Savings benchmarks to retire...

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FYI: In Fidelity’s “Retirement Planning” section, they provide the following recommendation pertaining to the amount of savings a person should have at various ages or stages in their career:

Fidelity’s guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67.
Factors that will impact your personal savings goal include the age you plan to retire and the lifestyle you hope to have in retirement. [Emphasis added.]

www.fidelity.com

DW and I have unwittingly met their recommended savings goals. However, it would have been very helpful to have the above savings guideline firmly in our minds when we were newlyweds almost 40 years ago.

I personally find Fidelity’s entire website too “rich in information,” too poorly indexed, and completely lacking in a useful search tool.

For instance, yesterday I somehow stumbled on a fantastic “Net Worth” calculator interface. However, this morning when I went back to try and add some entries and adjust some figures, there was absolutely no way to find the same tool again.

Hit-and-miss retirement planning tools that are not indexed are almost completely useless to me. I need to find my way back to where I left off whenever interacting with a complex website such as theirs.

In any event, their recommended savings goal is the kind of information a young person needs to have when they first embark on a career, with reminders every couple of years so that they can play catch-up as necessary when it is not too late.

Baby Boomers are retiring by the thousands every day and only a fraction of them have saved the amount that Fidelity says they should have. Only by practicing some degree of deferred gratification and making a few important decisions can help people to meet their own savings needs.

Thanks to COVID-19’s thinning the herd - resulting in some pretty sizeable wealth transfers “prematurely,” some lucky young people will find themselves with windfalls from unvaccinated grandpas’ estates. Nonetheless, it would behoove young people to keep in mind benchmarks such as Fidelity’s saving recommendations so that they will be in a position to retire in relative comfort when they get old like us.

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Notehound:
However, this morning when I went back to try and add some entries and adjust some figures, there was absolutely no way to find the same tool again.

Did you pull down your browser history page?

When I run into same problem, nine times out of ten it pops up. (When you’ve got the full list of history pulled up, trim it with a search on “fidelity” or other appropriate term.)

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Fidelity’s guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67.

The Fool also touts the “10X your expected ending salary” as a benchmark to reach. But I don’t know how you reconcile that with the 4% rule, which would dictate 25X your ending salary.

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Just for grins and the exercise, I poked around and popped this list at Fidelity.

The page says “ALL”; maybe the page your looking for is listed? The descriptions sound like it might be.

https://www.fidelity.com/calculators-tools/retirement-calcul…
All retirement calculators & tools

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Baby Boomers are retiring by the thousands every day and only a fraction of them have saved the amount that Fidelity says they should have. Only by practicing some degree of deferred gratification and making a few important decisions can help people to meet their own savings needs.

My rule of thumb which I pass on to younger folks is to save 10% of your income each to in order to retire in the style to which you become accustomed. If you have an employer with a matching program it becomes relatively easy. Sign up to have 6% held out of your paycheck and have the company add 3%.

Of course, lots of people have different circumstances…

DB2

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If you have an employer with a matching program it becomes relatively easy. Sign up to have 6% held out of your paycheck and have the company add 3%.
DB2

To all my kids and Gkids, where there is an employer match, I tell them to ALWAYS max the match, if at all possible. (The younger they are, the more difficult to do. Sometimes because of the genuine here and now need to meet current expenses, but more often because of ‘perceived’ needs.)

The employer match is the best ‘instant’ investment income available. Period. (We had some years of 100% match, up to 6% of salary, but that’s another story. Very generous employer.)

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“The Fool also touts the “10X your expected ending salary” as a benchmark to reach. But I don’t know how you reconcile that with the 4% rule, which would dictate 25X your ending salary.”

You missed several big points.

While you are working, you’re paying all sorts of extra taxes - SS and FICA right off the top - 8%. You’re also in higher income brackets.

While you are working, you are living on a lot less than ‘your full salary’. If you’re saving 15 or 20%, that is money you don’t need when you retire.

When you retire, you’ll also collect SS likely or some other plan like teachers pension, etc.

So, what you need to retire is an income along with that that funds your desired lifestyle.

So if you are making $100,000, saving 15%, paying taxes on that total amount - both state and fed income taxes - and SS and FICA, you’re living on a lot less than $100,000 a year. Likely $50 or $60K per year.

Now, if you are going to get $25,000 a year in SS, you only will need $35 to 45K from your savings to get there.

So if you save 10x your salary, you’ll have a million bucks saved. At 4%, that’s 40K bucks on top of SS. Which will put you right about where you are now. Also your commuting expenses, clothing expenses for work, etc, all go down. Maybe your house is ‘paid off’ too by retirement. Or you move to different location with lower costs, better weather, etc.

There is absolutely no need to save 25x your salary.

Plus, if you do well, you’re “ending salary” may be a lot more than you need to live on. Or not.

t.

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The Fool also touts the “10X your expected ending salary” as a benchmark to reach. But I don’t know how you reconcile that with the 4% rule, which would dictate 25X your ending salary.

The 4% SWR is not 25x your ending salary. It is 25x your needed income (minus other income streams like SS) in your first year. You adjust for inflation after that. We’ll keep it simple. You need $40k for retirement expenses (including fed and state income taxes). You have no other income. You will need $1 million in investments.

If it was 25x ending salary, I wouldn’t be anywhere near meeting that and my plans are to retire this year.

PSU

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bjurasz asks,

<<Fidelity’s guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67.>>

The Fool also touts the “10X your expected ending salary” as a benchmark to reach. But I don’t know how you reconcile that with the 4% rule, which would dictate 25X your ending salary.

The “4% rule” is 25x your “annual living expenses”, not salary.

The last few years before I retired at age 38 I was saving 50% of gross income, 25% was lost to Federal and state income taxes plus FICA, and I lived comfortably on the remaining 25%.

So the 4% rule was only being applied to one quarter of my salary, 6.5 times gross income.

Too, at age 67, Social Security and perhaps a pension will also reduce the retirement savings withdrawal required to meet expenses.

intercst

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Hi notehound,

My CPA financial planner and I had this discussion about Fidelity’s retirement planning tools.
His response - They are in business to invest your money. The more money you give them to invest, the more they make. Their retirement planner plans on the high end.

I guess that’s a good thing that folks might try to achieve those savings / investment goals - but they are very difficult for the “average joe” to attain.

'38Packard

  • who’s financial planner is paid by the hour and not on commission…
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For instance, yesterday I somehow stumbled on a fantastic “Net Worth” calculator interface. However, this morning when I went back to try and add some entries and adjust some figures, there was absolutely no way to find the same tool again.

Start from the “Accounts and Trade” tab at the upper left, and then go down to “Full View”

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If it was 25x ending salary, I wouldn’t be anywhere near meeting that and my plans are to retire this year.

PSU

Having been retired for many years now, there is a very simple bit of math that has worked well for me. Don’t have debt! Figure out how much you have coming in … spend less then that.

Tim <off to sun and fun in a Varadero all inclusive 4 star resort for two weeks in March>

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Having been retired for many years now, there is a very simple bit of math that has worked well for me. Don’t have debt! Figure out how much you have coming in … spend less then that.

Hmmm… sounds like we had the same Econ101 instructors…

Dumping all debt before making the transition was key… and relatively ‘painless’, at least most of it was…

(The second part of the plan has been adhering to the Will Rogers’ investment advice (paraphrased): Only buy stocks that go up. If they don’t go up, don’t buy’em.)

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Dumping all debt before making the transition was key…

Dumping all debt was EASY! I seldom bought anything on credit which was a problem because then I had no credit rating. The Encyclopedia Britannica came to the rescue. I bought two of them on credit (one in Venezuela and the other in California) solely for the purpose of establishing a credit record. Nice books! Good content for the time.

The Captain
you cannot go bankrupt if you have do debts

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Having been retired for many years now, there is a very simple bit of math that has worked well for me. Don’t have debt! Figure out how much you have coming in … spend less then that.

I’m quite capable of figuring this out. I was just pointing out that 25x ending salary is not a realistic multiplier for some people.

PSU

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