How Much Money You Need Saved by Age to Retire is a Damaging Exercise
By: Frankie Calkins
Tags: Retirement Planning, Financial Independence, Money Mindset, Financial Freedom, Fire Movement

How Much Money You Need Saved by Age to Retire is a Damaging Exercise

Photo by engin akyurt on Unsplash

I’m more than a little fired up today. I actually wanted to write an article helping you set financial benchmarks and goals. You know, the good ol’ classic “here’s exactly how much you should have saved if you want to retire on time” bit.

But quickly, after researching, I realized it would do you no good. In fact, it would likely do you harm.

There’s enough information out there on the topic if that’s all you want to know. But frankly, it’s all bullshit.

Let me explain AND offer an actionable approach you can start implementing today instead.

First off, I’m not out to criticize anyone who simply wants to know where they stand compared to their peers. If you have no idea, turn to the data and, so to speak, “experts.” I get it. Many do that. After all, there’s more information available to us for free now than ever, so take advantage of it.

One piece of warning — several by the end of this

Information overload can be a real thing, especially if the information makes you feel bad, which I think is inherently what’s going to happen here. The data shows most Americans are behind and off-track when it comes to the traditional retirement age.

Yet, to come back around, it’s human nature to want to compare ourselves to one another.

In fact, I read multiple times that the #1 question people ask financial advisors is: how am I doing compared to other clients?

I’m not sure why we have this tendency to compare. Maybe it’s some sort of survival instinct from days long gone.

We do it all the time, and most of the time, we do it unconsciously. Today I want to highlight the harm, the damage that does. Plus, why you need to be aware of it and reasonable solutions to help you avoid this comparison thinking — which spirals into negative thinking, self-doubt, regret, and maybe even the 5 stages of grief…

Before I dive into this more, I want to start with actionable financial real-life money advice I wish I knew many, many years ago:

If you’re only saving money, you’re doing it wrong.

Most articles say, “here’s how much you need saved, but that alone is misleading. You cannot save your way to retirement alone. You must invest.

Source: Our Rich Journey (YouTube)

It isn’t about earning more or spending less. It’s about how you set up your money to earn more money. You can earn money one day and one hour at a time, or you can make sure your money is always working for you. This was my biggest miss financially growing up.

After college, I avoided investing for a decade because it seemed scary. It really isn’t, and I have several articles on the topic if you are looking to learn the basics.

My second key piece of financial advice is:

If your salary increases, your savings should proportionally increase as well.

As people earn more, they typically get better at spending. Annual expenses go up. Savings rates go down.

If that’s the case, no matter how much money you have saved by age, you are delaying retirement if you allow this to happen. As your spending increases (and therefore your annual expenses rise), you suddenly need to save and invest more money to retire on time if you want to afford your new, more expensive lifestyle in retirement.

In some cases, that needed amount of retirement income needed could double or triple.

Let’s be real, the majority of people cannot build a nest egg of $1 million dollars. Frankly, if you found out from one of these articles or a retirement calculator that’s how much you need, you’ll want to give up. It’s laughable. Why even try?

This brings up a very important point about the “how much you need saved by age” conversation.

There is no fool-proof way to measure if you’re off track or ahead of the game.

There are FAR too many variables to consider to give anybody end-all-be-all evergreen advice.

Are you married?

Do you have kids?

Do you already own a home? If so, how much of the mortgage is paid.

Do you have debts?

Where do you live?

How long do you plan to live? You know the answer to that one, right?

What kind of retirement will you have?

How will your investment do?

Will you need long-term health care?

The list goes on and on…

Let’s go back to those clickbaity articles and YouTube videos that do a lot more harm than good, as I mentioned.

Those articles and videos with definitive numbers simply end up making you feel worthless, quite literally. They’re dreadful reminders about mistakes you’ve made in the past. That is never how I approach personal finance.

In fact, the first unofficial tip in the introduction of my second book is this:

Forgive Yourself. Stop beating yourself up for mistakes you’ve made or procrastination that has delayed your success. You won’t be able to focus on the future if you spend energy thinking about the past. Start fresh, think forward, and stay positive. Mindset is everything.

So, what can you do instead, no matter where you are financially and at any age?

Step 1: Take a step back and focus on what age you want to retire.

Don’t be scared to dream big and try to retire early even if you feel “way behind.” You know what they say about aiming for the moon and landing amongst the stars.

Step 2: Evaluate what type of retirement you hope to have.

If it’s traveling or otherwise lavish, you’ve got some serious work to do. If it’s the opposite and you can keep expenses low, you might be able to retire in 10, 15, or 20 years no matter where you’re at now, even without a savings rate above 50% (defined as how much you save divided by your after-tax income).

Pro Tip: Side hustles and passive income can help you get there faster.

It’s also critical you build habits before you focus on numbers or vague rules of thumb or guidelines. Like getting fit, working on your financial muscles takes consistent habits over time. You build habits day by day. If you feel behind or off track, you will not fix it with sheer will and force one day or even in one month.

With that said, let’s discuss a critical mental concept I recently learned about from the Financial Rockstar podcast.

Gap Mentality vs. Gain Mentality

I’m going to start by sharing the data most articles and videos cover — how much you technically should have saved by age to retire on time.

Take a moment to study the chart below. It represents how much you and a partner need saved by age compared to your combined salary. Face the numbers for a moment and digest them.

I bet I know the first thing you did — you located your age. You locked in on the closest line, and you compare it to your own estimated net worth or savings. That’s normal.

As you looked at those numbers, you were likely measuring yourself in the gap, not the gain. As you looked at these numbers, did you think: I feel behind? That right there is gap thinking. It’s looking to compare yourself to others or the status quo.

Instead, I suggest you work on developing gain thinking.

Think about the progress you’ve made. Think about where you were 5, 10, 20 years ago and where you are today. What have you gained? (Hint: I’m not just talking about money.) How far have you come? And what opportunity lies ahead of you?

If you’re saving for a down payment on a house, don’t think to yourself, I’m still $30,000 away. Instead, shift this thinking to Wow; 18 months ago, I had just $5,000 saved. Now I have $12,000. I’ve more than doubled it. I’m making numbers up, but you get the idea.

Typically, money breeds gap thinking. It creates little success scorecards. It’s dangerous, it’s unhealthy, and it’s never productive.

Perhaps this is part of the reason why talking about money has become so taboo. As humans, we can help but instantly compare in the back of our minds.

To practice gain thinking, remember that money is simply a tool. It’s neutral. It’s you (see also: your peers and the media) that make it seem like more than that. Money helps you get what you want. It’s that simple.

Everyone is different. Minimalists need very little. Some want a lot and have a desire to travel often. You can only compare yourself to what future you need and want out of life.

Better yet, compare yourself to where you were 10 years ago financially and on a happiness level.

Ignore the media and enjoy your life.

Be present. Be happy. Set goals but make sure they’re you’re own goals and for the right reason.

Here’s another interesting point about gap thinkers: they can be extremely successful but not necessarily happy. They continue to move the goalposts to want more and more, and/or they spend the bulk of their time working because of #hustleculture. They don’t stop to reflect on what matters most, who matters most, what they really want out of life, or their big picture why.

If you want to be unhappy, compare yourself to others. If you want to be happy, spend time reflecting on where you are now vs. where you used to be. Spend time thinking about where you want to be in the future and why.

Catch yourself when you find yourself admiring the Joneses, thinking about what others think of you, or are comparing yourself to others in general. Those mental exercises are toxic and limiting.

Gain thinking can benefit you in many ways beyond personal finance. For example, I wanted to start a blog for years. Finally, I figured out, the only thing holding me back was fear of what others would think and comparison to those that are much more successful than me.

Then I redefined success for the future me. If I can gain 100 followers on Medium, that would be awesome. If I can learn how to earn money from writing, that would be amazing. If I can write three articles a week instead of one, I could help and reach more people with my message. If I can show up consistently, I would be proud of that.

Since then, every day, my metrics look a tiny bit better. I’m able to reach more people because of my habits — all because I developed gain thinking.

I often think to myself, where will I be 10 years from now if I keep working as hard as I am now, with the same positive attitude I have now? Where will I be if I get 1% better each day?

You will never be at the top. That’s okay.

There will always be somebody smarter, better, strong, younger, prettier, richer, and so on than you. Or retired sooner than you. And that’s great.

But you today are much better than you were in the past and future you can discover even more happiness — even if you don’t have exactly 4x your salary saved and invested by age 45 because “experts” say you should.

Live your life with a focus on what matters most. I personally think good financial knowledge and money can help get you there, but if you think money alone gets you there, you’re missing the point.

Run your own race. That’s my message today. Comparison is the root of all unhappiness. Your story is uniquely yours and different is better than better.

I honestly did not expect myself to have such a strong reaction to the topic. This is literally the opposite of what I intended to write for you today, but I went with my gut and took a bit of a risk.

Remember, it’s easy to go with the grain. It’s easy to fall victim to the status quo. It takes guts and courage to do things your own way. To define success on your own terms. To trust yourself and your instincts. To believe in yourself.

Never let articles or benchmarks from supposed experts tell you how to live your life. It is NEVER too late to change your financial life or radically change your life in general.

If you studied the chart above and felt bad about your current situation, now is the perfect time to say out loud — I guess I’m going to be an anomaly.

Get determined. Stay positive. Build gain thinking and build habits. Compare yourself to past you and future you only. Decide what you want out of life and why. That’s how you’ll achieve financial success. That’s how you’ll achieve success in general.

Best of luck building habits and momentum.

Never forget, you are doing great compared to past you. Now, go make future you proud by flexing your financial muscles one day at a time.

Small efforts day in and day out will show you the way.

Have an awesome rest of your day. I genuinely appreciate your time. Be sure to follow me on Medium for more weekly finance inspiration. Watch to see how fired up I am about this topic on the video version.