Message Font: Serif | Sans-Serif
No. of Recommendations: 2

I'm 31, savings ratio of 1.2, debt ratio of 1.67, savings rate of 16.5%. That's quite a bit ahead of the curve on savings, pretty much on the mark on debt, and ahead on the rate. All of which is to be expected if my goal is to Retire Early rather than at 65. Looks like I'm ahead of the curve at this point!

But if you want to retire early, then you would need 12 times your salary at the age you want to retire--not 65. So you could re-calculate with this in mind to see if you would still be ahead of the curve.

However, I don't totally agree with the logic of this article.

I see one problem with the article's Savings-to-income ratio: it doesn't accurately reflect the status of folks who have have high incomes and save a high percentage of that income. Since they save a lot and spend little then they likely will not require a high percentage of their pre-retirement income.

For someone in this situation, I believe that a Savings-to expense ratio would be a far better gauge to analyze their financial health.

I'll give an example to illustrate. Let's say that a 55 y/o earns $100,000 per year, has annual expenses of $25,000 and has savings of $500,000.

Their Savings-to-income ratio would be 5, which is lower than they should have for that age. However, their Savings-to expense ratio is a very respectable 20.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.