Many workers wonder at some point in their careers if they are on track and amassing enough wealth for a good retirement. It’s one of the main principles used by a lot of workers and their advisors for retirement planning.
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Here’s an interesting way to think about it. According to Edward Jones, “The bottom-line goal of retirement planning is deceptively simple: accumulating enough money to live the life you want once your career is no longer occupying most of your time or generating a regular paycheck.”
Let’s dig a little deeper into where your net worth should be come your golden years.
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Net worth can be a helpful factor in planning for retirement. In simple terms, your net worth is the value of all of your assets minus the total of all of your liabilities.
Let’s say you’re 62 and wondering if you’re on track for a comfortable retirement — especially since you’re approaching it within a few years. According to Paces Ferry Wealth Advisors, your net worth should equal six times your annual salary by this age. So, if your annual salary is $100,000, a net worth of around $600,000 would be on track for a comfortable retirement.
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One thing to remember is that retirement savings are only part of your assets when determining net worth. Along with retirement accounts and other investments, other assets that are part of your net-worth equation include savings and checking accounts, real estate and vehicles.
Keeping that in mind, it can be helpful to look at age-related goalposts for retirement planning and saving. Say you have a $50,000 salary. According to data from Edward Jones, by age 62 you should have $435,000 to $530,000 in savings.
Since your net worth is more than just your savings, you can add to that base amount (and subtract liabilities) based on your lifestyle and what you think it’ll look like in retirement.
If you talk to a financial advisor, the topic of debt will likely come up. That’s because it’s generally recommended to lower your debt as much as possible before you retire. You may be able to downsize or refinance your mortgage. Those steps could help you with debt as you face life with a fixed retirement income.
After seeing some of these figures, you may think you don’t have enough to live comfortably in retirement. These are general guidelines, and it can be helpful to talk to an advisor.
