Most retirement savers should save eight times their annual salary, according to Fidelity Investments. To stay on track with that sum, they should have about a year's pay put away by age 35, three years' pay saved by 45, and five years' pay saved by 55.
Before you begin bemoaning your current finances, hear this: Boston College's Center for Retirement Research has done its own research on the subject, and director Alicia H. Munnell notes that the "eight times" figure isn't a one-size-fits-all measure. It's most accurate for those who earn $100,000 or more annually. "If you're in a low-income group and you're going to get most of your money from Social Security, you don't need that high a multiple," Munnell explains. Instead, she recommends those who earn $50,000 a year to save about six times that by the time they retire, while those who earn $25,000 a year should save four times that for retirement.
Fidelity's research is based on some optimistic assumptions; for example, that workers contribute between 6 percent and 12 percent of their pay to retirement accounts starting at age 25, that they have a 3 percent annual employer contribution, and that their salary grows each year over general inflation. Still yet, this model gives investors a rough estimate of what they'll need to save for a comfortable retirement.
Are you on track to save eight times your annual salary by the time you retire?
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