For a financially and physically healthy retirement, consider the following ratios.
To strive for optimum health throughout life, most people know they need to keep their "good" vs. "bad" cholesterol ratio in check, maintain a balanced rest vs. physical activity ratio and ensure their nutritious food vs. junk food consumption ratio doesn't tip in the wrong direction.
On the financial side, most also are well aware of the benefits of maintaining an appropriate stock vs. bond ratio in their portfolios. Another ratio that's worth focusing on when preparing for retirement is the work-to-retirement ratio.
The work-to-retirement ratio is the number of years a person works compared to the number of years they expect to spend in retirement.
Many people view age 65 as the standard retirement age, and the average life expectancy is now 85 (but it continues to increase). So today's average 65-year-old retirees are projected to enjoy a 20-year retirement.
If you began working at age 18 and work until age 65, that's 47 years of work and 20 years of retirement. That equates to a work-to-retirement ratio of 2.3 to 1. This means you will spend 2.3 years working to save for one year of retirement. But most people don't start saving for retirement when they're 18.
Let's say a person begins saving for retirement at age 35. Now we have a savings-to-retirement ratio of 1.5 to 1, or 1.5 years of work to save for one year of retirement.
That's why saving for retirement as early in your work years as possible is a good idea because it allows you to leverage the compounding effect of money.