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How much money do I need to have saved by the time I retire?

An industry rule of thumb suggests the following: 

  • After working for five years: You should have saved a capital sum equal to one year’s salary. 
  • After working for 10 years: That saved capital sum should equal two years’ salary. 
  • After working for 20 years: You should have saved five times your annual salary. 
  • After working for 30 years: You should have saved 10 times your annual salary.
  • After working for 40 years: You should have saved 17 times your annual salary.

What should your retirement savings goal be?

Your goal should be to save enough money by the time you retire to provide an income that will maintain your standard of living. To do this, you can use a replacement ratio (RR) to you set your target. A replacement ratio projects your first monthly pension income as a percentage of your last month’s salary just before retiring.  Or in other words, what percentage of your working salary will continue after you retire.

This can sound overwhelming, but luckily you have the power of compound interest on your side:

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