So, let's talk about the 40-year-olds. Right, okay, so we know that in our 30s, the average 401K balance is about $48,000. By the time we get to our 40s, Brian, you're still in this decade for the moment. By the time you get to your 40s, the average 401K balance is about $108,000. Now, again, it's more than doubled, so it is growing. And just like you said, Ryan, the savings rate is ticking up a touch.
The average savings rate - here's what troubles me - for folks in their 40s, this includes the employer match. If you're someone who's a higher-income individual/household, you should not be including the employer match in your 25% savings rate. Once you're saving 25% outside of the employer match, but I don't think this average gets me super excited. No, I don't think our folks should be ahead of that. And, they say that again, according to Fidelity, you should have almost five times (4.8 times) your annual income saved by the time you get to your mid-fifties. I didn't say anything in the 20s or 30s because that money is so hard, and you have to push yourself. You're trying to figure out how to pay for the family and everything else. But by the time you're in your 40s, I think this number is too low. I think it is. You're going to see that's going to be a common trend. I think in the 50s that we're going to share in a second, that's too low. I want you to try to shoot for higher than what Fidelity is saying, and currently, they're saying 4.8 times your income by the time you're 40-50 years of age. Now, we tell people all the time, 'Hey, save 25%, save 25%.' If you are getting into that 40 age or the 40 plus age, depending on what your plans are, 25% may not be enough. And I know that's cold water, but look at this.
Even if you start at 40 and you start saving 25%, you still have to work until almost 70 until you're able to replace 80% of your income. Now, this doesn't factor in social security, this doesn't factor in pensions. It doesn't factor in maybe only needing 60% of pre-retirement income. But you can see the longer you wait, the later it gets pushed out. If you get to where you're 49, that's getting up there. If you get to 49 and you haven't started saving, 25% is great. You ought to shoot for that, but you're probably not going to have a normal time. You're probably going to have to work a little bit later than what people normally think of as a retirement. I don't, look, I am such an optimist. I don't even - because there are going to be people that watch this that are in their late 40s, maybe even early 50s. And I don't want them to think, 'Oh my goodness, this sounds horrible.' Because there are opportunities for you to figure out what levers you can actually control. And I would encourage you first, if you do wake up and you're like, 'How do I play catch-up?' If you go to learn.moneyguy.com, we actually have a 'Know Your Number' course
You can figure out whether you are on a healthy curve, behind the curve, or sitting right where you should be. Once you have that information, you can decide whether you need to make more money now or increase your savings and contribution rates to get aggressive and save 35-40% of your income. Alternatively, instead of thinking that you won't be able to retire, you could consider a modified retirement. There's nothing that says you can't work part-time or figure out other ways to supplement your income. I don't think it's all cold water and glass half-empty. In fact, there are opportunities for those who start later. I love it, I love it, I love it. And once again, thank you for being the optimist. I appreciate it.
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