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Fidelity Outlines Age-Based Savings Guidelines to Help Workers Stay on Track for Retirement
Suggests Most Workers Save at Least 8X Ending Salary to Fund Income in RetirementBOSTON – Fidelity Investments® today outlined an easy-to-understand set of savings guidelines to help workers evaluate whether they are on track to meet their income needs in retirement based on their current savings. According to Fidelity’s calculation, most employees should aim to save at least 8 times their ending salary in order to meet basic income needs in retirement1.
While every individual’s situation will differ greatly based on desired lifestyle in retirement, the average worker may replace 85 percent of his pre-retirement income2 by saving at least 8 times his ending salary3. In order to reach the 8X level by age 674, Fidelity suggests workers have saved about 1 times their salary at age 35, 3 times at age 45, and 5 times at age 55.
“We believe these savings targets offer a rule of thumb to help employees get engaged in retirement planning by making it simpler and more achievable, but we recognize many individuals may need more than 8X their ending salary in retirement based on their lifestyle,” said James M. MacDonald, president, Workplace Investing, Fidelity Investments.
The company’s 8X savings guideline is based on a hypothetical worker saving in a workplace retirement plan, such as a 401(k), beginning at age 25, working and saving continuously until 67, and living until 92. The ending goal would include savings in all qualified retirement accounts, such as 401(k)s and IRAs, as well as other outside savings. The guidelines also make the following assumptions:
• The employee will make continuous annual salary contributions to a workplace plan beginning at 6 percent and escalating 1 percent per year until 12 percent, plus receive an ongoing 3 percent annual employer contribution during their career5.
• The calculation assumes a lifetime hypothetical average annual portfolio growth rate of 5.5 percent6.
• Social Security payments are factored into the replacement income ratio of 85 percent7.
• The employee’s income grows by 1.5 percent per year over general inflation with no breaks in employment or savings8.
“The two factors that have the greatest impact on retirement savings over time are starting early and saving consistently,” added MacDonald. “Having worked with millions of workplace retirement plan participants, we know that positive behaviors lead to positive outcomes. Having age-based targets provide benchmarks to help retirement savers stay on track toward their ultimate goal.”
Retirement Guidance Helps Ensure Better Success
Fidelity urges workplace retirement plan participants to Plan for Life and to take advantage of the educational help provided through their workplace. Fidelity is committed to investing in, and delivering, a superior customer experience to its participants. The company provides engaging guidance through the channels that work best for the participant, be it over the phone, in-person or online. This includes licensed and dedicated telephone representatives, onsite workplace workshops, on-demand webinars, and access to representatives at our more than 170 investor centers nationwide. In addition, the firm’s suite of interactive online tools, available on its innovative NetBenefits® participant portal, help participants plan for retirement as well as transition from saving to income in retirement.
About Fidelity Investments
Fidelity Investments is one of the world’s largest providers of financial services, with assets under administration of $3.7 trillion, including managed assets of $1.6 trillion, as of July 31, 2012. Founded in 1946, the firm is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and many other financial products and services to more than 20 million individuals and institutions, as well as through 5,000 financial intermediary firms. For more information about Fidelity Investments, visit www.fidelity.com.
Guidance provided by Fidelity is educational in nature, is not individualized, and is not intended to serve as the primary or sole basis for your investment or tax-planning decisions.