Retirement Benchmarks: Are You on Track for Your Future?

My Twitter feed lit up yesterday morning, but it wasn’t my stunning sunset photo or a witty retweet that sparked the buzz. Instead, a writer took issue with a 2017 tweet I shared, detailing retirement savings guidelines. Here’s what I posted originally.

By age 30, you should have 1x your annual income saved for retirement. By 40, aim for 3x; at 50, 6x; by 60, 8x; and by retirement, 10x.

— Jean Chatzky (November 1, 2017)

These guidelines, developed by Fidelity, reflect common recommendations across many financial institutions. If individuals earning between $50,000 and $300,000 meet these targets, they can potentially replace 80% to 85% of their pre-retirement income, assuming they also receive Social Security. That’s a valuable goal.

However, as writer Riza Cruz pointed out, these benchmarks can feel discouraging if you’re not on track, especially during challenging economic times. After various recovery predictions, the reality shows a K-shaped recovery, where some professionals, working from home, have seen their investments bounce back while others continue to struggle. Many are facing hardships as industries like travel, dining, and retail remain in decline, worsened by the end of the $600 unemployment benefit in July.

So, what should you make of these benchmarks now? They are merely guidelines, as the word “aim” suggests. If you’re not quite there but can save, consider using this period—when spending on commuting and travel is low—to boost your savings. If you’re facing difficulties, don’t stress about meeting these targets. Focus instead on your job search, networking, and skill development. Once you regain stability, you can shift your focus back to saving.

Used Car Market Update

Recently, I’ve received numerous offers from my local Volvo dealer to trade in my 2015 wagon. They seem eager for my old car more than for me to purchase a new one, and now I understand why. Used cars have become the new must-have item during the pandemic. The New York Times reports that demand has surged due to commuters opting for personal vehicles over public transport, coupled with a two-month halt in new car production this spring. Used car values skyrocketed by 16% in July, according to Edmunds. If you have an extra vehicle you’re considering selling, now’s the moment.

Time to Use Your 529 Savings

With many colleges issuing refunds this year, there’s been a spike in questions about 529 plans. To avoid taxes and penalties, any refunded money needs to be returned to your 529 account within 60 days. Fortunately, the IRS has extended the deadline this year as part of pandemic relief, allowing students to utilize the funds for the fall semester.

Many parents are also asking if they should exhaust 529 funds before taking out loans or if these funds can cover utility bills for students' apartments. A comprehensive article addresses these questions from Ann Carrns in The New York Times. With students considering gap years or lighter loads for in-person classes, it’s crucial to monitor 529 withdrawals. Withdrawals must align with the calendar year of the expenses. Carrns emphasizes being cautious with spring tuition, as bills span two calendar years. Make sure to withdraw the funds appropriately to avoid complications.

Cooking at Home

According to CNN, “the great grocery boom” appears to be winding down. Year-over-year grocery sales spiked over 31% in March but dipped to an 11.5% increase in August. With winter approaching and outdoor dining options dwindling, many of us will continue cooking at home.

I’ve been feeling the pressure of meal planning, but this service has been a lifesaver. The small box ($149) provides enough proteins for 19 meals for my family of two. I’ve tried both the pork chops and salmon from my first shipment, including Ina Garten’s panko-crusted salmon last night, and it was delicious.