Wouldn't it be great if there were some sort of magic number that guaranteed financial security throughout retirement? That way, we'd all know exactly how much to save, and from there, we'd get peace of mind.
A recent Northwestern Mutual survey found that Americans landed on $1.46 million as that magic number of sorts. But that doesn't mean you need $1.46 million to retire comfortably, or that saving that much is attainable given your income.
Also, while $1.46 million may be more than what some people need to live a nice lifestyle in retirement, for others, it may not be enough. So rather than rely on a single number like that, you may want to use Fidelity's rule for retirement planning. The financial giant says you should aim to have 10-times your final salary socked away in an IRA or 401(k) by the age of 67, which is when people born in 1960 or later can claim their Social Security benefits in full.
What's great about Fidelity's advice is that it's based on individual earnings. If your ending salary is $70,000, you're aiming for a $700,000 nest egg, which may be what you need based on the paycheck you're used to collecting. If your final salary is $150,000, then you're aiming for $1.5 million -- though you might not need quite that much, depending on your lifestyle.
Either way, though, the idea of accumulating 10-times your salary might seem challenging. But with the right strategy, you may be surprised at how easy it is to hit that goal.
Start young and invest in stocks
Retiring with 10-times your salary could boil down to simply giving yourself a long savings window and investing heavily in stocks.
If you wait until your 40s or 50s to start contributing toward retirement, you may not get to that goal -- or you might have to part with a lot of money each month to get there. And if you choose safer investments than stocks, your money may not grow at a fast enough pace to get you to your goal.
But if you begin funding an IRA or 401(k) in your 20s and you invest the bulk of your savings in stocks from the start, you might easily end up with 10-times your salary by age 67. And you might also get there without having to give up a large chunk of your paycheck every month.
Over the past 50 years, the stock market's average annual return has been 10%. So let's say you contribute $100 a month to a retirement plan between ages 25 and 67 for a total of 42 years. If you're able to score a 10% yearly return in your portfolio during that time, you're looking at a total of about $645,000.
Meanwhile, a typical annual wage for someone aged 67 is about $55,000, according to the Bureau of Labor Statistics. If we apply Fidelity's rule, that means our savings target would be $550,000. Here, you're getting to almost $100,000 more on just $100 a month.
Consider your personal goals and expenses when setting a retirement savings goal
Fidelity's rule of thumb is a good one to follow if you want some guidance on setting a retirement savings goal. But you can also adjust that guidance based on your needs and objectives.
If you want your retirement to be filled with travel, you may decide you should aim to save 12- or 13- times your salary. If you intend to downsize your home and live frugally, then eight-times your final salary may be more than enough.
It could pay to sit down with a financial advisor and have them help you establish a savings goal that's truly unique to you. This could make it so you're not putting undue pressure on yourself to oversave, but you're also less likely to wind up with an income shortfall on your hands.
FAQs
Retiring with 10-times your final salary should give you a nice nest egg. To achieve that goal, aim to start saving for retirement from a young age. Consider investing heavily in stocks so your money may grow and you don't have to contribute as much to a retirement plan each month.
What is the 10x salary rule for retirement? ›
According to retirement-plan provider Fidelity Investments, the rule of thumb is to save 10 times your income if you want to retire by age 67. Adjust this amount if you want to retire any earlier or later.
How much should a 67 year old have saved for retirement? ›
Key takeaways
Fidelity's guideline: Aim to save at least 1x your salary by 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Factors that will impact your personal savings goal include the age you plan to retire and the lifestyle you hope to have in retirement.
How much money should I have when I retire at 67? ›
10x your annual salary by 67
To fund an “above average” retirement lifestyle—where you spend 55% of your preretirement income—Fidelity recommends having 12 times your income saved at age 67, which is the normal Social Security retirement age.
How much does Suze Orman say you need to retire? ›
When asked what a safe amount would be, she explained that it would be in the millions but depends on several factors, such as where you live, your expenses, and whether you own a home outright. She believes the amount you'd need to retire early would be closer to $5 or $10 million.
What is the $16728 bonus in retirement? ›
Have you heard about the Social Security $16,728 yearly bonus? There's really no “bonus” that retirees can collect. The Social Security Administration (SSA) uses a specific formula based on your lifetime earnings to determine your benefit amount.
What is the $1000 a month rule for retirement? ›
According to the $1,000 per month rule, retirees can receive $1,000 per month if they withdraw 5% annually for every $240,000 they have set aside. For example, if you aim to take out $2,000 per month, you'll need to set aside $480,000. For $3,000 per month, you would need to save $720,000, and so on.
What is the average 401k for a 67 year old? ›
Average and median 401(k) balances by age
| Age range | Average balance | Median balance |
|---|
| 35-44 | $91,281 | $35,537 |
| 45-54 | $168,646 | $60,763 |
| 55-64 | $244,750 | $87,571 |
| 65+ | $272,588 | $88,488 |
2 more rowsJun 24, 2024
Summary. $300,000 can last for roughly 26 years if your average monthly spend is around $1,600. Social Security benefits help bolster your retirement income and make retiring on $300k even more accessible. It's often recommended to have 10-12 times your current income in savings by the time you retire.
What is average Social Security payment at 67? ›
As of July 2024, the average check is $1,782.74, according to the Social Security Administration — but that amount can differ drastically depending on the type of recipient.
The median income for Americans 65 and older is $50,290. The mean (average) is $75,020. Average annual expenditures for Americans 65 and older are $57,818. The average Social Security retirement benefit check is $1,907 as of January 2024.
How many people have $1,000,000 in retirement savings? ›
Nearly 399,000 Americans also have a least $1 million in an individual retirement account. The key to stashing away such sums? Start early and contribute to your retirement plan consistently over many years, Fidelity said.
How much does Dave Ramsey say to save for retirement? ›
Ramsey's recommendation, which he shared on his website Ramsey Solutions, is to invest 15% of your gross income into your 401(k) and IRA every month. There's a good reason you should invest 15% of your income.
What is the average nest egg in retirement? ›
What are the average and median retirement savings? The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000. Taken on their own, those numbers aren't incredibly helpful.
What is the minimum wealth to retire? ›
By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you'll have enough funds. Seamless transition — roughly 80% of your pre-retirement income.
Do I really need 10 times my salary to retire? ›
By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10 to 12 times your income at that time to be reasonably confident that you'll have enough funds.
What is the 10x income rule? ›
The financial giant says you should aim to have 10-times your final salary socked away in an IRA or 401(k) by the age of 67, which is when people born in 1960 or later can claim their Social Security benefits in full. What's great about Fidelity's advice is that it's based on individual earnings.
What is the 10x investment rule? ›
While it is true that angel investors (like our dragons) typically seek 10 times their money back over 3-5 years that isn't the source of the "10x rule". The 10x rule means that in order to gain market traction a product must be exponentially better. ie 10 x faster, 10x smaller, 10x cheaper, 10x more profitable.
What is the 90 10 rule Warren Buffett 1 money savings tip for retirees? ›
According to Buffett, you should invest 90% of your retirement funds in stock-based index funds. According to Buffett, the remaining 10% should be invested in short-term government bonds. The government uses these to finance its projects.
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