Am I On Track For Retirement?

Am I On Track For Retirement? September 26, 2012

I hope you have some sort of savings plan for your future.  Whether you use your company 401(k) or an individual retirement account like a Roth IRA, you’ll be better off if you start thinking about it sooner than later.

Ok, fair enough.  You’ve heard people rant about saving for retirement and how most people don’t start until it’s too late.  What good is another article about saving for retirement going to do?

Probably not much.  So here’s a fairly different spin on the topic of retirement.

Age Based Benchmarks for Retirement Planning

I recently read an article that highlighted three benchmarks set by Fidelity Investments.  These simple retirement benchmarks were interesting for two reasons.  First, the benchmarks were pretty general.  We all have different incomes, expenses, and financial situations, so it’s impossible to assume that reaching these benchmarks will insure a healthy retirement.

Secondly, these retirement saving rules of thumb will probably discourage a lot of people who aren’t even close to these figures.  This can do two things: 1. Inspire that person to save even more, or 2. Discourage them to the point of not trying to save.

Regardless, these benchmarks were interesting and might prove helpful to you. Here they are:

–       Age 35: Your retirement savings should equal your annual salary.

–       Age 45: your retirement savings should equal 3 times your annual salary.

–       Age 55: Your retirement savings should equal 5 times your annual salary.

–       Age 67: Your retirement balance should equal 8 times your annual salary.

The assumptions Fidelity makes are based on a worker who saves from age 25 to 67 living until age 92.  The worker’s contributions are equal to 6% annual salary and raised by 1% every year until the worker reaches 12%.  A 3% employer match is assumed and a return of 5.5% is used in the calculation.

Again, these benchmarks might work for some people, but it’s not a ‘cure all’ for everyone.  Give serious thought to your retirement planning goals and try to make small steps to reach the goals you and a financial planner set out.

If studies like these encourage you to save more, that’s great! If you have nowhere near these figures, don’t completely freak out.  Look over your budget and try to increase your retirement contributions little by little.

Are you on track with your retirement savings?  Do you think these rules of thumb are helpful? 

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