Marcio Silveira, CFP, Pavlov Financial Planning
If you are a typical American, the answer is probably NO.
In order to properly answer this question you should do a comprehensive financial plan with a Certified Financial Planner (CFP).
If you do not have the time, money or desire to engage a CFP professional, the second best approach is to use a rule of thumb. Like any rule of thumb, it is a matter of opinion. It can, however, shed some light to the question above. Am I on track or not?
The Fidelity Rule of Thumb
Fidelity Investments recently put together this tool. In my opinion, it is useful to get the retirement conversation started. It lists different ages and the target level of Net Worth (Assets minus Liabilities) as a multiple of the annual gross income.
Table (Fidelity) - Age / Net Worth as % of income
35 / 1X
40 / 2X
45 / 3X
50 / 4X
55 / 5X
60 / 6X
67 / 8X
This table applies to middle class workers with incomes typically between $60K and $100K.
Lower income individuals need to save less because Social Security and other government programs are likely to cover a higher proportion of their retirement income needs. In case of higher income individuals, the multiple is actually higher because social security will only cover a small share of retirement income needs assuming that the retirement lifestyle is similar to the lifestyle during regular working years.
The specifics for each individual vary, but in order to hit these numbers investors generally should save about 15% of their income and invest at least 60% of their portfolio in stocks.
Being mindful of investment costs and taxes also has a major effect, especially in the long term.
One can actually stop working at any age if the amount of wealth is large enough. In this case the investment returns equal or exceed the income requirements and the portfolio retains its real value indefinitely.
This amount is estimated to be between 35 to 50 times yearly expenses. So, if an individual spends $100K per year, he or she can be confidently considered financially independent with a net worth of $5 million or more.
When one is financially independent, work becomes a choice and not a necessity.