Sunday, July 13, 2014

Save Up to Fifteen (15) Times Your Salary for Retirement

An interesting article in the New York Times today covering a book by Professor R.C. Marston on how much you need to save for retirement. His conclusion?  Save up to 15 times your final salary, which is a lot - if you earn $100,000 a year, you need $1.5 million to retire.

It does make some sense.  If you save 15X your salary, and use the rule of thumb to withdraw 4% of your savings each year in retirement, you will get 60% of your salary, plus whatever you get from government pension plans (15 to 25% of your salary), for a total of 75 to 85% of your salary.  The rule of thumb for living expenses in retirement is 70%, although there is a good argument that you need more in your early years of retirement and perhaps less later.  See this previous blog entry.

I know, this sounds depressing, how am I going to save 15X my salary?

  • If you are a member of a good pension plan, you likely need less than 15X
  • You will accumulate most of your retirement savings during your late 40's and 50's when your kids are finished college, your mortgage is lower, and your earning power should be at its peak.
  • Follow the advice in this blog and max out your 401K, RRSP, IRA, stick to low cost index funds, and don't live above your income.
  • Or, you could do it the American way and work forever ;-)


  1. Here's some scarier news. If you pay high fees with your investments, and most people do, the 4% rule doesn't apply to you, and you'll need more than 15X your salary.

    1. Michael, yes you are correct, studies show that low fee funds have higher returns on average compared to high fee funds.


Comments are not moderated prior to posting. Mark