Want your nest egg to carry you through your golden years? Then aim to accumulate at least 10 times your annual salary by the time you retire.
That's the "simple" goal that a new study exhorts Americans to pursue. The thing is, only about 1 in 10 retirees surveyed managed to do that, according to the study by Lincoln Financial Group.
"Too few Americans are saving sufficiently to provide for themselves in old age," concludes the study, released this week. "What is needed is a simple way to encourage and empower individuals to save."
To calculate where you stand, tally your total savings, including checking accounts, mutual funds, 401(k) accounts, etc. Then subtract all your non-mortgage debt to get your net savings. Then divide your net savings by your annual income.
A few notes: Real estate is excluded from this formula, so don't count your home as part of your savings or your mortgage as part of your debt. Also, all figures should be pretax. So use your gross income and the current amount in tax-deferred retirement accounts.
It's worth noting that there's nothing scientific about saving 10 times your income. It's just an easy-to-understand figure. But most people who did meet that goal report feeling financially secure in retirement, according to a Lincoln Financial spokeswoman. And people still working can learn something from them.
Most of the so-called 10-timers shared a few obvious savings habits while working, including contributing to workplace retirement plans and following clear investment strategies, such as relying on index funds.
Also, a majority of those who became 10-timers boosted their savings rate when they had extra money to salt away. It's especially helpful to do that early in your career, according to the study.
"Steadily saving a modest amount each year is important but is probably not enough by itself" to achieve 10-timer status, the study says.
That's dispiriting for anyone hoping that slow and steady will win the race. But after running the numbers, you'll at least have an idea of how far behind you are.