How Much Should the Average Middle-Class Boomer Have in Savings?

Posted on 17 Apr at 5:59 am

Baby boomers in America are at or near retirement. So how much should the average middle-class boomer have in savings in order to comfortably weather their golden years?

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While Andrew Latham, CFP and managing editor at SuperMoney, stated there’s no one-size-fits-all answer given factors like debt, present funds, possible bequests, medical expenditures and expected inheritances, there are a couple of popular rules of thumb that can help guide retirement savings goals.

If we define middle-class as someone making between $55,000 and $90,000 annually, baby boomers would be expected to have approximately $500,000 to $1,000,000 in savings according the following calculations:

$55,000 annual income x (10 to 12) = $550,000 to $660,000 in savings
$90,000 annual income x (10 to 12) = $900,000 to $1,080,000 in savings

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Latham explained that this rule creates a much more personalized target. The idea is to save 25 times your estimated annual retirement expenses — which assumes a 4% annual withdrawal.

First, calculate your annual retirement expenses which are estimated to be about 75% of your pre-retirement living expenses, “as you’ll likely spend less on work-related costs and saving for retirement.” (For the purposes of this model, we use annual income to signify pre-retirement living expenses). Next, subtract any expected annual fixed income like Social Security or pensions to determine what your savings need to cover. Finally, multiply that number by 25.

.75 x $55,000 annual income = $41,250 annual retirement expenses
$41,250 – $20,000 expected Social Security = $21,250 needed in annual savings
$21,250 x 25 = $531,250 in overall savings

.75 x $90,000 annual income = $67,500 annual retirement expenses
$67,500 – $30,000 expected Social Security = $37,500 needed in annual savings
$37,500 x 25 = $937,500 in overall savings

The bottom line, says Latham, is that the goal is not to meet some arbitrary number but to have a realistic plan that fits every individual’s needs and goals.

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This article originally appeared on GOBankingRates.com: How Much Should the Average Middle-Class Boomer Have in Savings?