Only you know how much income you need to retire comfortably. You can run all the models and projections you want but it’s up to you to make sure you’re good. CNBC reports that Fidelity Investments’s rule of thumb is that if you want to retire by 67, you need to save ten times your income. They write:
According to retirement plan provider Fidelity Investments, the rule of thumb is to save 10 times your income if you want to retire by age 67 — including anything in a retirement account and investments. Here’s how that breaks down by each decade along the way:
- Savings by age 30: the equivalent of your annual salary saved; if you earn $55,000 per year, by your 30th birthday you should have $55,000 saved
- Savings by age 40: three times your income
- Savings by age 50: six times your income
- Savings by age 60: eight times your income
- Savings by age 67: ten times your income
When you plan to retire matters. Those retiring at 62 (the earliest you can claim Social Security) will need to save more to compensate for an additional five years without income. On the other hand, those retiring at 70 probably won’t need the full amount of 10 times their income, as they will have worked an additional three years and presumably have fewer years left to spend their savings.
The type of lifestyle you want to have in retirement also plays a role. These age-based savings milestones are estimated to provide enough income for you to continue your current lifestyle in retirement, rather than planning to downsize or spend more.
Action Line: The reality is, you need to save til it hurts. Then if you can, save a bit more. When you want to develop your retirement income plan, I’m here. Email me at ejsmith@yoursurvivalguy.com.
P.S. Read more about Your Survival Guy’s Save Til It Hurts Hall of Fame here.
