Steps to take if you're behind in saving for retirement

Review some strategies to help you get back on track.

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As you round into the homestretch on the road to retirement, have you saved less than you perhaps hoped or planned?

If so, don't panic. It isn't the optimal situation, but you're not the first person who has ever needed to recalibrate your retirement planning—and you certainly won't be the last.

The good news moving forward is that there are solid, proven saving strategies to get you back on track. Here's how to get started.

Determine where you stand

To understand how your current retirement savings stack up in relation to your preferred retirement date and desired lifestyle, consider using Fidelity's retirement savings factor, which offers an adaptable blueprint for how to prepare for your golden years throughout your working life.

The factor is predicated upon setting aside specific multiples of your salary at certain ages, working toward the ideal of 10 times your salary by retirement, allowing a clear snapshot of your progress toward your goal at virtually any age.*

If, for example, you hope to retire at age 67 and your annual income target is 45% of preretirement annual income, then—assuming a 15% savings rate, 1.5% constant real wage growth, a planning age of up to 92, and no pension—by age 30 you should have accumulated your current salary in savings. By age 45 it should be 4x. The more time you have, the less money you need to have saved, thanks to the power of time and compounding. The closer you are to retirement, the higher the savings factor. By age 50, if you want to retire at age 67, the savings goal rises to a factor of 6x salary.

Whatever you hope for your retirement lifestyle, this savings factor is an easy way to gauge how your retirement savings strategy is faring.

Consider saving more

It's never too late to revamp a retirement savings routine that isn't quite performing as well as intended. Options can range from revising your budget to free up a few extra dollars here and there for a savings account to increasing your contributions to your work retirement plan: regarding the latter, it is frequently a wise decision to earmark as much as possible to your employer-provided 401(k) plan. In 2017, you contribute up to the IRS limit of $18,000. And if you're 50 or older, you can take advantage of a "catch-up contribution.” For instance, your eligible "catch-up contribution” for 2017 is $6,000, bringing your total allowable contribution to $24,000 in 2017.

If you want to save more than your work retirement plan allows, look into other tax-wise ways to save. Consider putting money into a traditional or Roth IRA. And, if you have a side gig, you might explore a Simplified Employee Pension (SEP), into which you can contribute some of your side income.

Delay retirement?

If your retirement savings are coming up short, a second option is to work longer. The Fidelity savings factors in the previous examples assume a retirement age of 67. Perhaps you'll plan to work until age 70, but your ability to do so will depend on your health and employment prospects. If you can continue working for a given period of time, it both increases your time to save and decreases the amount you'll need for retirement. Operating on a longer timeline, you might even embrace a slightly more aggressive investing strategy, but do so with care and consider seeking out the advice of a seasoned professional with expertise in the retirement saving space.

Keep in mind that taking Social Security early will permanently reduce your monthly benefits. Conversely, you can permanently increase these benefits by delaying them past normal retirement age up to age 70. Also, while some expenses will disappear in retirement—work-related clothes and commuting costs, for example—others such as healthcare are likely to increase with age.

Think ahead

One way to make do with less in retirement is to pay down high-interest debt while you're still working. There are plenty of actions you can take today to make your money stretch further tomorrow: consider paying off high-interest credit cards, so they don't eat away at your future income, for example. Or downsize to a less expensive home, further lowering your monthly bills. The key is to be proactive and always keep one eye on the future you hope to build in retirement.

Wherever you are with your strategy, recognize that you have real choices and opportunities. If you're falling short of your goals, a few smart, informed adjustments could very well once again put the retirement lifestyle you want back into reach.

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This information is intended to be educational and is not tailored to the investment needs of any specific investor.
* The 10x savings rules of thumb are developed assuming 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 92. The replacement annual income target is defined as 45% of preretirement annual income and assumes no pension income. This target is based on Consumer Expenditure Survey 2011 (BLS), Statistics of Income 2011 Tax Stat, IRS 2014 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 U.S. Intermediate Term Government Bonds Total Return Index, and short term are represented by Ibbotson Associates SBBI 30-day U.S. Treasury Bills Total Return Index, respectively. It is not possible to invest directly in an index. All indexes 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.
The statements and opinions expressed in this article are those of the author. Neither Fidelity Investments nor your employer can guarantee the accuracy or completeness of any statements or data.

Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917

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