🏦 Retirement Wealth
Retirement wealth measures how prepared you are to eventually stop working without a significant decline in your quality of life. It's about the assets you're building today that will sustain you tomorrow. This dimension has a particularly unforgiving relationship with time: starting late makes the math significantly harder, while starting early — even at small amounts — gives compounding decades to work in your favor.
What the Assessment Measures
The Retirement Wealth assessment evaluates four core areas:
- Savings Rate — What percentage of your income are you directing toward retirement accounts and long-term investments?
- Savings Target Progress — How do your current retirement savings compare to benchmarks for your age and income?
- Account Structure — Are you using tax-advantaged accounts (401(k), IRA, Roth IRA, etc.) efficiently?
- Retirement Income Planning — Do you have a view of what retirement income sources you'll have — savings, Social Security, pension, other — and whether they're sufficient?
The Savings Benchmarks
The J.P. Morgan Guide to Retirement provides widely cited savings benchmarks by age and income. While individual circumstances vary significantly, these provide a useful baseline:
- By age 30: 0.5–1× your annual income saved
- By age 40: 1.5–2.5× your annual income saved
- By age 50: 3.5–6× your annual income saved
- By age 60: 6–11× your annual income saved
These ranges are wide because they account for different income levels and expected retirement lifestyles. Higher earners typically need to save a larger multiple because Social Security replaces a smaller percentage of their pre-retirement income.
Compound Growth: The Most Important Concept in Retirement Planning
Compound growth means your returns earn returns. $10,000 invested at age 25 becomes approximately $217,000 by age 65 at a 8% average annual return — without adding another dollar. The same $10,000 invested at age 45 becomes approximately $47,000 by age 65. That's the same investment producing nearly 5× more wealth simply because of a 20-year head start.
This is why the most important retirement action at any age is simply to start — or to increase contributions — today rather than later.
Tax-Advantaged Accounts: Use Them First
Tax-advantaged retirement accounts reduce your tax burden either now (traditional pre-tax accounts) or in retirement (Roth after-tax accounts). If your employer offers a 401(k) match, contributing enough to capture the full match is effectively a guaranteed 50–100% return on that contribution. This is almost always the highest-priority financial action available.
After capturing any employer match, the general priority is: maximize Roth IRA contributions (if income-eligible), then return to maximize 401(k) contributions, then invest in taxable brokerage accounts.
How to Improve Your Score
- Find out if your employer offers a 401(k) match and ensure you're contributing enough to capture the full match.
- Open a Roth IRA if you don't have one and you're within the income limits — even small regular contributions matter.
- Calculate where your current savings stand relative to the age-based benchmarks above.
- Increase your contribution rate by 1% immediately, and plan to increase it by 1% each year until you reach 15%+.
- Ensure your retirement investments are in low-cost diversified index funds, not sitting idle in a money market or savings option.
This guide is for informational and educational purposes only. It is not financial or tax advice. Consult a qualified financial advisor for personalized guidance.