What 1 Popular Retirement Rule Says You Should Have Saved by Age 67

Saving for retirement is hard. For starters, humans aren't very good at delaying gratification. And saving is basically choosing not to spend today so you can spend, hopefully even more, in the future. But there's another problem with saving for retirement: it is hard to set a goal. There's one popular retirement rule that can help with that. Here it is.

Don't compare yourself to everyone else

When you think about money, the gut reaction is to compare yourself to other people. That's understandable, but it can lead you into troubling waters. For example, the average 65 to 74-year-old has a net worth of nearly $1.8 million. So, you could argue that by 67 you should have that much money saved up. But that figure mashes together the very rich with people who aren't as fortunate. The median net worth, with half of all people above and half below, is roughly $410,000, which is a lot lower. Which one is the better target?

Image source: Getty Images.

That doesn't even consider the fact that net worth includes assets like a home, which isn't something you can easily tap for cash. Sure, you could sell your home and move into a small residence, but you still need to live somewhere. And you aren't average or median. You are you, and your earnings and savings numbers are unique.

That's where a simple savings rule comes in, based on your salary. Essentially, you are creating a personalized saving goal for retirement. To cut to the end of the story, the rule is that you should have 10x your salary saved by age 67. But that's just the final step in the process, because the rule provides benchmarks all along the way to keep you on track.

The rule says that by age 30, you should have saved 1x your salary. By 35, you should be at 2x. By 40, 3x. At 45, the target is 4x. This is where things start to heat up a little, noting that if you have been saving for 20 years, you will hopefully start to see the benefits of compounding. At age 50, the goal is 6x your salary. At 55, 7x. At 60, 8x. And, finally, by full retirement age of 67, the goal is 10x.

The savings path, personalized for your needs

In the end, this is just a rule of thumb. But the benefit of using multiples of your salary is that you get a savings goal tailored to your situation. And, if you follow the glide path, you have benchmarks all along the way to the final savings goal. In reality, the path this simple rule lays out could be more important than just putting up a figure of 10x your salary, since it can help keep you motivated over what could be decades of hard work, saving, and investing.

The Motley Fool has a disclosure policy.