How much should I have in Investments?
Investors often struggle to understand how much they should have in investments to achieve their retirement goals. Of course, this will vary by age, but there is a formula to give you a good idea of your progress toward achieving your long-term financial goals.
The Investment Asset to Gross Pay Ratio:
(Investment Assets + Cash and Cash Equivalents) / Gross Pay
To calculate this ratio: Add the value of all your investment accounts (401(k), 403(b), 457, IRA, Brokerage, etc.) to all your cash accounts (savings, money market, time deposit accounts, and then divide the number annual gross pay (pay before taxes).
The benchmark depends on your age and financial goals, but the general age-based guidelines are:
Age 25: 0.2:1
Age 30: 0.6-0.8:1
Age 35: 1.6-1.8:1
Age 45: 3-4:1
Age 55: 8-10:1
Age 65: 16-20:1
Discuss with your financial professional to ensure you are planning, saving, and investing properly in order to accomplish your financial goals.