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It's easy to understand why people are ridiculing this idea. As MarketWatch highlights in its bluntly titled follow-up, “the response underscored just how worried people are about their financial obligations and the challenges that make saving for retirement seem impossible.”
Placing such a high target on savings is likely to alarm people, especially when you consider that one-third of Americans have less than $5,000 saved for retirement and one in five have nothing saved at all, according to Northwestern Mutual’s 2018 Planning & Progress Study. “It’s possible, but in my experience, it's not usually achievable,” says Roger Whitney, a Texas-based Certified Financial Planner, on saving twice your salary.
In fact, even those who save regularly might struggle to reach this goal. Here's an example shared by Danielle Schultz, a Certified Financial Planner based in Illinois:
Consider Mary: She starts working at 25 with a salary of $60,000 per year and receives a 2% annual raise. She contributes 10% of her salary ($6,000/year or $500/month initially), and this amount increases by 2% annually along with her salary increase. Her employer matches 3% of her salary, meaning a total of $7,800 is contributed to her retirement plan in the first year.
Let’s assume Mary is taking a fairly aggressive investment approach—typical for someone her age—and earns a 7% annual return on her savings.
By the time Mary is 35, in 10 years, she would have accumulated $116,712 in savings and investments. Her salary would have grown to $73,189, so hitting that target is certainly within reach. To reach double her salary saved ($146,378), Mary would need to save $9,800 per year, increasing by 2% annually.
This is the minimum savings rate I’d suggest for retirement. In 35 years, she could have around $1 million—not a huge fortune, but certainly more than many people have. Combined with Social Security, this might be enough for her, though it’s likely Mary will be able to boost her earnings above the 2% growth and save even more. While predicting 35 years ahead is highly uncertain, it's clear that starting to save early at least 10% of your income is crucial.
That being said, the article is relatively harmless—I’ve even written something quite similar! Even though the savings figure might seem daunting to some, it’s still ... accurate. Yes, saving double your salary by age 35 is one way to ensure a financially secure retirement.
Of course, for many people, this might not be feasible. The idea of a “stress-free” retirement is more of a bygone ideal (it wasn’t really the reality for many in previous generations either) than a guarantee for today’s workforce. As I explained earlier, these figures serve as a reference point to help you determine how much you'd like to save and set goals toward achieving it.
When it comes to your personal finances, there is no one-size-fits-all solution. While experts at firms like Vanguard and Fidelity use the benchmark of saving double your salary, it’s just that—a goal. It's the ideal situation. Personal finance specialists also advise against taking on unaffordable debt and suggest skipping that morning coffee run, but clearly, not everyone follows these so-called 'rules.' Just like most of us don’t always meet our daily fruit and vegetable intake or avoid smoking and drinking to stay healthy.
“This rule doesn’t apply universally. There are so many factors to consider, it’s impossible to offer one-size-fits-all advice,” says Kathleen Grace, a Certified Financial Planner from Florida and managing director at United Capital. “For instance, what kind of healthcare will they require later? Will they take on part-time work in retirement? How much will it cost to live where they retire? Will they have debt in retirement? Are they planning to sell their home to fund retirement?”
How to Save Twice Your Annual Salary
So, what steps should you take? The basics of personal finance still hold true. If you have a 401(k), contribute enough to get the employer match, and then some (or consider opening an additional account). If you don’t have a 401(k), set up an IRA or a Roth IRA. Cut back on unnecessary expenses, automate your savings where possible, and be proactive in seeking higher-paying opportunities.
“To save, you must control your spending so it stays below your earnings,” says Schultz. “So, if you’re unable to save, you either need to cut costs, increase your income, or find a balance between the two.” There’s no escaping these fundamental truths.
You’ve heard all of this before, haven’t you? And you’re probably thinking: I need to save for retirement, pay off student loans, save for my wedding, buy a house, and support my kids—all while living on stagnant wages or gig economy work. It just doesn’t add up.
But don’t give up just yet. First, create a plan. Start with small steps and gradually increase—maybe $10 per month to begin, then $25, whatever works for you. Don’t get discouraged by comparing yourself to arbitrary standards. Don’t vote for those who want to strip workers of their rights, make retirement savings harder, and take healthcare from the most vulnerable, all to benefit the wealthiest and powerful corporations.
Focus on what you can control, and make small changes in your lifestyle that can improve your financial situation. “The best investment someone in their 20s and 30s can make is in themselves,” says Whitney. “In their skills, experiences, and professional networks. These might not show up on a balance sheet, but they could propel someone towards a brighter future.”
To use a health analogy, you can’t control everything—some illnesses are genetic, others come from accidents or external factors. But still, we do our best to eat healthily and exercise, even when we don’t want to, to reduce health risks. Most people don’t just give up because they know they’ll get sick one day. The same approach should apply to your finances. While you can’t control everything, you can still make intentional choices to save money that will benefit you in the future.
