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Bottom Line Up Front

  • There are a variety of tips to measure progress and make adjustments where necessary to your retirement savings goals. 
  • While you can use your 401(k) for a loan, it's important to know the potential advantages and disadvantages to this.
  • It's important to review your retirement savings account from time to time, especially when there are changes in your personal financial situation.

Time to Read

5 minutes

May 12, 2022

What Retirement Savings Benchmarks Should You Consider?

Just as a fitness tracker can help you assess your progress toward fitness goals, having benchmarks can help you stay on track with your retirement planning and retirement savings. However, with so many benchmarks and rules of thumb, it can be tough for Americans to know which ones really apply. Whenever you encounter these “rules,” it can be helpful to take a look at the underlying assumptions. Does the retirement calculator assume you’ll receive Social Security benefits? Will your retirement age be 62? Will you need a certain percentage of your annual salary in retirement? Once you know the assumptions, you can decide how they apply—or don’t apply—to your own situation.

How to Make Savings Benchmarks Manageable

It’s estimated most people will need at least eight times their final salary by retirement age of 67 to fund retirement at 85 percent of pre-retirement income. For example, a final salary of $100,000 would require $800,000 in a savings plan. 

Benchmark #1: Have you already started saving in an employer-sponsored plan, traditional individual retirement account (IRA) or Roth IRA? Getting started is the most critical financial decision to make with your personal finances.

Benchmark #2: As a starting point, Millennials should strive to save the equivalent of one year of salary by age 35. Take your current age and subtract it from 35. For example, suppose you’re 26 years old and expect to make $32,000 a year. Divide $32,000 by nine years (35 minus 26). You need to save about $3,500 a year—or about $295 a month—to reach your goal.*

Benchmark #3: Rack up three times your salary by age 45. If you’re making $40,000 a year at this point, that would mean $120,000 should be in your retirement savings account.

Benchmark #4: Aim for five times your salary by age 55. Someone making $45,000 a year should have $225,000 saved.

Benchmark #5: If you’ve been staying on track, you should be able to save eight times your final salary by age 67. For example, a final salary of $50,000 would require $400,000 as a savings target: $50,000 x 8 = $400,000.

Are You On Track With Your Retirement Savings Goals?

Use these tips to measure progress and make adjustments where necessary:

  • Update your goals. Use the salary you're earning at each age to calculate the corresponding benchmark. 
  • Monitor your performance. Tracking your progress against milestones gives you insight into your savings progress.
  • Rebalance and reallocate. If your goals, timeline or risk tolerance change, you may need to rebalance your retirement allocation by changing the mix of your investments. 
  • Rev up, roll over and pay down. Aim to increase your contributions by 1% each year. Remember—the difference between 1% and 2% of a $35,000 salary is only about $30 a month. 

Managing Loans and Withdrawals

401(k) Loans

Many 401(k) plans let participants borrow from their retirement accounts to buy homes, pay for education or medical expenses, or prevent eviction or mortgage default. Generally, you may be allowed to borrow up to half your vested balance up to a maximum of $50,000 or less if you have other outstanding 401(k) loans.

Usually, loans must be repaid within five years, although the deadline may be extended if it's used to purchase your primary residence. Servicemembers may also get an extension during the time they’re on active duty. 

Potential advantages of 401(k) loans:

  • You won’t need a credit check.
  • Interest rates are generally low compared with most consumer loans.
  • You’re paying yourself back—with interest—rather than paying a financial institution. 

Potential drawbacks to 401(k) loans:

  • If you leave your job, you may have to pay off the loan immediately and usually within 30 to 90 days. Otherwise, you'll owe income tax on the remainder, as well as a 10 percent early distribution penalty if you're not a retiree and under age 59½.
  • You may not be able to afford to make the payments as well as make new catch-up contributions, thereby significantly reducing your potential long-term savings.
  • While you’re borrowing pre-tax money, you’ll be paying it back with after-tax money, but will still owe taxes on withdrawals in retirement.

Further Tax Implications

With 401(k) and traditional IRA withdrawals, the money is added to your taxable annual income, which could bump you into a higher tax bracket or even jeopardize certain tax credits, deductions and exemptions tied to your adjusted gross income (AGI). 

Losing Compound Earnings

Finally, if you borrow or withdraw your retirement savings, you'll lose out on the power of compounding, where interest earned on your savings is reinvested, and in turn, generates more earnings. 

Bottom Line

Think long and hard before tapping into your retirement savings or nest egg for anything other than retirement itself. If a withdrawal is your only recourse, be sure to consult a Certified Financial Planner (CFP) or Navy Federal Investment Services financial advisor about the tax implications.

Keeping Tabs On Your Accounts

So, how often should you review your accounts to make sure you’re making progress? As it applies to your contribution limit rate:

  • Each time you receive a raise in salary, or at least once a year.
  • If there is a change in your workplace retirement plan employer match level, if offered.
  • If you’re falling behind in your savings rate and need to catch up.

As it applies to your investments:

  • At least once a year.
  • Whenever you’ve reached a savings goal.
  • If your goals, timeline or risk tolerance have changed.
  • If your investments are consistently underperforming their appropriate market indices.

Our financial advisors can help you evaluate your priorities and outline strategies to help you stay on track. Reach out to Navy Federal Investment Services for help with your retirement planning. 

Key Takeaways Key Takeaways


Navy Federal Financial Group, LLC (NFFG) is a licensed insurance agency. Non-deposit investments, brokerage, and advisory products are only sold through Navy Federal Investment Services, LLC (NFIS), a member of FINRA/SIPC and an SEC-registered investment advisory firm. NFIS is a wholly owned subsidiary of NFFG. Insurance products are offered through NFFG and NFIS. These products are not NCUA/NCUSIF or otherwise federally insured, are not guaranteed or obligations of Navy Federal Credit Union (NFCU), are not offered, recommended, sanctioned, or encouraged by the federal government, and may involve investment risk, including possible loss of principal. Deposit products and related services are provided by NFCU. Financial Advisors are employees of NFFG, and they are employees and registered representatives of NFIS. NFIS and NFFG are affiliated companies under the common control of NFCU. Call 1-877-221-8108 for further information. 

This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.