An early retirement milestone

Recently our household passed an interesting financial milestone. We now have 1x our annual salary in retirement savings (The strong market over the last few years has helped). Evaluating retirement savings can be voodoo math, but several experts say that you should have 1x your salary at age 30, others put that goal at age 35. Often that milestone sounded out of reach, especially looking at how slowly we started. Other experts say you should save 15% a year, which is a rate we have never hit. But as a couple we consistently save for retirement and reached that important milestone alongside paying off debts and the evil student loans (I’m getting close). It’s fun to celebrate a milestone and see how far we have come, but that is not the main reason I’m writing this.

The Millennial generation has been facing a tough financial environment for years. We have rising education and health care costs on one side and lower employment rates and household pay on the other. It also takes some faith to invest, adjusting for inflation the market is still below the high point that was reached while I was in college.

It seems clear that this generation faces a very difficult challenge in finding financial security. I think the only way for us to do it is to be better informed and to make wise decisions when it comes to our finances. I think the Wired generation has the tools to evaluate our spending, loans, and investments. I hope that we can learn from some of the mistakes around us and start preparing now.

Note: I think the 1x by 30 rule is simplified and overemphasizes your current salary. But even simple projections are better than nothing, if this simple goal doesn’t help you then find your own goal. Also, to quote J. Scott Armstrong “One of the most enduring and useful conclusions from research on forecasting is that simple methods are generally as accurate as complex methods.”