How Much Savings Should I Have By Age 70?

By age 70, you should be retired and enjoying your golden years. Let me help answer the question: How much savings should I have by age 70?

At age 70, you should be focused on capital preservation. By age 70, you should have at least 20X your annual expenses in savings or as reflected in your overall net worth. The higher your expense coverage ratio by 70, the better.

In other words, if you spend $75,000 a year, you should have about $1,500,000 in savings or net worth to live a comfortable retirement.

Even if there was a zero return on your money, you could withdraw $75,000 a year for the next 20 years. Luckily, a mix of stocks and bonds have historically returned 4% – 6%, making it unlikely you will run out of money in your lifetime.

At age 70, you should also consider long-term care. If you have any dependents or still have a lot of outstanding debt, a life insurance policy is probably unnecessary if you don't have one already.

Let's take a look at the methodology for getting to 20X your annual expenses in savings or net worth by age 70.

Savings And Net Worth Guide By Age 70

I recommend everybody start off with 10% and raise their savings amount by 1% each month until it hurts. If you've ever had braces, you get the idea. Keep that savings rate constant until it no longer hurts, and start raising the rate by 1% a month again.

Please note that I am making 401K and IRA contributions a priority over post-tax savings. The reasons are: 1) we have a tendency to raid our post tax savings, 2) tax free growth, 3) untouchable assets in case of litigation or bankruptcy, and 4) company match. Obviously you need some post-tax savings to account for true emergencies. Ideally, my goal for everyone is to contribute as much in their pre-tax savings plans as possible and then save another 10-35% after tax.

The maximum 401k contribution for 2021 is $15,500. The maximum pre-tax contribution will probably increase by $500 every two years or so if history is any guidance.

Recommended Expense Coverage Ratio By Age 70

The below chart is an expense coverage ratio chart that follows someone along a normal path of post college graduation until the typical retirement age of 62-67. I assume a 20-35% consistent after tax savings rate for 40+ years with a 0-2% yearly increase in principal due to inflation.

The other assumption is that the saver never loses money given the FDIC insures singles for $250,000 and couples for $500,000. Once you breach those amounts, it's only logical to open up another savings account to get another $250,000-$500,000 FDIC guarantee.

Expense Coverage Ratio = Savings / Annual Expenses

By age 70, you should still have at least 13 times your annual expenses saved or as part of your net worth. You're spending down your capital as you live your best life. But you're also careful not to spend it all. Thankfully, you should have Social Security providing you steady income.

Note: Focus on the ratios, not the absolute dollar amount based on a $65,000 annual income. Take the expense coverage ratio and multiply by your current gross income to get an idea of how much you should have saved.

Your 20s: You're in the accumulation phase of your life. You're looking for a good job that will hopefully pay you a reasonable salary. Not everybody is going to find their dream job right away. In fact, most of you will likely switch jobs several times before settling on something more meaningful. Maybe you are in debt from student loans or a fancy car. Whatever the case, never forget to save at least 10-25% of your after tax income while working and paying off your debt. If you have the ability to save 10-25% after tax, after 401K and IRA contribution up to company match, even better.

Your 30s: You're still in the accumulation phase, but hopefully you've found what you want to do for a living. Perhaps grad school took you out of the workforce for 1-2 years, or perhaps you got married and want to stay at home. Whatever the case may be, by the time you are 31, you need to have at least one years worth of living expenses covered. If you've saved 25% of your after tax income for four years, you will reach one year of coverage. If you saved 50% of your after tax income a year for five years, you will have reached five years of coverage and so forth.

Savings By Middle Age

Your 40s: You're beginning to tire of doing the same old thing. Your soul is itching to take a leap of faith. But wait, you've got dependents counting on you to bring home the bacon! What are you going to do? The fact that you've accumulated 3-10X worth of living expenses in your 40's means that you are coming ever close to being financially free. You've hopefully built up some passive income streams a long the way, and your capital accumulation of 3-10X your annual expenses is also spitting out some income.

Your 50s: You've accumulated 7-13X your annual living expenses as you can see the light at the end of the traditional retirement tunnel! After going through your mid-life crisis of buying a Porsche 911 or 100 pairs of Manolo's, you're back on track to save more than ever before! You are 100% in tune with your spending habits, therefore, you raise your savings rate by another 10% to supercharge your final lap.

Your 60s: Congrats! You've accumulated 10-20X+ your annual living expenses and no longer have to work! Maybe your knees don't work either, but that's another matter! Your nut has grown large enough where it's providing you hundreds, if not thousands of dollars of income from interest or dividends. Full Social Security benefits kick in at age 70 now (from 67), but that's OK, since you never expected it to be there when you retired. You're also living debt free since you no longer have a mortgage. Social Security is a bonus of an extra $1,500 a month. You're budgeting a couple thousand a month for health care as you plan to live until 100.

Your 70s And Beyond

Sure, you've been spending 65-80% of your annual income every year since you started working. But now it's time to spend 90-100% of all your income to enjoy life! There's no point dying with too much. Please spend your money or give it away while living.

They say the median life expectancy is about 79 for men and 82 for women. Let's just bake in living to 100 just to be safe by taking your nut, and dividing it by 30.

For example, let's say you live off $50,000 on average a year and have accumulated 20X that = $1,000,000. Take $1,000,000 divided by 30 = $33,300. You're getting another $18,000 a year in Social Security, while the $1 million should be throwing off at least $10,000 a year in interest at 1%.

Obviously no one ever knows what might happen to provide a boost or a drag to their finances. Maybe you get lucky with a great new job offer or invest in the next Apple Computer. Or maybe you get laid off at 40 and can't find work for two years. My chart above merely serves as a savings guideline. Work to build alternative income streams in the meantime.

Please Enjoy Life More In Your 70s

There's no need to save so much in your 70s anymore. You should have Social Security and a nice retirement portfolio to take care of you. Maybe you even have a valuable pension that pays a steady amount for the rest of your life.

The only way to reach financial independence is if you save and learn to live within your means. National average money market accounts are yielding a pitiful 0.1%. Meanwhile, the average US personal savings rate was pretty pathetic until the pandemic hit!

For the money you are comfortable risking, actively invest the rest of your after-tax savings in real estate, the stock market, bonds, real estate, and basically anything else that matches your risk tolerance. 

Given you're inquiring about your savings at age 70, it's probably best to stay CONSERVATIVE with your investments with a heavier weighting towards fixed income (bonds), and a lighter weighting in stocks. The last thing you want to do is lose a ton of principal and have to go back to work.

Diversify Your Investments Into Real Estate

By the time you're 70, you want to have a diversified net worth that is less volatile and produces more income. Therefore, I suggest investing more in real estate and less in stocks.

The combination of rising rents and rising capital values is a very powerful wealth-builder. Thanks to my real estate portfolio that generates roughly $150,000 a year in passive income, both my wife and I were able to retire early.

In 2016, I started diversifying into heartland real estate to take advantage of lower valuations and higher cap rates. I did so by investing $810,000 with real estate crowdfunding platforms.

With interest rates down, the value of cash flow is up. Further, the pandemic has made working from home more common. Take a look at my two favorite real estate crowdfunding platforms. Both are free to sign up and explore. 

Fundrise: A way for accredited and non-accredited investors to diversify into real estate through private eFunds. Fundrise has been around since 2012 and has consistently generated steady returns, no matter what the stock market is doing. For most people, investing in a diversified eREIT is the easiest way to gain real estate exposure. 

CrowdStreet: A way for accredited investors to invest in individual real estate opportunities mostly in 18-hour cities. 18-hour cities are secondary cities with lower valuations, higher rental yields, and potentially higher growth due to job growth and demographic trends. If you have a lot more capital, you can build you own diversified real estate portfolio. 

Recommendation To Manage Your Finances

By age 70, your net worth may be more complicated. Therefore, I highly recommend signing up for Personal Capital, a free online wealth management tool that let's you easily monitor your finances.

Before Personal Capital, I had to log into eight different systems to track 28 different accounts (brokerage, multiple banks, 401K, etc) to manage my finances. Now, I can just log into one place to see how my stock accounts, how my net worth is progressing, and whether my spending is within budget.

One of their best features is their 401K Fee Analyzer which is now saving me more than $1,700 in portfolio fees I had no idea I was paying. They also have a fantastic Investment Checkup feature that screens your portfolios for risk.

At age 70 or thereabouts, it's more important to stay on top of your estate than ever. Please make sure you know where your loved ones can access all your estate documents.

And if you haven't created a will or a revocable living trust, please do so soon. Your savings by 70 should be strong. Make sure to spend your money!