Couple in Their Late 30s Assess Retirement Savings, Face Potential Shortfall
A couple in their late 30s with a combined $105,000 in retirement savings and young children are evaluating their progress toward a planned retirement at age 60, and experts suggest they may be behind schedule.
The couple, aged 39 and 37, currently have $215,000 in a 401(k), $40,000 in stock, and $60,000 in a pension, but financial professionals indicate that, based on averages, they ideally would have twice that amount saved at this stage. According to data from the Federal Reserve’s 2022 Survey of Consumer Finances, the average 35 to 44 year old has $141,520 in savings. Estimating retirement needs requires considering current expenses; experts often suggest budgeting 70% to 90% of pre-retirement income. If earning $150,000 annually, this couple may need $120,000 per year in retirement, offset by potential Social Security benefits.
“To have $80,000 in retirement income per year, you will need $2 million in reserves,” says Gil Baumgarten, CEO of Segment Wealth Management in Houston. “Worse, 21 years from now, each dollar will be worth half of its current value, so $80,000 won’t buy as much.” Experts recommend prioritizing consistent saving within retirement plans, aiming for at least 10% of joint income, and maximizing employer matching contributions. Balancing retirement savings with future college expenses is also crucial; a 529 plan can be a useful tool, but experts caution against prioritizing education savings over personal retirement.
While a financial advisor can provide personalized guidance, some suggest focusing on low-cost investment options like VOO, VTI, or SPY, and Vanguard’s indexed 529 plans. Alonso Rodriguez Segarra at Advise Financial notes that advisors can help with complex decisions like Roth versus traditional 401(k) contributions and optimizing 529 plan contributions. Finding a certified financial planner who offers services on an hourly or project basis—ranging from $200 to $500 per hour or $1,500 to $7,500 per project—may be more beneficial than those charging a percentage of assets under management. This situation highlights the growing need for individuals to proactively manage their financial futures, especially with increasing economic uncertainty.
Financial professionals suggest continued monitoring of savings progress and seeking expert advice to refine strategies as needed.
