Fidelity: Put Aside 8 Times Your Salary Before You Retire


Fidelity Investments has issued new savings guidelines suggesting that workers save at least eight times their final salary to meet basic income needs in retirement.

In the set of age-based targets released this week, Fidelity says employees should have the equivalent of their annual salary in savings by age 35 to reach the first benchmark en route to that goal.

To stay on pace, individuals should then plan to have saved twice their salary by 40, four times' salary by 50, five times by 55 and six times by 60.

Under that scenario, then, someone with a $60,000 salary would need to have $240,000 in savings at age 50 to be on track.

Although many will need more, especially at higher pay levels, saving eight times' income by age 67 should provide most workers with roughly 85 percent of their preretirement income in retirement, according to Fidelity.

The nation's largest 401(k) administrator says its 12 million account holders had an average balance of about $73,000 at the end of June.

"We constantly are asked by participants, 'How do I know if I'm on track and what do I set as a target to ensure I will have sufficient income in retirement?' " said Beth McHugh, vice president of thought leadership at Boston-based Fidelity.

Setting a savings target that's a multiple of income is an increasingly popular concept in financial planning. Its advocates believe it is a simpler and more manageable way of monitoring progress toward retirement security than trying to achieve a certain level of assets.

Fidelity's 8X savings guideline, which is a lower target than some published scenarios, is based on a worker saving in a 401(k) or other workplace retirement plan from age 25 to 67, then living until 92.