goal - Retirement Planning

How much to save for retirement is a question that often looms large in financial planning, especially as you get closer to 67 years of age. 67 can be a pivotal milestone in many people’s lives. At this stage, retirement is not just a distant dream. It becomes a tangible reality that merits careful consideration. However, retirement is not the only financial responsibility that may be on your plate at this age. It can coincide with other significant priorities, such as covering healthcare costs, tackling inflation and taxes, or providing financial support to dependent family members, such as your spouse, aging parents, and even adult children. While every individual’s circumstances and aspirations are unique, having a general retirement strategy can serve as a crucial guiding light on the path to retirement readiness. One such approach suggests aiming to accumulate retirement savings worth ten times your annual income by the time you reach age 67. But why this specific number, and how can it make your retirement more secure and fulfilling?

Consult with a professional financial advisor who can help you understand the rationale behind striving for this financial milestone. This article will also discuss why aiming for retirement savings worth ten times your annual income by age 67 can be a significant financial goal to pursue and the strategies to help you reach it.

What is the 10x rule for retirement and why should you aim for it by age 67?

The 10x rule for retirement estimates that having at least ten times of your pre-retirement income saved by age 67 can allow you to replace approximately 45% of your income annually in retirement. When combined with your Social Security benefits, this can help you maintain your current standard of living without significant financial constraints.

Many retirees express a deep-seated fear of outliving their savings and investments. In fact, according to a recent survey, 45% of baby boomers have identified this as one of their greatest retirement concerns. Aiming for a retirement nest egg that’s ten times your annual income significantly reduces the risk of running out of money during your golden years. 67 marks the point at which you can withdraw your full monthly Social Security benefit if you were born in or after 1960. While those born before that date may be eligible for full benefits earlier, reaching age 67 ensures you receive the maximum monthly payout. By saving ten times your annual income, you can effectively complement your Social Security benefits.

To put this into perspective, let us break down your savings milestones by age to help you get an idea of how much of your income you should aim to save:

Age 30: By the time you reach 30 years old, it is advisable to have at least your annual salary saved. This early start sets a strong foundation for your retirement journey.
Age 40: By the time you hit 40, aim to save three times your annual salary. This represents a significant step towards achieving your ten times-income goal.
Age 50: At the age of 50, your goal should be to have six times your annual salary saved. This level of savings can provide you with greater financial security as you near retirement age.
Age 60: By age 60, your target should be to have eight times your annual salary saved. This ensures that you are well-prepared for retirement and can confidently transition into a more leisurely lifestyle.
Age 67: Finally, by the time you reach age 67, your ultimate objective is to have saved ten times your annual salary. Achieving this milestone can position you for a comfortable and worry-free retirement, allowing you to enjoy the fruits of your labor.

Remember, these guidelines are meant to serve as a roadmap for your retirement savings journey. You may need more or less than this figure. However, it can be hard to arrive at a precise number, given that your needs will likely change over time. Inflation, the financial needs of your dependents, other financial goals like home ownership, lifestyle preferences, the standard of living in your state, and taxes can also determine your retirement expenses. Nevertheless, the 10x rule for retirement can offer you a realistic roadmap.

How can you implement the 10x rule for retirement by age 67?

Aiming for 10x retirement savings by age 67 is a smart financial strategy. Here is how you can make this rule work for you:

1. Set a clear savings target

Establish a clear goal of saving ten times your current annual salary by the time you reach age 67. This target will serve as your guiding light throughout your retirement savings journey. The goal of saving ten times your salary by age 67 is a long-term objective. It encourages you to adopt a forward-looking mindset, considering your financial well-being decades down the road. You must also aim to break down this goal into smaller, manageable milestones. This can be helpful to track your progress and adjust your savings strategy as needed along the way. Having a clear savings target and breaking it down into milestones helps maintain your commitment to retirement savings.

2. Allocate a percentage of your income to your retirement fund

A common approach is to save at least 15% of your pre-tax income each year for retirement. For example, if you earn $60,000 annually, this translates to saving $9,000 each year, or approximately $750 per month. This consistent allocation ensures you are steadily building your retirement fund. When calculating your retirement savings target, use your pre-tax income (gross income) as the basis. This ensures that your contributions are made before taxes are deducted, allowing you to maximize your retirement savings and potential tax advantages.

While the 15% rule is a helpful benchmark, tailoring your retirement savings rate to your specific financial circumstances is essential. Factors such as your current age, retirement goals, and existing savings will influence the ideal percentage for you.

3. Start saving early

Time is your greatest ally when it comes to retirement savings. The earlier you begin, the more time your investments have to grow and compound. This means that your initial contributions have the potential to earn returns, and those returns, in turn, generate even more returns. If you have not already started, it is essential to begin as soon as possible. Ideally, you should start saving for retirement in your early twenties or as soon as you begin earning an income. Even small contributions made early can have a substantial impact on your retirement nest egg. Starting early also affords you the luxury of a longer investment horizon, which, in turn, allows you to take on more risk. With more time to ride out market fluctuations, you can invest in assets with higher growth potential, potentially leading to greater long-term returns. By building a solid foundation of retirement savings early in your career, you will be less reliant on future income to fund your retirement. This reduces the financial stress associated with having to save large amounts as you get older.

4. Catch up if necessary

If you find yourself starting to save for retirement in your 30s or 40s, do not be discouraged. While you may need to save more aggressively to catch up, it is still possible to reach your 10x retirement savings by age 67. Consider increasing your savings rate beyond the 15% benchmark to make up for the lost time. A retirement calculator can help you understand how much you need to save to reach your desired goal. You can find a retirement calculator online and use it to get a realistic view of where you stand and what you need to do.

You can also use retirement accounts like the 401(k) and Individual Retirement Account (IRA) to gain tax advantages. These accounts offer another advantage of catch-up contributions after the age of 50, which helps you speed up the savings process. The 401(k) also provides an employer match that adds to your savings. Maximize your contributions to these accounts to avail yourself of these benefits.

5. Consistently contribute to your retirement savings

Consistency in saving is crucial. Make saving for retirement a non-negotiable part of your financial routine. Consistent contributions paired with the power of compound interest can significantly boost your retirement savings over time. It is also essential to prioritize your retirement savings ahead of discretionary spending. By doing so, you actively work towards securing your financial future. Afterward, you can allocate your remaining income for daily expenses and leisure activities. You can set up automatic contributions to your retirement accounts to ensure you never miss a savings opportunity. This approach removes the temptation to spend your savings and ensures you stay on track.

6. Leverage income increases

Whenever you experience an increase in your income, whether through a raise or a bonus, consider increasing your retirement contributions accordingly. This allows you to accelerate your progress toward your 10x goal without feeling a significant impact on your day-to-day finances. Contributions to retirement accounts like 401(k)s and IRAs can provide immediate tax benefits. By redirecting a portion of your income increase into these accounts, you can reduce your taxable income, potentially lowering your current tax liability. If your employer offers a 401(k) match, aim to contribute enough to receive the full match amount. This is essentially free money that can significantly accelerate your retirement savings. Remember to take full advantage of this benefit, especially when your income rises.

Increasing your retirement contributions when your income rises does not necessarily mean sacrificing your current lifestyle. It is about finding a balance that allows you to enjoy the benefits of your hard work today while also securing your financial future.

7. Look for better income opportunities

Try to find better jobs that pay you more. The more you earn, the more you can save. This also takes away the stress of saving as you have more disposable income to cater to your present and future needs. It is essential to upskill yourself and stay relevant in your domain. The employment landscape is constantly evolving due to technological advancements and changing market demands. Identify areas in your profession that are in high demand and consider acquiring new skills or certifications to match these needs. Online courses, workshops, and networking can be valuable resources that can help you acquire better roles and salaries.

8. Diversify your investments

While saving diligently is essential, it is equally important to invest wisely. Diversify your retirement portfolio to manage risk and potentially boost returns over the long term. Different asset classes, such as stocks, bonds, cash, and real estate, have varying levels of risk and return. Different assets also have the potential to perform well at different times. When one asset class is underperforming, another may be flourishing, helping to balance your portfolio’s returns. Moreover, spreading out your investments can help you weather market volatility with more confidence, reducing the emotional stress often associated with investing. Diversification also enables you to lower your taxes. Tax-efficient investing is an essential aspect of portfolio diversification. You can consult with a financial advisor to create a well-balanced investment strategy tailored to your goals and risk tolerance.

To conclude

As you approach the age of 67, retirement becomes a reality rather than a future goal, and it is essential to have a clear roadmap and savings strategy in place. Setting a target of saving ten times your annual income by age 67 is valuable guidance that provides both direction and purpose. However, it is crucial to remember that retirement planning is not a one-size-fits-all endeavor. Your savings target should align with your unique circumstances and aspirations. Some individuals may aim for a more frugal retirement, while others may have more extravagant goals. Having said that, the earlier you start and the more diligently you save, the better prepared you will be to enjoy your retirement years to the fullest. Remember that achieving your retirement savings goal is a marathon, not a sprint. By starting early, saving consistently, and increasing contributions when possible, you can be well on your way to building a retirement fund that provides financial security and peace of mind during your golden years.

Use the free advisor match service to find a professional who can help you turn your retirement goals into a reality. Simply answer a few basic questions about your financial needs, and we will match you with 2 to 3 advisors who are best suited to meet your unique retirement and investment requirements.

For additional information on suitable retirement savings strategies for your specific needs, visit Dash Investments, or email me directly at dash@dashinvestments.com.

About Dash Investments

Dash Investments is privately owned by Jonathan Dash and is an independent investment advisory firm, managing private client accounts for individuals and families across America. As a Registered Investment Advisor (RIA) firm with the SEC, they are fiduciaries who put clients’ interests ahead of everything else.

Dash Investments offers a full range of investment advisory and financial services, which are tailored to each client’s unique needs providing institutional-caliber money management services that are based upon a solid, proven research approach. In addition, each client receives comprehensive financial planning to ensure they are moving toward their financial goals.

CEO & Chief Investment Officer Jonathan Dash has been profiled by The Wall Street Journal, Barron’s, and CNBC as a leader in the investment industry with a track record of creating value for his firm’s clients.