How much you should have saved for retirement at every age

Wednesday, October 18, 2023

56% of workers say they’re not on track to retire — how much money experts say you need

More than half of Americans don’t think they’ll be able to retire on time. 

Some 56% of Americans who are working full time, part time or are temporarily unemployed feel they are behind on their retirement savings, according to Bankrate’s September survey.

What exactly counts as “on track” depends on factors such as when you plan to leave your job and the amount of income you hope to live on in retirement. In general, though, aim to have 10 times your pre-retirement income saved by the time you reach 67, according to Fidelity. 

Here are more of their suggested goals by age:

• By age 30: 1x your income.
• By age 40: 3x your income.
• By age 50: 6x your income.
• By age 60: 8x your income.

That may seem ambitious, but remember: Your retirement investments are supposed to grow over time. If you start early, compounding can do a lot of the work for you.

To get closer to where you need to be, focus on upping your savings rate — the percentage of your pretax income you stash in retirement savings vehicles such as 401(k)s or Roth IRAs. Fidelity recommends saving at least 15%, a figure that includes employer contributions to workplace retirement accounts, if offered. 

And if that seems like too big a chunk of your income to put away, start small, experts say. Choose a percentage of your salary to contribute that works for you, and vow to increase the percentage by a point every year when possible.

Money Tip of the Week: How to handle a windfall

Between 2001 and 2019, the average windfall among those who received an inheritance was about $184,000, according to a University of Pennsylvania analysis of data from the Federal Reserve’s Survey of Consumer Finances. 

If you’re lucky enough to get that kind of money, you’ll likely have to fold it into your financial plan, which can be tricky. Inheritances tend to come as a mix of three different types of assets: cash, real estate and investments. Here’s how to handle them:

Cash: As long as the total value of the estate you’re inheriting is under $12.92 million in 2023, you won’t owe any federal taxes on it. Use any cash you inherit to plug holes in your finances. Prioritize building an emergency fund and paying down high-interest-rate debt.

Real estate: You get what’s known as a “step-up in basis” when you inherit a home. That means you get the house at its current value and won’t owe tax on any gains from the home’s previous sale price.

Get multiple appraisals on the property as quickly as possible to establish a fair market value. That will be the basis of any negotiations, whether you want to sell the home or find a way to divvy things up among siblings.

Investments: The same basis rules apply to investments in taxable accounts. Even if you’ve inherited appreciated stock, you can sell it the day you inherit it and pay no capital gains tax. You will owe tax, however, on inherited accounts that were funded with pretax dollars, such as traditional 401(k)s and IRAs. 

The more complicated the estate you’re inheriting, the wiser it is to hire pros, such as a tax planner, a financial planner and an estate attorney, to help with the process. 

Next Gen Investing: ‘Godfather of AI’ says AI could ‘escape control’ by rewriting its own code

Geoffrey Hinton, the computer scientist known as a “Godfather of AI,” says artificial intelligence-enhanced machines “might take over” if humans aren’t careful.

Rapidly advancing technologies could gain the ability to outsmart humans “in five years’ time,” Hinton said in a recent interview with the CBS program “60 Minutes.” If that happens, AI could evolve beyond humans’ ability to control it, he added.

“One of the ways these systems might escape control is by writing their own computer code to modify themselves,” said Hinton. “And that’s something we need to seriously worry about.”

Other AI experts don’t seem as concerned as Hinton about humans losing control. Yann LeCun, who is also considered a “Godfather of AI,” has called any warnings that AI could replace humanity “preposterously ridiculous” — because humans could always put a stop to any technology that becomes too dangerous.

Hinton noted that the worst-case scenario is no sure thing and added that industries like health care have already benefited tremendously from AI. Still, Hinton believes the concern is real enough that legislators need to put guardrails in place to regulate tech companies that work in the space – and soon. 

Humanity is likely at “a kind of turning point,” said Hinton, so tech and government leaders must determine “whether to develop these things further and what to do to protect themselves if they [do].”

Worth the Money: $69 portable charger

When I’m away from home for long stretches, my iPhone battery doesn’t always last the day. Of course, this won’t do. That’s why I keep a portable battery pack in my bag at all times.

Recently, I upgraded from a years-old brick of a charger to the sleek, easy-to-use Belkin BoostCharge Plus, which provides my phone with around three full charges worth of battery. 

Without a powered phone, I can’t text or order an Uber, or even call 911, so it feels good to have the extra juice whenever I need it, especially for emergencies. 

— Mike Winters, Money Reporter

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