Seventy-two percent of Americans are saving something every year, according to a recent Capital One study. The average saver sets aside 6.4% of their income. Less than 20% are saving more than 10%, and 25% save nothing.

That is a pretty dismal savings rate, especially when actuary studies show that for every 65-year-old married couple living today there is a 47% chance that at least one of them will be living at age 95.

Don’t guess at how much you need to save for retirement.

Who Are the Millionaire Savers?

Recently, Fidelity surveyed its network of 401(k) plans. The results showed that few Americans seem to be committed to a long-term savings plan:

  1. The average 401(k) balance is $91,300.
  2. In Fidelity’s entire network, only 72,000 people had more than $1 million.
  3. Of the millionaire group, only 9%, or 6,500 people, had more than $2 million.

Those savers who had more than $1 million in their 401(k) had the following profile:

  1. Average age: 59
  2. Annual savings as a percentage of pay: 15%
  3. Years of saving on the job: 30 years
  4. Allocation to equities: 75%
  5. Annual rate of return: 5%

The average saver sets aside 6.4% of their income.
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Finding Your Safe Withdrawal Amount

Using Monte Carlo simulation theory, let’s estimate the standard of living or “safe annual withdrawal amount” using these assumptions:

  1. Each couple retires at age 65, having saved nothing beyond their 401(k).
  2. The future rate of inflation is 2.4% (prices will double in 30 years at this rate).
  3. The future return on their investment is 6.9%, or 4.5% more than inflation.
  4. The survivor will have the same spending habits until they reach age 95.
  5. We are seeking an 85–90% probability that the portfolio is not exhausted at age 95.

The model shows the following for four different savers:

Savings at Retirement Safe Budget Inflated Budget at Age 95
$91,300 $3,300 $6,600
$1 million $34,000 $68,000
$2 million $64,000 $128,000
$3 million $92,000 $184,000


These amounts are spending budgets after estimated taxes (15–20%) and investment expenses (0.5–1%). But they ignore all savings outside of a 401(k) and personal IRAs (such as Social Security, any inheritances, useable home equity, proceeds from a business or other source of income). If available, these sources should be added to the aforementioned safe spending budget after adjusting for associated taxes, selling expenses and inflation.

The Goal: A Comfortable Retirement

So where do we begin if we are worried about saving enough for a comfortable retirement? Here is one way to calculate a sustainable withdrawal rate that will keep with inflation for as long as you live (which is very likely to be into your 90s).

  1. Measure the “saving gap” between how much you have saved so far and what you need at retirement based on the “safe withdrawal rate” table above.
  2. Count the years between now and the age you want to retire.
  3. Calculate the annual savings amount you need to commit to for the rest of your working career.

As simple as these three steps may sound, a lot of technical expertise is needed to individualize the calculation for each person and family. We have the tools to help you make a plan that will work. Please call us for a complete review or update.