Are You On Track to Retire?

People want to know if they are on track to retire.  And often times, they are looking for a quick and easy way to tell if they are doing enough, or if they need to do a bit more.  Fidelity created some general guidelines.  to help you quickly identify if you are making significant progress.  We talk about it in this episode of Monday Morning Money.

Are You On Track? Here are the Guidelines…

Multiply the factor by your annual household salary.  This is the level of savings recommended to be on track to retire at your normal retirement age.  For most people, normal retirement age is now 67 years old.

on track to retire

(The following is the transcript from the video shown above)

I recently met with a couple who was my age, 47 years old.  And the husband asked the question am I on track?  Have I saved enough at this point in my life to be able to retire?

It’s an interesting question, we dug into the numbers to see just where they were and where they might end up. But what if you are looking for something simple to see if you are on track? Stick around, we’ll share an idea with you.

Hi there, welcome to Monday morning money. I’m Neal Watson.

Are you on track to retire?

It’s a pretty common question. Sometimes people just want to have an idea if they are doing enough to be able to retire.  Something simple, where they can look quickly and say to themselves either I’m in good shape
or I really need to do more.

Well Fidelity has done some research on this topic, and they have come up with a measuring stick to help you quickly identify if you are making progress.  Let’s take a look.

  • By the time you are thirty, you should have one year’s salary saved.
  • By the time you are 40, you should have 3 times your annual salary saved.
  • That increases to six times by age 50.
  • 8 times by age 60,
  • and 10x by the time you reach your “normal retirement age.” Which for most people is 67 years old.

Let’s take a look at an example:

At age 30, Jane and Jim were making $75,000 per year.  To be on track they need to have at least that much in savings.

Over the next decade, they both see their earnings increase, and by age 40 they are earning $90,000 combined.  Hopefully they have continued to save, because to be on track they need to have $270,000.

At age 50, their combined income has grown to $120,000 per year.  If their savings has grown to $720,000, they are in pretty good shape to retire.

Their income increases to $140,000 per year over the next decade.  Their savings needs to improve as well.  The target for this age:  $1.1 Million dollars.

And when they reach age 67, which is their normal retirement age, it is suggested they have at least 10 times their annual salary.

Keep in mind, We are trying to hit a moving target. As time marches on, our wages and salaries tend to increase.  When that happens, our lifestyle—how we spend our money—tends  to increase.  Our savings needs to keep pace.

This yardstick is designed with the idea that you want to build a nest egg which will last for your entire retirement no matter how many years that is.

What About Retiring early?

So what if you want to retire before age 67?  Their guidelines also account for early retirement. Because your Social Security benefits will be lower when you retire early, you’ll need more in savings to create additional income.

So If you want to retire at age 65, you should have about 12x your annual income saved. And if you want to retire even sooner, you should have well over 14x your income in savings, and probably more if you have to buy your own health insurance.

And if you’re thinking about working later, Your increased social security benefits mean you may not need as much in savings to maintain your lifestyle.

Keep in mind this isn’t a perfect system.  Everyone is different and your needs may require a different number.

Are you on track?  If so, keep up the good work, it will take effort to stay on pace.  And if you are behind schedule? Well, perhaps it’s time to step back and look to see what you can do to improve your situation.

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And if you have a question you would like answered on a future episode, send us an email.  We’d love to hear from you.

Thanks for watching and join us next week for another episode of Monday morning money, have a great week.