It's A Mess

A friend of mine recently asked me how much he should have in retirement accounts based on his age and income level. Although this is an inexact science, I gave him pretty generalized advice that has a tendency to work for people that spend approximately 75% of their final salary, prior to retirement.

By age 30: 1x your annual salary

By age 40: 3x your annual salary

By age 50: 5x your annual salary

By age 65: 10x your annual salary

These numbers certainly don’t take into account a host of variables, but they are a good measuring stick to determine if you are at least on the right track.

All of this information is great to have, but I feel compelled to drop a truth bomb. Ready, here it is: America is absolutely terrible when it comes to saving money! Wow, shocker, I know.

If you have money burning a hole in your pocket, Apple announced their new iPhones and watches for preorder on Friday. Definitely don’t contribute to your retirement plan with that money (sarcasm).

Being the consummate nerd that I am, here is a colorful graph:

If you plan on eating ramen noodles and riding the bus during retirement, this graph probably does not strike you as disheartening. I agree ramen noodles are delicious and public transportation is a great way to get around if you are either very concerned about the environment or live in a hilariously overpopulated city, but most 70 year old folks don’t really appreciate this lifestyle.

You might be saying to yourself, “Alex, my government loves me and will support me in retirement with Social Security, right?”

Insert colorful and depressing graph here:

I know this graph may not be the clearest depiction of what I’m trying to convey, so let me point out one specific thing. The Social Security Administration is projecting the trust will be insolvent by 2035. This will undoubtedly be a topic of political debates and elections moving forward, but the current trajectory of politics certainly doesn’t seem to suggest a massive cut in government spending or any meaningful tax increases to fix the Social Security problem.

So the million dollar question is, “what the heck do I do?”

No, don’t do that.

Start small by participating in your company sponsored plan. At the very least, contribute enough to take advantage of the match they provide. If you don’t have a company plan, check to see if you are eligible for IRA or ROTH IRA contributions.

Assuming it is possible for you not to purchase the newest iPhone, I have a few ideas you could do with that money instead. Of course, you need to determine what’s appropriate for your individual situation (obligatory disclaimer) but here are some steps, in order, that you could take (secondary obligatory disclaimer: only utilize these steps if you and your financial advisor find it to be prudent):

  1. Pay down credit card debt to zero. If you can’t pay off your cards on a monthly basis, you shouldn’t have cards. Sorry, I’m just the messenger.

  2. Build up 6 months of living expenses in savings.

  3. Pay down student loans. Never miss payments, but don’t try to pay them off at the expense of bullet point number 2.

If you can get your budget under control to the point where you can save a combined 20% of your income (between retirement contributions and savings/investment accounts) you should be able to solve the retirement puzzle without having to rely on Social Security.

You may even be able to take a vacation during your retirement years.

Final Thought: We live in a society that places incredible pressure on us to look like we’ve made it. What “it” is, is not relevant. Our culture is one of excess and things. Determine what is important to you and your family and chase it without regard for what your Instagram followers think.


Any opinions are those of Alexander Leonida and not necessarily those of Raymond James or RJFS. All opinions are as of this date and are subject to change without notice. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts mentioned will occur. All investing involves risk and you may incur a profit or loss regardless of strategy selected. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation or a solicitation to buy or sell any security referred to herein.

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