Tables 11.2 through 11.7 show annual savings requirements (to be indexed up each year with inflation) for people with no current retirement savings and no future pension. Savings requirements are divided into those for couples and those for single individuals.
Couples
The following three sections discuss the annual savings requirements for cou- ples who want to retire in the future.
Couples Who Want to Retire at Age 60 This section and its related table show the annual savings requirements for a couple who wants to retire in the future at age 60. We assume that there are no prior savings. To use the table, couples first estimate their current combined total before-tax income.
They then pick their average age, to the nearest fifth year. Then, from the num- bers within Table 11.2, they can determine their annual after-tax savings requirements.
Example:The Jones couple plans to retire when they reach age 60. They make $105,000 per year before taxes, which puts them in the high wage category. They are 35 years old with no retirement savings and no com- pany pension. Table 11.2 shows that they should be saving $19,777 per year after taxes. This will index up every year with inflation.
Couples Who Want to Retire at Age 65 This section and its related table show the annual savings requirements for a couple who wants to retire in the future at age 65. We assume that there are no prior savings. To use the table, couples first estimate their current combined total before-tax income. They must then pick their average age, to the nearest fifth year. Then, from the numbers within the Table 11.3, they can determine their annual after-tax savings requirements.
TABLE 11.3 Couples Retiring in the Future at Age 65 with No Pension and No Current Retirement Savings: Annual
After-Tax Savings Requirements Before-Tax Working Income
Current Years until High Wage Above-Average Wage Average Wage Age Age 65 (over $90,000) ($50,000–$90,000) (under $50,000)
60 5 $92,208 $73,766 $58,437
55 10 $47,533 $38,026 $29,808
50 15 $29,379 $23,503 $18,423
45 20 $20,394 $16,315 $12,789
40 25 $15,097 $12,078 $ 9,467
35 30 $ 9,686 $ 7,749 $ 6,074
Go down the “Before-Tax Working Income” column (High, Above-Average, or Average) and find the closest “Current Age” line. The numbers within the table are the annual after-tax savings requirements.
TABLE 11.2 Couples Retiring in the Future at Age 60 with No Pension and No Current Retirement Savings: Annual
After-Tax Savings Requirements Before-Tax Working Income
Current Years until High Wage Above-Average Wage Average Wage Age Age 60 (over $90,000) ($50,000–$90,000) (under $50,000)
55 5 $134,868 $106,879 $82,563
50 10 $ 62,374 $ 49,629 $38,338
45 15 $ 38,706 $ 30,674 $23,696
40 20 $ 26,623 $ 21,293 $16,449
35 25 $ 19,777 $ 15,763 $12,177
Go down the “Before-Tax Working Income” column (High, Above-Average, or Average) and find the closest “Current Age” line. The numbers within the table are the annual after-tax savings requirements.
Example:The Smith couple plans to retire when they reach age 65. They make $75,000 per year before taxes, which puts them in the above-average wage category. They are 40 years old with no retirement savings and no company pension. Table 11.3 shows that they should be saving
$12,078 per year after taxes, an amount that will index up every year with inflation.
Couples Who Want to Retire at Age 70 This section and Table 11.4 show the annual savings requirements for a couple who wants to retire in the future at age 70. It is assumed that there are no prior savings. To use the table, cou- ples first estimate their current combined total before-tax income. They must then pick their average age, to the nearest fifth year. Then, from the numbers within Table 11.4, they can determine their annual after-tax savings require- ments.
Example:The Harvey couple plans to retire when they reach age 70.
They make $45,000 per year before taxes, which puts them in the average wage category. They are 45 years old with no retirement sav- ings and no company pension. Table 11.4 shows that they should be saving $6,061 per year after taxes. This will index up every year with inflation.
TABLE 11.4 Couples Retiring in the Future at Age 70 with No Pension and No Current Retirement Savings: Annual
After-Tax Savings Requirements Before-Tax Working Income
Current Years until High Wage Above-Average Wage Average Wage Age Age 70 (over $90,000) ($50,000–$90,000) (under $50,000)
65 5 $50,561 $40,449 $33,924
60 10 $29,243 $23,395 $19,084
55 15 $18,075 $14,460 $11,795
50 20 $12,547 $10,037 $ 8,188
45 25 $ 9,288 $ 7,430 $ 6,061
40 30 $ 5,959 $ 4,767 $ 3,889
35 35 $ 4,872 $ 3,898 $ 3,180
Go down the “Before-Tax Working Income” column (High, Above-Average, or Average) and find the closest “Current Age” line. The numbers within the table are the annual after-tax savings requirements.
Single Individuals
The following three sections discuss the annual savings requirements for single individuals who want to retire in the future.
Single Individuals Who Want to Retire at Age 60 This section and its related table show the annual savings requirements for single individuals who want to retire in the future at age 60. It is assumed that there are no prior savings.
To use the table, individuals first estimate their current before-tax income.
Then, on the left side of the table, they must then find their age, to the nearest fifth year. Finally, from the numbers within Table 11.5, they can determine their annual after-tax savings requirements.
Example:Mary, who is single, plans to retire when she reaches age 60. She makes $80,000 per year before taxes, which puts her in the above-average wage category. She is 35 years old with no retirement savings and no com- pany pension. Table 11.5 shows that she should be saving $12,531 per year after taxes, which will index up every year with inflation.
Key Point
Note the huge effect of a delayed retirement. For example, a 35-year-old average-wage couple planning to retire at age 60 needs to be saving
$12,177 per year. Retiring at age 65 requires saving $6,074 per year.
Delaying retirement until age 70 reduces annual savings to $3,180 per year!
TABLE 11.5 Individuals Retiring in the Future at Age 60 with No Pension and No Current Retirement Savings: Annual
After-Tax Savings Required
Before-Tax Working Income
Current Years until High Wage Above-Average Wage Average Wage Age Age 60 (over $90,000) ($50,000–$90,000) (under $50,000)
55 5 $116,495 $84,967 $96,187
50 10 $ 54,094 $39,454 $44,664
45 15 $ 33,434 $24,386 $27,606
40 20 $ 23,209 $16,928 $19,163
35 25 $ 17,181 $12,531 $14,186
Single Individuals Who Want to Retire at Age 65 This section and its related table show the annual savings requirements for single individuals who want to retire in the future at age 65. It is assumed that there are no prior sav- ings. To use the table, individuals first estimate their current before-tax income.
Then, on the left side of the table, they must then find their age, to the nearest fifth year. Finally, from the numbers within Table 11.6, they can determine their annual after-tax savings requirements.
Example:Sam, who is single, plans to retire when he reaches age 65. He makes $40,000 per year before taxes, which puts him in the average wage category. He is 40 years old with no retirement savings and no company pension. Table 11.6 shows that he should be saving $11,785 per year after taxes, which will index up every year with inflation.
Single Individuals Who Want to Retire at Age 70 This section and its related table show the annual savings requirements for single individuals who want to retire in the future at age 70. It is assumed that there are no prior sav- ings. To use the table, individuals first estimate their current before-tax income.
Then, on the left side of the table, they must then find their age, to the nearest fifth year. Finally, from the numbers within Table 11.7, they can determine their annual after-tax savings requirements.
TABLE 11.6 Individuals Retiring in the Future at Age 65 with No Pension and No Current Retirement Savings: Annual
After-Tax Savings Required
Before-Tax Working Income
Current Years until High Wage Above-Average Wage Average Wage Age Age 65 (over $90,000) ($50,000–$90,000) (under $50,000)
60 5 $86,214 $61,549 $76,071
55 10 $43,178 $31,095 $37,105
50 15 $26,687 $19,219 $22,934
45 20 $18,525 $13,341 $15,920
40 25 $13,714 $ 9,876 $11,785
35 30 $ 8,798 $ 6,336 $ 7,561
Go down the “Before-Tax Working Income” column (High, Above-Average, or Average) and find the closest “Current Age” line. The numbers within the table are the annual after-tax savings requirements.
Example:George, who is single, plans to retire when he reaches age 70.
He makes $100,000 per year before taxes, which puts him in the high wage category. He is 50 years old with no retirement savings and no com- pany pension. Table 11.7 shows that he should be saving $12,676 per year after taxes, which will index up every year with inflation.
TABLE 11.7 Individuals Retiring in the Future at Age 70 with No Pension and No Current Retirement Savings: Annual
After-Tax Savings Required
Before-Tax Working Income
Current Years until High Wage Above-Average Wage Average Wage Age Age 70 (over $90,000) ($50,000–$90,000) (under $50,000)
65 5 $55,349 $37,787 $55,171
60 10 $29,545 $20,621 $27,796
55 15 $18,261 $12,745 $17,180
50 20 $12,676 $ 8,847 $11,926
45 25 $ 9,384 $ 6,550 $ 8,828
40 30 $ 6,020 $ 4,202 $ 5,664
35 35 $ 4,923 $ 3,436 $ 4,631
Go down the “Before-Tax Working Income” column (High, Above-Average, or Average) and find the closest “Current Age” line. The numbers within the table are the annual after-tax savings requirements.
Key Point
Again, note the huge effect of a delayed retirement. For example, a 40-year-old above-average-wage individual planning to retire at age 60 needs to be saving $16,928 per year. Retiring at age 65 will require saving $9,876 per year. Delaying retirement until age 70 reduces annual savings to $4,202 per year!