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

Episode Overview

Title: Retirement Benchmarks by Age: 40, 50, 60 (And What If You’re Behind?)
Host: James Conole, CFP®
Date: November 4, 2025

Main Theme:
This episode tackles the concept of age-based retirement savings benchmarks—specifically, the popular idea that you should have a set multiple of your annual income saved by certain ages (40, 50, 60, and 67). James Conole explores both the usefulness and limitations of these rules of thumb, offers case studies showing where they work (or don’t), and ultimately presents a more tailored approach for determining your personal retirement savings target.

Key Discussion Points & Insights

1. The Appeal and Limits of Retirement Benchmarks [(00:00–05:18)]

Benchmarks Defined:
Common advice is to have a certain multiple of your salary saved at landmark ages, e.g., 3x income by 40, 6x by 50, 8x by 60, 10x by 67.
- "If you're 40, you should have three times your annual income saved for retirement. ... If you're 50, you should have six times ... If you are 60, you should have eight times ..." — James Conole [00:46]
The Problems:
- These rules are generic and may cause anxiety or false confidence.
- They don’t reflect personal situations—such as planned retirement age, pensions, home equity, or different spending needs.
Why They Sometimes Work:
The basic logic: If you retire at 67 earning $100K/year, with Social Security covering part of your needs, a portfolio of about 10x your salary could fund a 4% annual withdrawal to make up the difference.
- "That $40,000 gap just so happens to represent 4% of a $1 million portfolio." — [03:18]

2. Where Benchmarks Fall Short: Real-Life Examples [(05:19–10:40)]

Case 1: Early Retirement — Emily
- Emily, age 40, earns $100K and has $300K saved (matches the 3x benchmark).
- She wants to retire at 55 (not 67)—her $300K probably won’t suffice with a longer retirement and no Social Security right away.
- Insight: The timing of retirement changes the viability of benchmarks significantly.
Case 2: Significant Pension — Greg & Sherry
- Both age 50, earn $120K (should have $720K saved but only have $400K).
- Their pensions will cover 80% of income needs in retirement, so the benchmark overstates what they actually need.
- Insight: Non-portfolio income sources (like pensions) reduce the need for huge investment portfolios.
- "They don't need the full 10 times their annual salary at age 67 to retire because they have a pension that's going to cover so much of that." — [07:55]
Case 3: Non-Traditional Assets — Michael
- Michael, age 60, earns $80K, has $500K saved (benchmark is $800K).
- He feels behind but will downsize his home and free up $400K equity when he retires.
- Insight: Home equity, inheritances or windfalls can bridge the perceived gap.
- "It's not just his $500,000 of existing liquid portfolio assets. There's also going to be an inflow when he downsizes his home." — [09:36]

3. A Better, Customized Approach to Retirement Planning [(10:41–17:57)]

James outlines a four-step process for tailoring retirement savings goals to your own situation:

Step 1: Estimate Retirement Expenses [11:12]

Envision retirement lifestyle: What spending goes away (e.g., mortgage, kid expenses)? What rises (travel, hobbies)?
"Having a somewhat clear understanding...is the absolute most important thing you can do here." — [11:41]

Step 2: Identify Non-Portfolio Income Sources [12:00]

What will you receive in Social Security? Any pensions? Expected windfalls?
Your expenses will likely be covered by a mix, not investments alone.
"Does the combined amount of all these sources equal what you need it to..." — [13:05]

Step 3: Calculate the 'Gap' [13:35]

Subtract projected non-portfolio income from desired retirement spending = amount investments must provide.
Example: Desire $100K/year, $40K from Social Security, so $60K/year from investments.

Step 4: Determine Portfolio Needed & Backtrack to Today [14:49]

Use a sustainable withdrawal rate (e.g., 4%) to see how much portfolio is needed to generate the gap.
- $60,000 divided by 4% = $1.5 million needed at retirement.
Calculate how much you need today to reach that future goal (assume returns and contributions, use calculators).
- "Today, 10 years out from retirement, I would need just under $700,000 in my retirement portfolio to be on track to make it." — [16:58]
Key Point: This is a personalized, scenario-based calculation—not just based on generic income multiples.

Notable Quotes & Memorable Moments

On the Limitations of Benchmarks:
- "It's very cookie-cutter. They don't apply in all situations equally." — James Conole [04:05]
On the Value of a Custom Plan:
- "It's not based upon current income. It's not based on your age alone. It's based upon where do you want to be in retirement?" — James Conole [17:19]
Reassuring Listeners:
- "If you’re 40, if you’re 50, if you’re 60 and you’re worried that these benchmarks you see aren’t exactly where you are, don’t fret too much. Run a more custom analysis..." — James Conole [17:49]

Timestamps for Key Segments

| Timestamp | Segment Description | |-----------|------------------------------------------------------------------| | 00:00 | Introduction to benchmarks & motivation for the episode | | 00:46 | Listing popular benchmarks (3x, 6x, 8x income by age) | | 03:18 | How the 10x benchmark “works” in an average 67-year-old case | | 05:19 | Example 1: Early retirement’s impact on benchmarks | | 07:55 | Example 2: Pensions and how they alter investment needs | | 09:36 | Example 3: Downsizing and non-portfolio assets | | 10:41 | Custom approach: Four-step process begins | | 11:41 | Emphasizing clarity on retirement expenses | | 13:05 | Integrating non-portfolio income (Social Security, pension) | | 14:49 | Using a withdrawal rate to estimate needed portfolio size | | 16:58 | Example calculation: Backdating needed portfolio to the present | | 17:19 | Customization over generic rules summarised | | 17:49 | Encouragement to focus on your personal situation |

Summary for Non-Listeners

This episode helps listeners rethink the “rules of thumb” for retirement savings, such as saving a certain multiple of salary by specific ages. While those rules can offer a basic starting point, James Conole emphasizes that real retirement planning must be personalized. Age, salary, and generic charts don’t capture your unique goals, likely expenses, non-investment income (like pensions or home equity), or the timing of your retirement. By following a straightforward four-step process—envisioning your spending, tallying income sources, calculating the gap, and running future value calculations—you can get a more accurate sense of what you need. The episode reassures those feeling ahead or behind according to charts: what matters is building a plan based on your numbers, not arbitrary benchmarks.

Transcript

A (0:00)

If you're in your 40s, your 50s, your 60s, you've probably seen some of those online charts that show you how much you need to have saved by your age. And if you're like most people, those charts either make you feel anxious because you don't have that much, or you do have that much, but you still don't feel quite confident that number has anything specific to do with you. If you're feeling that way, you're exactly right. And what I want to do in today's video is share with you some general rules of thumb, some helpful rules of thumb and show you why they exist, but then give you a better way a of looking at how much should you have in your portfolio at certain ages to make sure you're on track to retire. So let's start with these rules of thumb. In just a second, I'm going to share with you three specific examples that show you how these rules of thumb can be quite off when you used as the sole purpose of understanding how much you'd have. But for some basic rules of thumb. If you're 40, you should have three times your annual income saved for retirement. In fact, you can see that on this chart right here. If you're 50, you should have six times your annual income saved for retirement. And if you are 60, you should have 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 should have about $800,000 saved for retirement. Now, if you look all the way at the end of this graph, you can see by age 67, you should have 10 times your annual salary saved. So let's look at an example of where this rule of thumb actually works before looking at examples of where it doesn't. You're 67, you're making $100,000 per year, and you want to retire. The first thing we need to start with is after taxes, what are you actually taking home? This depends on are you married? What are your deductions? What state do you live in? How much are you saving for retirement? But let's just assume for simple numbers. $100,000 is what you earn and $70,000 is what you take home. 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 per year. So $2,500 per month of benefits leads to $30,000 per year. If you want $70,000. There's a $40,000 gap there. That $40,000 gap just so happens to represent 4% of a $1 million portfolio. So you can see how this rule of thumb generally works. What's the after tax take home pay you might have at your income level today? And then how might a portfolio of 10x that amount in retirement give you the distributions needed to supplement Social Security and meet your income needs for the rest of your life? So that's why this rule isn't a horrible place to start. But it's very cookie cutter. They don't apply in all situations equally. Example number one of where this doesn't apply, let's look at Emily. Emily is 40 and she earns $100,000. I'm going to pull back up this graphic from Fidelity that shows you in their opinion or in this 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 her ability to retire. But here's the thing. Emily wants to retire at 55, not at 67. What happens at 55? Well, Social Security hasn't kicked in. That's a lot fewer years that she has to compound her existing $300,000 to be able to be in a position to create income for her. And that's a much longer time horizon 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 a position to retire 55 if she's already 40. So one of the main things that skews this is actually the timing of your retirement. The timing of your retirement is going 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 chart from fidelity again. At 50, they're saying they should have six times their annual income saved. Well, if Greg and Sherry are making $120,000 per year, then that means they would need to have $720,000 saved for retirement to be on track in this example. But Greg and Sherry don't have $720,000. They only have $400,000. But here's the thing. Greg and Sherry are both schoolteachers. And when they retire, they are actually going to have a pension that's going to cover 80% of all their income needs in retirement. So they don't need the full 10 times their annual salary at age 67 to retire because they have a pension that's going to cover so much of that. And once you factor in Social Security as well, they're nearly at the point where they don't need much of their investments to actually live on at all. So in this situation, we can start to see that another indicator of how much you actually need Isn't just your portfolio value and your age. It's also what outside income sources will you have, what non portfolio income sources will you have in retirement to be able to support your income needs throughout the rest of your life? Then finally, the third case state that we're going to quickly look at. Before we walk into a better formula that will help you determine how much you need at whatever age you are approaching retirement is Michael. Michael is 60 years old, and he earns $80,000 per year. This Fidelity chart says that if he's earning $80,000 and he's 60, he should have close to $800,000. Or he should have $800,000 in his portfolio. But Michael only has 500,000. He wants to work until 67, but he feels behind because he sees this chart and he says, I'm not on track. But Michael owns a home that he plans to downsize in retirement. And when he plans to downsize that home, it's going to free up about $400,000 of equity for him. So what he needs to take into account is it's not just his $500,000 of existing liquid portfolio assets. There's also going to be an inflow when he downsizes his home. Now, in your case, this might be downsizing a home. This might be an expected inheritance. This could be some other type of windfall. But you start to see how these general rules of thumb can be. But there's a better way. Here's that better way. Instead of looking at arbitrary benchmarks or how much should you have saved at certain ages, here's something that you can do that's gonna be much more custom to you. Number one, start with an understanding of what are your expenses going to be in retirement? Imagine your retirement. What will life look like at that point? What big expenses might no longer be there? That could be things like retirement, savings, mortgage, family support. What are the things that are expenses today that might not be expenses in retirement? Now, on the flip side, what things might you be doing in retirement that you're not doing today? Is there extra travel? Is there extra money set aside for leisure, for activity, for hobbies? What does life look like? Having an understanding of that number is. Does not have to be precise. But having a somewhat clear Understanding of that is the absolute most important thing you can do here. And that's step number one. What will expenses be in your retirement? Step number two is what non portfolio income sources will you have to offset those expenses? Let's use an example. Let's assume for the sake of simplicity 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 to go towards that $100,000 of expenses in retirement. That $100,000 isn't just going to come from one source. Some might come from pension, some might come from Social Security, some might come from your investments. The important thing is, does the combined amount of all these sources equal what you need it to to meet your income needs? So you want $100,000 per year. And by the way, one thing I did not mention, failed to mention initially, is that number should be adjusted for inflation. If you want to spend $100,000 per year today, but you're only 40, adjust that for inflation. But to keep this simple, let's assume that $100,000 is the inflation adjusted number and $40,000 is what's coming in from Social Security. That's step two is identify those non portfolio income sources. Step three is identify the gap. What's the difference between how much you want to spend and how much is coming in in non portfolio income sources? That gap here, that's the amount that must be filled by your portfolio assets. So that gap in this example is $60,000. In other words, $60,000 is the amount you need coming from your portfolio to supplement Social Security and allow you to live the retirement you want to live. So what do you do with that number? Your portfolio needs to be more than $60,000 because that's $60,000 per year. What you do is you use withdrawal rate numbers that are sustainable for whatever the retirement time horizon you have is meaning that number is going to be different if your retirement only lasts for 10 years versus if you expect it to last for 50 years. Let's use 4%. 4% tends to be a very conservative rule. I actually talked to the founder of the 4% rule a couple weeks back talking about new research showing that you can actually spend more than that 4% and likely be just fine over the course of your retirement. But let's use 4 because it's a commonly used number. Commonly understood. So 4% represents the amount I can take from my portfolio, and if 60,000 represents that actual amount, I need to divide 60,000 by 4%, that's going to give me $1.5 million. That $1.5 million is the amount I would need at retirement. It's not the amount you would need today at 40 or 50 or 60. That's your retirement amount. So the final step, step number four, is to run a calculation back into what number do you need today. So, for example, if I know that My retirement is 10 years out from now and I need $1.5 million in my portfolio, I can run a calculation. You can use a calculator for this. You can use Excel for this. You can use financial planning software for this. This part's actually relatively simple. If I assume that I'm going to get a 7% rate of return over the next 10 years, which, by the way, is just an assumption, it's not a guarantee. You can use whatever number you feel comfortable with, but you need to start with something, and then ideally, you can test, well, what if that number's 4% versus what if that number's 10%? How does that range of potential returns impact what this looks like? But anyways, 10 years out, I need $1,500,000. I'm assuming my money is going to 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 today, 10 years out from retirement, I would need just under $700,000 in my retirement portfolio to be on track to make it. So what that is, that's a much more customized way to determine how much do you need in your portfolio. It's not based upon current income. It's not based on your age alone. It's based upon where do you want to be in retirement? What income sources will you have to help meet those needs? What's the gap between those income sources and your income needs in retirement? And what number do you need to have in your portfolio today such that you'll be on track between contributions and growth over the next few years to be where you want to be in your retirement years? So if you're 40, if you're 50, if you're 60 and you're worried that these benchmarks you see aren't exactly where you are, don't fret too much. Run a more custom analysis, run a more custom calculation to say, what do you actually need? Not just based on your income, but based upon your retirement desires. Where are you today? And then see if you're on track it.