Fidelity: You’ll need to have saved 8 times your annual income to bankroll retirement

People who retire at 67 need to have banked roughly eight times their annual salary to have adequate finances for their retirement, Fidelity Investments said Wednesday.

In order to reach that level by 67, younger workers need to have saved an amount equal to their annual salary by age 35, three times their annual salary by age 45, and five times their annual salary by age 55, said Fidelity, a Boston-based financial services company whose specialties include retirement savings products.

If people have amassed an amount equal to eight times their annual salary in their final year of work, they can likely count on replacing 85-percent of their annual income for a 25-year period, according to this calculus.


Fidelity cautioned that its guidance is strictly a rule of thumb. The savings and spending habits of people vary widely, and so it is hard to devise a one-size-fits-all solution.

In reaching what it calls its “8x savings guideline,’’ Fidelity said it made a number of assumptions.

One is that individuals start saving at 25 and that from age 31 to 67, they are setting aside 12 percent of their annual income for retirement savings. Another assumption is that an individual’s employer is contributing to a retirement plan such as a 401(k). Fidelity’s guideline also assumes that an individual works continuously until age 67, an iffy assumption in an age of layoffs.

But someone able to follow these guidelines until they retire at 67 has a good chance of having an amount equal to 85 percent of their pre-retirment income at their disposal, when Social Security payments are also factored into calculations.

In a statement, James M. MacDonald, president of Workplace Investing at Fidelity, said: “The two factors that have the greatest impact on retirement savings over time are starting early and saving consistently…. Having age-based targets provide benchmarks to help retirement savers stay on track toward their ultimate goal.’’

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