How Much Should You Really Have Saved By 35?

May 25, 2018

How Much Should You Really Have Saved By 35?

Megan Markle just became the new Duchess of Sussex at 36, and with that, how much you should have saved before 35 has become a viral thing. I’ve seen articles about it everywhere, from Morningstar to the Wall Street Journal.

The common finance standpoint is that you should have saved at least twice your yearly salary by 35, which is an achievement many compare to marrying a British prince.

Figure 1: Comments on Twitter about saving and British Royalty. Source: Twitter.

The 2X Salary By 35 Savings Rule

The recommendation that you should have at least 2 times your yearly salary saved by 35 comes from Fidelity, and it is their savings factor that gives you confirmation that you are on a good track to reach 10 times your salary by 67 so that you can retire comfortably.

Figure 2: The retirement savings factor for a comfortable retirement by Fidelity. Source: Fidelity.

Fidelity came up with four factors to help you prepare for your retirement: a yearly savings rate, a savings factor, an income replacement rate, and a potentially sustainable withdrawal rate. Today, we’ll focus on the savings factor and leave the other topics for another day. I’ll try to put the savings factor into a current financial market perspective.

Let’s start with Fidelity’s assumptions which is something you might already see as crazy given the student debt you have if you are younger, or the extremely high living costs today. Fidelity expects each of us to save 15% of our salary, invest more than 50% of that in stocks, and retire at 67 with a plan to keep your previous lifestyle. Those sound like shitty assumptions to me, but let’s continue.

You Should Take Responsibility For Your Financial Life & Retirement

Given the above assumptions, many think that if they do that, invest in index funds, overweight stocks in the first years, and add more bonds later, they will reach 10X salary savings at 67 and retire comfortably. That is actually more than correct, but here are some things that aren’t so nice.

Having The Goal To Retire At 67 Really Sucks

Retiring is something you want to do as soon as possible or never if you love what you do. If you don’t love what you do, then better retire as soon as possible.

A very inspiring story comes from 94-year-old John Goodenough, professor in the Cockrell School of Engineering at The University of Texas at Austin, and co-inventor of the lithium-ion battery. Yes, you red that correctly, 94 years of age and still a professor leading a team of scientists.

Figure 3: 94 and still hustling. Source: University of Texas.

So, that is one option but if not an option for you, let’s look at whether what most expect can easily happen.

Saving 15% Of Your Salary, With 1.5% Wage Growth, & Investing Should Lead You To 10 Times Your Salary By 67 If You Start At 25

I’ll use $40k as a starting salary because it’s the average wage between 25 and 34 years old in the U.S. The ratio is what matters here, not the salary.

If you have a salary of $40k, saving 15% of it means putting aside $6,000. The fact is that the average personal saving rate is 3%. The top 1% probably save around 30%, the top 1% to 10% save around 15%, while the bottom 90% in income save much less.

Figure 4: U.S. personal saving rate. Source: FRED.

So, if you are average, try to increase your savings by 5 times…

Return On Investment Isn’t Even That Important

If I invest 15% of my $40k salary every year for 42 years and get a 7% return, the total sum at year 42 is $1.8 million, which is 22.5 times the $80k salary at age 67. However, if the return is just 5% per year, compounded, the saved amount falls to $1 million while if the return falls to 4% per year, the amount falls to $829k which is still not bad but a big difference.


There is actually a lot of wisdom in what Fidelity preaches. The key is the 15% savings rate and keeping that rate over 42 years without tapping into the funds for a down payment on a house, a divorce, paying off student debt, kids expenses, health issues, car breakdowns, roof leakages, etc. The few that stick to the plan can retire like millionaires.

I must say, that’s an easy story to sell because it’s like the first day at school, you promise yourself you will do whatever it takes, study hard, and then the first sunny weekend comes and you say you’ll do the homework later. However, Fidelity is always there to tell you: I told you so!

The point of this article is for you to rethink where you are and where you want to be. Perhaps it’s better to spend the 15% per year, have a great life, travel the world, and live off social security after 67, rather than travel the world at 67. Just some food for thought.

By Sven Carlin Investiv Daily Retirement Saving Share: