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How to plan your retirement

Key takeaways

  • If you're saving for retirement, the best way to help ensure success is by saving consistently (Fidelity suggests saving 15% of your income annually, including any match you get from your employer) and investing appropriately for your age.
  • Consider using as many tax-advantaged accounts as possible to help boost your readiness for retirement. For instance: investing in a 401(k), an IRA, and a health savings account (HSA).
  • Think about ways to beat inflation, control health care costs, and consider sources of predictable income such as Social Security, a pension, or an income annuity to cover essential expenses.

The best retirement ever doesn't require millions of dollars, multiple homes, and dinners at fancy restaurants. What it does need is a vision and a plan.

Donna Dickinson had both when she started her career. Long-term planning and consistent saving helped her retire when she wanted, with the lifestyle she hoped for.

"I knew I wanted to be comfortable enough to not have to worry about money and be able to do what I wanted," Dickinson says of her retirement vision. "I started planning, saving, and investing as soon as I started working. My company offered retirement with full benefits when my age plus years of service equaled 90. I happily retired at age 57, 5 years ago, and have no regrets. That was my long-term goal and plan."

Donna was lucky. Her company offered matching 401(k) contributions and stock options that she was able to take advantage of. Plus, part of her retirement benefits package included contributions to health care coverage before she turns 65, when Medicare kicks in. "I do have a monthly contribution, but the company also contributes, making it affordable. I would not have been able to retire when I did otherwise," she says. Employer benefits can be critical to retirement success—and they're wildly variable. But visioning and planning are key as well. Whatever your career path looks like, preparing can help you seize the savings opportunities that present themselves. Fidelity has some guidelines to help you along the way.

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Visualization: A powerful way to imagine your future

Knowing what you want and picturing yourself achieving your goal can help you see the steps you'll need to reach your destination. To get started visualizing your best retirement ever, consider these questions.

  • What are you retiring to? Some people find inspiration by picturing family and friends, while others are inspired by animals, nature, or the promise of solitude.
  • What do you want to do in retirement? What would you do if you could do anything you wanted? Could you estimate what that might cost? That could help you understand how much to try to save.
  • How does retirement fit in with the rest of your goals? Realistically, retirement may not be your highest money priority all of the time. A financial plan can help identify money trade-offs and strategies for reaching multiple goals.
  • Are you on track to hit your retirement goals? Where are your savings now compared to what you may need? This can be a scary number to contemplate, but facing it head-on can be empowering—whether you're on track or need to catch up.

Read Viewpoints on Boost your odds of a successful retirement

How to plan the best retirement ever by age

Having a vision can help you set a concrete goal for retirement. Once you've considered how you might spend your time and where you might be, you'll have a sense of how much that might cost. Your expenses in retirement and how many years your savings will need to provide income will help you set your savings goal.

How to plan for retirement in your 20s: Focus on saving as much as you can in tax-advantaged accounts and investing for growth potential.

Possible savings goal: Aim to save 1 times (1x) your annual salary by age 30.1 To learn more about Fidelity's savings factors, read: How much do I need to retire?

Take advantage of time and the potential of compounding growth. When it comes to long-term saving, time is a powerful force and it's on your side. The earlier you begin saving and investing, the lower your savings rate can be throughout your career thanks to the power of compounding.

Starting early makes a difference. Saving for 10 years starting at age 25 results in a higher balance than saving for 32 years starting at age 35.
This hypothetical example assumes the following: (1) annual IRA contributions on January 1 of each year for the age ranges shown with no withdrawals through age 67, (2) annual $7,000 contribution for first year, (3) an annual nominal rate of return of 7%, and (4) no taxes on any earnings within the IRA. The ending values do not reflect taxes, fees, or inflation. If they did, amounts would be lower. Earnings and pre-tax (deductible) contributions from traditional IRAs are subject to taxes when withdrawn. Earnings distributed from Roth IRAs are income tax-free provided certain requirements are met. IRA distributions before age 59½ may also be subject to a 10% penalty. Systematic investing does not ensure a profit and does not protect against loss in a declining market. This example is for illustrative purposes only and does not represent the performance of any security. Consider your current and anticipated investment horizon when making an investment decision, as the illustration may not reflect this. The assumed rate of return used in this example is not guaranteed. Investments that have potential for a 7% annual nominal rate of return also come with risk of loss.

Make the most of savings with tax-advantaged accounts. At this life stage, money can be scarce but saving and investing what you can in a tax-advantaged account will pay off later in life. After all, the less you pay in taxes the more potential you have to grow that money. Examples of tax-advantaged accounts include IRAs, workplace savings plans like 401(k)s, and health savings accounts (HSAs).

Your HSA, if you have one, can be a particularly powerful savings vehicle for retirement due to its triple tax advantage: Contributions are made on a pre-tax basis or you can take a deduction for contributions made yourself (rather than through payroll deductions by your employer), investments in the account have tax-free growth potential, and withdrawals are tax-free when used for qualified medical expenses now or in retirement.2

Read Viewpoints on 5 ways HSAs can help with your retirement

Fidelity's guideline: Save 15% of your income annually, including any match you get from your employer. This assumes you start saving at age 25 and plan to retire at age 67.3

If 15% is too much, start where you can. If you get a match from your employer, aim to contribute enough to get the entire match and then increase your contribution rate each year until you get to 15%.

Also, make sure to invest that money for long-term growth potential. Over the long term, stocks have historically had higher returns than bonds or cash. In your 20s, consider investing in a diversified mix of investments with a significant portion devoted to stocks. Investors with many years before retirement have time to ride out the ups and downs in the market, and the potential compounding and growth stocks can provide may help you reach your retirement goals. But balancing the growth potential of stocks with your own ability to tolerate risk is critical to staying invested for the long term.

Read Viewpoints: Investing ideas for your IRA

How to plan for retirement in your 30s and 40s: Focus on amping up savings in tax-advantaged accounts and continuing to invest for long-term growth.

Possible savings goals: Aim to save 3 times (3x) your annual salary by age 40 and 4x by age 45.

Try to ramp up your savings. This is a busy time of life for many people, but it's also a time when your income may be on the rise. If you're not saving as much as you'd like or may need, try increasing your contributions each year when you can. For example, if you get a bonus or a raise, consider dedicating at least a part of it to retirement savings.

Find more tax-advantaged ways to save. Try to save as much as you can in tax-advantaged accounts like a 401(k), IRA, and HSA.

If your company offers stocks options or nonqualified deferred compensation plans, they could also be a way to help supercharge your savings.

Read Viewpoints on Make the most of company stock in your 401(k) and The basics of nonqualified deferred compensation

If most of your retirement savings is in traditional pre-tax savings vehicles like IRAs and 401(k)s, it can sometimes make sense to convert some of the money into a Roth IRA and/or Roth 401(k). You will need to pay income taxes on the converted amount, but withdrawals in retirement are tax-free, giving you more flexibility to reduce your overall tax bill in retirement. There are many considerations before doing a Roth conversion, including your current and future tax brackets.

Read Viewpoints on Do you earn too much for a Roth IRA? and Backdoor Roth IRA: Is it right for you?

Think about speaking with a tax professional to understand if/when this strategy could be good for you.

Continue investing for potential long-term growth. With a decade or more before you are likely to retire, you will likely want to keep the majority of your retirement portfolio in a diversified stock portfolio.

Read Viewpoints on 3 keys to choosing investments

How to plan for retirement in your 50s and 60s: Focus on catching up with savings, diversifying investments, and considering retirement income.

Possible savings goals: Aim to save 6 times (6x) your annual salary by age 50 and 8x by age 60.

Use catch-up contributions. People over age 50 can take advantage of catch-up contributions to their retirement accounts. In 2024, the IRA contribution limit is $7,000 with an additional $1,000 catch-up contribution allowed for people over 50 years old.

For 2024, the IRS contribution limits for HSAs are $4,150 for individual coverage and $8,300 for family coverage. If you're 55 or older during the tax year, you may be able to make a catch-up contribution, up to $1,000 per year. Your spouse, if age 55 or older, could also make a catch-up contribution, but will need to open their own HSA.

The 401(k) contribution limits for 2024 are $23,000 for pre-tax and Roth employee contributions and $69,000 for combined employee and employer contributions. Employees age 50 and older can also make a $7,500 pre-tax catch-up contribution.

If you have a workplace savings plan, you may be able to make after-tax contributions to bolster your savings.

Read Viewpoints on What to do with after-tax 401(k) contributions

Diversify your investments. As you approach retirement, you will likely want to build more stability into your portfolio, balancing the long-term growth potential of stocks with the steady income that bonds can provide. Spreading your investing dollars across several types of investments (generally stocks, bonds, and short-term investments), known as diversifying, may not boost performance—it won’t ensure gains or guarantee against losses—but it has the potential to improve returns for the level of risk you’re targeting.

How does it do that? By possibly smoothing out the ride and providing some cushion against the big swings that can happen in the stock market. As you approach retirement, it can be a good idea to reduce the amount of stocks in your investment mix and build up the amount invested in bonds and short-term investments.

Another way to diversify when you’re investing for retirement could be with a target date fund. Target date funds provide a diversified mix of investments in one fund that gradually shifts to a more conservative mix as the target date nears, and beyond.

Learn about Fidelity's target date funds, Fidelity Freedom® Funds.

Consider where your income will come from in retirement. It can make sense to have a plan in place before you retire so there are no surprises.

Fidelity's guideline: For most people, Social Security and pensions (if you're lucky enough to have one) will provide an income base in retirement, with the rest coming from savings. But how much should you assume will come from savings? Fidelity's estimate is to save enough to replace at least 45% of your preretirement income,4 after accounting for Social Security and pensions.

We believe a solid retirement income plan should provide 3 things:

  • Predictable income from Social Security, pensions, and/or annuities to ensure core expenses are covered
  • Growth potential from investing a portion of savings to meet discretionary spending and legacy goals
  • Flexibility to refine your plan as needed over time

Read Viewpoints on 3 keys to your retirement income plan

Get help making informed decisions about retirement by answering a few questions in this comprehensive guide covering Social Security, cash flow, investing, Medicare, and more: Retirement Decision Guide

Going from saving to living in retirement

Retirement savings goal: Aim to save 10 times (10x) your annual salary by age 67 if that is the age you plan to retire.

Managing health care costs. According to the Fidelity Retiree Health Care Cost Estimate, an average retired couple age 65 in 2023 may need approximately $315,000 saved (after tax) to cover health care expenses in retirement beyond what Medicare covers.5 Retirement planning conversations should also include a discussion of the impact long-term care costs have on individuals and their family's future.

Consider annuities: To cover your income needs, particularly your essential expenses (such as food, housing, and insurance) that aren't covered by other predictable income like Social Security or a pension, you may want to use some of your retirement savings to purchase an income annuity.6

Read Viewpoints on How to feel financially secure in retirement

Look for ways to beat inflation: Social Security and certain pensions and annuities help keep up with inflation through annual cost-of-living adjustments or market-related performance. Additionally, choosing investments that have the potential to help keep pace with inflation, such as growth-oriented investments (e.g., stocks or stock mutual funds), Treasury Inflation-Protected Securities (TIPS), real estate securities,7 and commodities,8 may make sense to include as a part of an age-appropriate, diversified portfolio that also reflects your risk tolerance and financial circumstances.

Fidelity's guideline: As an estimate, aim to withdraw no more than 4% to 5% of your savings in the first year of retirement, then adjust that amount every year for inflation.9

Read Viewpoints on 5 ways to help protect retirement income

Be aware of required minimum distributions (RMDs) from retirement accounts, which begin at age 73 as a result of the SECURE Act 2.0 for investors who turned 72 on or after January 1, 2023. The RMD age will increase again to 75 in 2033. These are the types of accounts that require RMDs: Traditional IRAs, 401(k) and 403(b) plans, and SIMPLE and SEP IRAs (but not Roth IRAs). The annual deadline is December 31, but you may delay taking your first RMD up until April 1 of the year after you turn 73.10 It's important to know, however, that if you choose to wait until April 1 for your first RMD, it will mean taking 2 RMDs that year—one in April and one by the December 31 deadline. That additional income could have tax consequences for you.

From saving to living

Successfully saving and investing for retirement is a lifelong journey. Sometimes the going will be easy and sometimes it may seem tougher. A clear sense of purpose can help you stick with it consistently through good times and bad.

No matter how elaborate or succinct, the only way to realize your retirement vision and achieve your goals is by continuing to choose them as a priority for your money.

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Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.

This information is intended to be educational and is not tailored to the investment needs of any specific investor.

1. Fidelity has developed a series of salary multipliers in order to provide participants with one measure of how their current retirement savings might be compared to potential income needs in retirement. The salary multiplier suggested is based solely on your current age. In developing the series of salary multipliers corresponding to age, Fidelity assumed age-based asset allocations consistent with the equity glide path of a typical target date retirement fund, a 15% savings rate, a 1.5% constant real wage growth, a retirement age of 67 and a planning age through 93. The replacement annual income target is defined as 45% of pre-retirement annual income and assumes no pension income. This target is based on Consumer Expenditure Survey (BLS), retirement Statistics of Income Tax Stat, IRS tax brackets and Social Security Benefit Calculators. Fidelity developed the salary multipliers through multiple market simulations based on historical market data, assuming poor market conditions to support a 90% confidence level of success.

These simulations take into account the volatility that a typical target date asset allocation might experience under different market conditions. Volatility of the stocks, bonds and short-term asset classes is based on the historical annual data from 1926 through the most recent year-end data available from Ibbotson Associates, Inc. Stocks (domestic and foreign) are represented by Ibbotson Associates SBBI S&P 500 Total Return Index, bonds are represented by Ibbotson Associates SBBI US Intermediate Term Government Bonds Total Return Index, and short term are represented by Ibbotson Associates SBBI 30-day US Treasury Bills Total Return Index, respectively. It is not possible to invest directly in an index. All indices include reinvestment of dividends and interest income. All calculations are purely hypothetical and a suggested salary multiplier is not a guarantee of future results; it does not reflect the return of any particular investment or take into consideration the composition of a participant’s particular account. The salary multiplier is intended only to be one source of information that may help you assess your retirement income needs. Remember, past performance is no guarantee of future results. Performance returns for actual investments will generally be reduced by fees or expenses not reflected in these hypothetical calculations. Returns also will generally be reduced by taxes.

2. With respect to federal taxation only. Contributions, investment earnings, and distributions may or may not be subject to state taxation. Please consult with your tax professional regarding your specific situation. 3. Fidelity's suggested total pre-tax savings goal of 15% of annual income (including employer contributions) is based on our research, which indicates that most people would need to contribute this amount from an assumed starting age of 25 through an assumed retirement age of 67 to potentially support a replacement annual income rate equal to 45% of preretirement annual income (assuming no pension income) through age 93. The income replacement target is based on Consumer Expenditure Survey (BLS), Statistics of Income Tax Stats, IRS tax brackets, and Social Security Benefit Calculators. The 45% income replacement target (excluding Social Security and assuming no pension income) from retirement savings was found to be fairly consistent across a salary range of $50,000-$300,000; therefore the savings rate suggestions may have limited applicability if your income is outside that range. Individuals may need to save more or less than 15% depending on retirement age, desired retirement lifestyle, assets saved to date, and other factors. See footnote 1 for investment growth assumptions. 4. The income replacement rate is the percentage of preretirement income that an individual should target replacing in retirement. The income replacement targets are based on Consumer Expenditure Survey (BLS), Statistics of Income Tax Stat, IRS tax brackets, and Social Security Benefit Calculators. The 45% income replacement target assumes no pension income, and a retirement and Social Security claiming age of 67, which is the full Social Security benefit age for those born in 1960 or later. For an earlier retirement and claiming age, this target goes up due to lower Social Security retirement benefits. Similarly, the target goes down for a later retirement age. For a retirement age of 65, this target is defined as 50% of preretirement annual income and for a retirement age of 70, this target is defined as 40% of preretirement income.


Estimate based on individuals retiring in 2023, 65-years-old, with life expectancies that align with Society of Actuaries' RP-2014 Healthy Annuitant rates projected with Mortality Improvements Scale MP-2020 as of 2022. Actual assets needed may be more or less depending on actual health status, area of residence, and longevity. Estimate is net of taxes. The Fidelity Retiree Health Care Cost Estimate assumes individuals do not have employer-provided retiree health care coverage, but do qualify for the federal government’s insurance program, original Medicare. The calculation takes into account Medicare Part B base premiums and cost-sharing provisions (such as deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D (prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by original Medicare. The estimate does not include other health-related expenses, such as over-the-counter medications, most dental services and long-term care.

6. Guaranteed lifetime income is subject to the claims-paying ability of the issuing insurance company. 7.

A common stock REIT is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. A REIT is required to invest at least 75% of total assets in real estate and to distribute 90% of its taxable income to investors.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.

Illiquidity is an inherent risk associated with investing in real estate and REITs. There is no guarantee that the issuer of a REIT will maintain the secondary market for its shares, and redemptions may be at a price that is more or less than the original price paid. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry.


The commodities industry can be significantly affected by commodity prices, world events, import controls, worldwide competition, government regulations, and economic conditions.

9. The sustainable withdrawal rate is defined as an inflation-adjusted annual withdrawal rate, and expressed as a percentage of your initial (at retirement) savings balance. This rate is estimated to be 4.5%, assuming a retirement age of 67 and a planning age through 93. See footnote No. 1 for investment growth assumptions. 10. Required minimum distribution rules do not apply to participants in 401(k) plans who are less than 5% owners of employers that sponsor a workplace plan, until they retire or turn 73, whichever is later.

Fidelity Freedom Funds are designed for investors who anticipate retiring in or within a few years of the fund's target retirement year at or around age 65 and plan to gradually withdraw the value of their account in the fund over time. Except for the Freedom Income Fund, the funds' asset allocation strategy becomes increasingly conservative as the funds approach the target date and beyond. Ultimately, the funds are expected to merge with the Freedom Income Fund. The investment risk of each Fidelity Freedom Fund changes over time as its asset allocation changes. These risks are subject to the asset allocation decisions of the Investment Adviser. Pursuant to the Adviser's ability to use an active asset allocation strategy, investors may be subject to a different risk profile compared to the fund's neutral asset allocation strategy shown in its glide path. The funds are subject to the volatility of the financial markets, including that of equity and fixed income investments in the U.S. and abroad, and may be subject to risks associated with investing in high-yield, small-cap, commodity-linked and foreign securities. Leverage can increase market exposure, magnify investment risks, and cause losses to be realized more quickly. No target date fund is considered a complete retirement program and there is no guarantee any single fund will provide sufficient retirement income at or through retirement. Principal invested is not guaranteed at any time, including at or after the funds' target dates.

Keep in mind that investing involves risk. The value of your investment will fluctuate over time, and you may gain or lose money.

Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.

Views expressed are as of the date indicated, based on the information available at that time, and may change based on market or other conditions. Unless otherwise noted, the opinions provided are those of the speaker or author and not necessarily those of Fidelity Investments or its affiliates. Fidelity does not assume any duty to update any of the information.

Investing involves risk, including risk of loss.

In general, the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities). Fixed income securities also carry inflation risk, liquidity risk, call risk and credit and default risks for both issuers and counterparties. Lower-quality fixed income securities involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Foreign investments involve greater risks than U.S. investments, and can decline significantly in response to adverse issuer, political, regulatory, market, and economic risks. Any fixed-income security sold or redeemed prior to maturity may be subject to loss.

Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.

Diversification and asset allocation do not ensure a profit or guarantee against loss.

Past performance is no guarantee of future results.

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