How Much Savings Should Should I Have At 65?

How much savings should I have at 65?

Are you wonder, what your savings at 65 should be to live a good retirement ? The answer depends on your lifestyle, life expectancy, and what you want to do after 65.

At the very least, at age 65, you should be retired from work you don't love to do. Sure, you can still work to make supplemental income, but hopefully you don't have to work for money. You work because you have an X-Factor that gives you joy and purpose in life.

At age 65, you should have a savings/net worth amount equivalent to at 20X -25X your annual expenses. If you want to be really aggressive, you should aim to have around 20X your average annual salary as a net worth.

In other words, if you spend $50,000 a year, you should have about $1,000,000 – $1,250,000 in savings or net worth to live a comfortable retirement lifestyle. Savings can be defined as cash, pre-tax investments, post-tax investments, rental property, and anything of value.

Hopefully you are done working in the rat raced by now, and are soon eligible for a pension or Social Security you've spent decades paying into. If you aren't at 20X -25X your annual expenses, you need to cut down on your expenses, or figure out ways to make extra side income to bridge the expense gap.

Savings At 65 Guide

Below is my pre-tax and post-tax savings guide by the amount you make. The more you make, the higher your saving rate.

Savings Guide By Age - Savings at 65 guide

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. If you make more than $200,000, certainly shoot to save more if you can. You can theoretically achieve a 35%+ savings rate in two short years with this method!

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 $19,500. The maximum pre-tax contribution will probably increase by $500 every two years or so if history is any guidance. Ideally, everyone is a 401k millionaire by age 60 if you follow my 401k savings by age guide.

401(k) By Age Guide

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

Expense Coverage Ratio Chart For Financial Freedom

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, and 4X your expenses at age 35. It's important to really focus on your finances at this age because life comes at you fast with homeownership expenses, baby expenses, student loans, and more. You must focus on doing well in your occupation and staying disciplined with your savings and investments. At the very least, max out your 401k.

Savings As You Enter 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. It's important to stay on track with your savings habits and NOT let a mid-life crisis bog you down.

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.

Savings At 65 – Retirement Years

Your 60s: Congrats! You've accumulated 20X – 25X your annual living expenses and no longer have to work! Maybe your knees don't work either, but that's another matter. Your retirement 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 67, which will help your retirement cash flow.

You should also be living debt free since you no longer have a mortgage, and heaven forbid, egregious credit card debt. 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.

Here's a more in-depth article on when to take Social Security.

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! 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%.

Never Stop Saving For Retirement

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 pathetic before the coronavirus pandemic. The pandemic has shown us that people can save more if they want to.

U.S. personal savings rate

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

Given you're inquiring about your savings at age 65, it's best to stay CONSERVATIVE with your investments with a heavier weighting towards fixed income (bonds), and a lighter weighting in stocks. Shoot to make no more than a 4% rate of return, which is about double the rate of inflation. Check out my proper asset allocation of stocks and bonds by age.

Life After Retirement Can Be Great!

Retirement doesn't mean not doing anything. At age 65, you should hopefully have 15+ more great years to live. Make sure you retire to something, not from something.

I retired early and found myself actively doing a lot of great things that I've always wanted to do, but never had time for. For example, I coach high school varsity tennis that makes me $5,000 for the three-month season. I also do some 1X1 personal finance consulting that makes me about $8,000 a year.

I also wrote a severance negotiation book to help people walk away from jobs they dislike with money in their pocket. Today, I'm working on a traditionally published book with Portfolio, a Penguin Random House imprint. The book should be released in 2022. Then of course, I publish on this site 3X a week and earn a healthy online income.

There is so much you can do after you retire. Enjoy your time. Pursue the things you've always wanted to do.

Manage Your Wealth And Savings At 65 And Older

Now that you are retired or close to retired at 65, I highly recommend signing up for Personal Capital, a free online wealth management tool that let's you easily monitor your finances. You must manage your money and preserve it. Don't let unnecessary risk destroy your wealth.

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.

They have an incredible Retirement Planning Calculator that uses your linked accounts to run a Monte Carlo simulation to figure out your financial future. You can input various income and expense variables to see the outcomes. Definitely check to see how your finances are shaping up as it's free.

Retirement Planning Calculator was started in 2009 and is one of the most trusted personal finance sites today with over 1.5 million pageviews a month. Financial Samurai has been featured in top publications such as the LA Times, The Chicago Tribune, Bloomberg and The Wall Street Journal.