Saving Estimates, Retirement & The Impact Of Time…


Replacing 80% of pre-retirement income for a max earning family, defined by the Social Security Administration as a family with a household income of $106,800 in 2010 dollars? Round that off to 2017 dollars of $120,000 and that is pretty much everyone we deal with. The Center for Retirement Research at Boston College in a November 2011 paper by Alicia H. Munnell, Francesca Golub-Sass, and Anthony Web provides some great back of the envelope estimates on what you as a family should be doing in terms of saving for retirement depending upon when you start. There is of course a lot more to it than just this but this is a great conversation starter.

The data below from the paper have rates of returns on the x-axis and retirement age on the y. This rate of return is the real, after-inflation return so a 4% real return in the table corresponds to a 7% nominal return with 3% inflation. And that’s a good ballpark to rely on to formulate your savings strategy.


A picture speaks a thousand words…consolidating that 4% column and reporting a few striking observations…And 62, 66 and 70 are roughly the ages when you can start drawing on your Social Security checks.


  • Start to save at 45 and plan to retire at 62 – a near impossible feat considering that you will need to save 71% of your pre-tax income to afford the same quality of life as when you were working. Delay retirement to 70 and the required savings rate drops to a much bearable 23%. 8 more years of the grind if you call it that and the annual savings required drops by 2/3rd.
  • Start at 25 and retire at 70…just save 9% each year. Don’t want to stretch it to 70 and want to close shop at 62 then 24% each year does it.

The same quality of life but with starkly different savings rates. But then the person who delayed socking money away till 45 lived his life. But so did the person starting at 25. No big sacrifices there either. Just that he or she happened to come across this math a bit sooner than the one who started at 45. But even at 45, not much is lost. Start when you can and with how much ever you can and leave the rest to the markets to come through. And of course, don’t forget to still continue living in the present because you are only here once. Not a revelation but wanted to restate.

Until later…

Image credit – Pixabay