Personal Finance

If you make $300k per year, don't retire at 65 unless you have this much saved

Kristin Hitchcock

Published: November 26, 2024 10:10 am

24/7 Wall St. Key Takeaways:

• Saving for retirement always requires discipline and consistency. However, the amount you need to save depends on how much you make now (assuming you have comparable expenses).
• You’ll probably need to make adjustments as your income and retirement plan changes. 
• Also: Take this quiz to see if you’re on track to retire ^(Sponsored)

Retiring comfortably at 65 requires a careful balance of saving and spending, no matter what your income is. When you make $300,ooo a year, you should have at least 2.09 million saved by the time you reach retirement age. 

How did we factor this? We took several key assumptions in consideration:

• A 15% pre-tax retirement contribution throughout your working years.
• A 28% effective tax rate.
• An annual portfolio return of 6% before retirement and 5% after retirement.
• Social Security benefits start at age 65, contributing to your income during retirement.

These factors represent the “normal” retirement situation and help ensure that your savings can withstand inflation. 

What to Do If You’re Behind on Savings

Don’t panic if you look at the number and realize you’re behind on your savings! That’s more common than you might think. There are several actionable steps you can take to catch up:

• Max Out Contributions: Take full advantage of 401(k) catch-up contributions (up to $7,500 in 2024 if you’re 50 or older) and max out IRAs. If you’re behind, you need to start putting in as much as you can now. 
• Delay Retirement: Postponing retirement by even a few years allows your portfolio to grow and boosts Social Security benefits. If you just can’t save anymore, this can be an easy way to make retirement more comfortable. 
• Cut Current Spending: Redirect savings by reducing discretionary expenses, such as travel or luxury purchases. Use these funds to increase contributions.
• Consider Downsizing: If you can lower your housing costs, you can use the extra savings to relocate to a more affordable area.

Every dollar saved now compounds over time into even more money. 

What to Do If You’re Ahead on Savings

If your savings are on track or exceeding your retirement target, leverage this position to further secure your future:

• Pay Down Debt: If you have debt, you can cut back on retirement savings and reduce your high-interest debt, leading to a lighter financial burden in retirement. 
• Diversify Investments: Consider diversifying into real estate, dividend-paying stocks, or other income-generating assets to supplement your retirement income.
• Boost Tax-Advantaged Savings: Max out contributions to health savings accounts (HSAs) or consider Roth conversions to reduce your tax burden in retirement.
• Refine Retirement Plans: You could consider higher retirement goals, like extensive travel or philanthropy. This will help you maintain a safety cushion for unexpected expenses, as well. 

You can use these points to help improve your financial position instead of just throwing more in a savings account. Of course, having more money saved is rarely a bad thing!