Fidelity Investments has come up with a rule of thumb workers can use to see if their retirement savings are on track.

It shows what percent of their current salary workers should have saved up at various ages if they want to be able to retire at age 67 and live on 85 percent of final pay.

To get there, the average worker should have saved (in all retirement accounts combined) about a year's worth of salary at age 35, three times at age 45, five times at age 55 and eight times by age 67.

For example, a worker earning $100,000 at age 67 should have saved $800,000.

The rule makes various assumptions - such as that the worker starts saving at age 25, saves continuously until age 67, lives until age 92 and earns an average investment return of 5.5 percent. It also assumes the person starts contributing 6 percent of pay to a workplace plan and increases that by one percentage point a year until reaching 12 percent and gets a matching contribution equal to 3 percent of pay from the employer.

Change any of those assumptions and the amount needed at various ages also changes.

Fidelity, like most retirement-plan administrators, has more sophisticated tools workers can use to get personalized answers to their questions.

It devised the rule of thumb because so many of its more than 17 million retirement-plan participants wanted to know if they were on track to retire and "didn't want a half-hour explanation," says Jeanne Thompson, a vice president of market insights with Fidelity.

Most retirement rules of thumb focus on how much to save each year (10 to 15 percent is a common benchmark), how much you should have saved by the end of your career or what percent of your final pay you need to live on in retirement (70 to 85 percent is a good target).

But none provided a benchmark workers could use to see if they are on track.

Original post:
Retirement rule of thumb from Fidelity

Video Link: https://www.youtube.com/watch?v=jHgZws6unmg

11-09-2012 16:51 9/11/12 Utah Football Jordan Wynn Press Conference More:

See original here:
University of Utah - Utah Football - Jordan Wynn Press Conference - 09/11/12 - Video

By MarketWatch

Dont miss these top stories:

By the time you retire at age 67, you should have eight times your salary saved for retirement, in order to replace 85% of pre-retirement income. Youre on track to cover basic retirement expenses if, at 35, you have one full year of current salary saved up and if you continue saving at a specified rate.

Thats according to a new retirement tool from Fidelity Investments, which Andrea Coombes writes about in her latest column. To be fair, any tool that claims it can tell you how much you need to save is making some assumptions that may not fit your situation, and by following the guidelines, you may end up saving not enough or too much, she writes.

Read the full column in todays Personal Finance pages, along with more retirement coverage from Robert Powell and Chuck Jaffe. Plus, read about the latest Census Bureau statistics that indicate median household income decreased last year, and 46 million Americans remained in poverty.

Amy Hoak , Personal Finance Daily

Are you saving enough for retirement? A new tool aims to give savers a rough guide to let them know whether theyre on trackbut, as with all retirement tools aimed at a broad audience, take the information with a grain of salt. Retirement savings: How much is enough?

With the Fed likely to launch QE3, experts are suggesting that there might be some different moves to make with your money, especially if you are retired or fancy retiring. 7 QE3 moves to make with your money.

Before politicians can fix Social Security, they need to ensure that older Americans feel more secure about their financial future due to the fruits of their own labor, rather than any form of entitlement, writes Chuck Jaffe. For a better retirement, work longer.

Doctor develops new system to allow older people to remain at home, while providing them with cost-effective services using technology and a combination of volunteer and paid labor. Seniors get wired to stay home.

Go here to see the original:
Personal Finance Daily: How to save enough for retirement

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

In the set of age-based targets released Wednesday, Fidelity says employees should have the equivalent of their annual salary in savings by age 35 in order 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 pre-retirement income in retirement, according to Fidelity.

The nation's largest 401(k) administrator is distributing the guidelines as what it calls a rule of thumb to help employees become more active in their retirement planning. Its 12 million accountholders 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. "The ultimate goal is to get them more engaged and get them to seek guidance -- either directly from one of our representatives or through one of our online tools."

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.

Most advisers say you'll need to make anywhere from 70 percent to 85 percent of your pre-retirement income to maintain a similar standard of living in retirement, although it can vary widely depending on lifestyle.

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. The worker would begin by contributing 6 percent of annual salary, then raise the amount 1 percent every year until reaching 12 percent, all the while receiving a 3 percent match from the employer.

Original post:
Fidelity issues new retirement savings guidelines

By Andrea Coombes

SAN FRANCISCO (MarketWatch)Are you saving enough for retirement? A new tool from Fidelity Investments aims to give savers a rough guide to let them know whether theyre on trackbut, as with all retirement tools aimed at a broad audience, take the information with a grain of salt.

Fidelitys new guide estimates that workers should save at least eight times their salary by the time they retire at age 67, in order to replace 85% of their pre-retirement income. (To reach that 85% replacement rate, Fidelity adds in expected Social Security benefits.) The guide offers specific age-based savings goals to meet along the way.

For example, Fidelity says that a 35-year-old should be on track to cover her basic retirement expenses if shes saved one years worth of her current salary and she continues to save at a specified rate until she retires at age 67. For a 40-year-old, its two times salary; for a 55-year-old its five times salary.

For people who are unsure about whether theyre saving enoughand plenty of us fit that descriptionthis type of guidepost may be a useful check-in. Fidelity Investments, which unveiled the new tool on Wednesday, manages 401(k) plans for about 12 million participants and said workers are asking for this type of information.

Among workers who call for retirement guidance, The No. 1 question we get from participants when they call is, Am I on track? said Beth McHugh, vice president of thought leadership at Fidelity Investments.

Heres the rub: Any tool or guide that promises to tell you how much you need to save is using assumptions that may or may not fit your situation. You may end up saving too littleor too much. As Fidelity notes in its news release: Every individuals situation will differ greatly. The best advice is to proceed with caution with this tool and with any of the myriad retirement-savings calculators and guides out there.

For example, while Fidelity says that having saved eight times your salary by the time you retire is a good rule of thumb to reach an 85% replacement rate, consulting firm Aon Hewitt says youll need 11 times your salary saved to pay for retirement costs.

According to Aons report, which studied savings behavior of 2.2 million workers at 78 large firms, a 25-year-old worker with solely a 401(k) plan needs to save 15% a year (including the company match) to retire at 65 with adequate resources.

The Aon report adds that people who wait until age 30 to start saving need to set aside 19% of pay (including the match). Aon assumes a company match of 6% and an employee contribution of 9% every year for 40 years, and that men will live to 87 and women to 88.

Read the original here:
Andrea Coombes' Ways and Means: Retirement savings: How much is enough?

Finding success in retirement is a matter of trade-offs. Some pre-retirees will say that they'd like to have every bit as much, if not more, money in retirement as they had while they were working, even if it means they have to work longer or economize more in advance. Ticking off items on their bucket lists is a key goal, and hiking in the Himalayas and playing golf at Pebble Peach don't come cheaply.

Other pre-retirees are comfortable with a different type of trade-off. They, too, would like a good quality of life in retirement, but don't mind economizing a bit in their later years, especially if it means they can be retired longer. They consider time to be the true luxury that accompanies retirement. To get there, they're willing to downsize their homes, hang on to their cars long enough to earn plaudits on the national radio talk show, "Car Talk," and entertain at home rather than enjoying lavish meals out.

Many others will balance the above two styles, economizing on some items but considering other splurges sacrosanct. I've known plenty of retirees who weren't wealthy but still managed to travel to fascinating places and contribute to charitable organizations that mirrored their values. They made room in their budgets for these priorities by saving on other line items.

If you're nearing retirement and you don't have as much saved as you had hoped, working longer, taking Social Security later, and continuing to sock money away are key ways to help bridge the shortfall. But you might also take heart in knowing that your successful retirement will depend on identifying your own trade-offs--areas where you're able to trim costs in exchange for what you really want, which might be the ability to retire sooner.

Here are some of the key ways in which retirees might be able to cut their costs.

Make Changes on the Home FrontMoving is a pain in the neck, but one of the easiest ways to make retirement more affordable is to consider moving to a less-expensive residence, usually someplace smaller. If you own your home, you might be able to reduce your mortgage amount or unlock equity by downsizing to a smaller place; you're also likely to cut your property taxes, maintenance costs, and utility bills. Of course, downsizing carries its own trade-offs; Morningstar.com users discussed them in this Discuss forum thread (http://socialize.morningstar.com/NewSocialize/forums/p/310170/3289160.aspx#3289160), and I summarized their comments in this article (http://news.morningstar.com/articlenet/article.aspx?id=565050). Several cited the ability to shed unnecessary objects as one of the key side benefits of downsizing, though many also noted that they didn't plan to downsize because they had never "upsized" in the first place.

In a related vein, some retirees and pre-retirees in the same Discuss forum thread noted that relocating to cheaper geographic locales had helped them dramatically reduce their in-retirement cost loads (and escape brutal Northern winters). Not only do housing costs vary significantly by geography, but so do tax burdens. This handy map (http://www.retirementliving.com/taxes-by-state) provides an overview of the tax rates in each state, including the skinny on property, income, and sales taxes. For adventurous pre-retirees who would like to economize, moving to a foreign country with low costs may be an option; this article (http://news.morningstar.com/articlenet/article.aspx?id=564465) provides an overview of some of the trade-offs that accompany retirement overseas.

Trim Day-to-Day ExpensesMaking changes to your housing situation is one of the biggest-ticket ways to cut your in-retirement costs, but it's also the one that will require the most dramatic lifestyle adjustment. For those who aren't prepared to take that plunge, there are a host of simple ways to reduce expenses on everything from food to utilities to personal care--small changes that will add up over time. This article (http://news.morningstar.com/articlenet/article.aspx?id=376020) details some of the easiest tweaks you can make to reduce your day-to-day outlay, and users also offered terrific tips of their own in the Comments field below the article.

Slice Travel and Leisure CostsRetirees have something working folks don't have, and they have it in abundance: time. But many retirees will also tell you that having more time gives them more opportunities to bust their budgets by overspending. Online alerts and daily deal sites make it particularly easy to save on everything from meals to vacations to skydiving, but there are old-fangled ways to economize on travel and leisure costs, too. This article (http://news.morningstar.com/articlenet/article.aspx?id=377819) amalgamates money-saving tips on everything from cultural and sporting events to travel, entertaining, and dining out.

Watch Your Investment and Other Financial Costs Like a HawkThe aforementioned tips all relate to lifestyle changes. But if you want to cut your in-retirement expenses without having to change your living habits one little bit, the easiest way to do so is to reduce how much you're paying your financial institutions. Consumers don't typically write checks for most of these services; instead, their share of expenses is automatically deducted from their balances. That might be convenient, but the end result is that they're usually not particularly sensitive to what they're spending, even though financial-services costs can easily be one of the biggest line items in many retiree households. To boot, higher investment costs are inversely related to investment performance, making mutual funds and exchange-traded funds some of the rare consumer products where paying up doesn't typically buy you a better product. This article (http://news.morningstar.com/articlenet/article.aspx?id=376989) provides 50 tips for cutting your investment, insurance, and banking costs.

Follow this link:
How to Cut Costs in Retirement

From its showcase botanic gardens, public parks, and nature reserves to community vegetable plots, school planting projects, and well-kept private grounds, Christchurch deserves its status as a garden city. The gardens give the city its breathing space, provide a backdrop to its numerous festivals and public entertainment, and present an opportunity for residents to escape all that a bustling city has to offer.

With a population of about 375,000, Christchurch is a small city by world standards, but it is New Zealand's second-largest and the gateway to the scenic delights of the South Island. Lakes, rivers, wine country, beaches, ski fields, mountains, and thermal springs are all on the doorstep while the city offers all you would expect in urban shopping, dining, education, entertainment, health care, and recreational facilities.

Situated in the South Pacific, New Zealand is a safe and separate haven. It's a clean and green oasis with a stable Western democratic government that's far away from many of the world's trouble spots but well-connected and engaged in world affairs. In 2010, the United Nation's human development report ranked New Zealand as the world's third best country to live in, and in 2011 it was ranked as the world's least corrupt country. Christchurch personifies all that makes New Zealand such a great destination and is one of the country's most vibrant cities.

Christchurch is located a third of the way down the east coast of the South Island, in the province of Canterbury. Lying between Pacific Ocean beaches and the ancient volcanic Port Hills, the city is flat and crossed by the rivers Avon and Heathcote. It is surrounded by the Canterbury Plains, an area of productive farmland running from the coast to the Southern Alps, the mountain range running the length of the South Island.

The beauty of Christchurch lies in its gardens (740 parks and reserves) and its natural environment. The city founders, with much-appreciated foresight, reserved a huge park and botanical gardens in the center of the city for public use. The 161-hectare Hagley Park is now very much the heart of city life.

For all these reasons, Christchurch qualifies as a top retirement option. The small population means Christchurch can offer a slower pace of life and a community feel. Visitors and expats alike marvel at the lack of crowds and traffic even though Christchurch is the major urban center for the South Island and offers all the services and entertainment you could desire.

Recreational opportunities abound. Within 30 minutes to a three-hour drive you can be bungee jumping, skiing, hot air ballooning, white water rafting, tasting wine at the cellar door, whale watching, and hiking. In the city you could be surfing, swimming, playing golf, boating, or shopping. Entertainment options include attending live theatre, a concert, watching a film, and visiting museums. And, of course, you can always relax by the river or beach. The city has a full festival program celebrating jazz, Chinese New Year, drama, and flowers.

All types of community groups are active, and, as the local language is English, it's easy for foreign retirees to connect and become part of the active local scene. The local university, many secondary schools, and retiree education groups offer adult education courses including crafts, photography, history, cooking, philosophy, languages, science, and do-it-yourself. All this is on offer within a safe and clean city with a pleasant climate.

Once known as a Pavlova Paradise, Christchurch is not the perfect escape for everyone, and there are two downsides in particular. First is the earthquake risk. The risk of another large quake has receded significantly, but there is still a lot of damage in the city. Some areas will be construction zones for years to come. However, if you are living in a damage-free area you can go about your day-to-day life without being affected much beyond some traffic delays and detours.

The second downside of note is the distance. New Zealand is a long way from the rest of the world (except Australia and the Pacific Islands), meaning travel can be expensive and time consuming. With flight connections, it can take more than 24 hours to reach a destination in Europe or North America. This remoteness, though, is seen as an attraction by many would-be retirees looking for an escape from world crises.

Read more:
Retirement in New Zealand's Garden City

For many years, baby boomers and other workers looked at their homes as giant piggy banks. Rather than saving for retirement, they assumed rising home values would bail them out in their golden years.

But since 2008, a "huge paradigm shift" has made the road to a secure retirement much rockier, according to Jill Vihtelic, professor of business at Saint Mary's College in Notre Dame, Ind. Vihtelic says the best way to prepare for an "uncertain future" is to spend less and invest your savings. And the sooner you start your retirement planning, the better.

America's retirement crisis is well-documented in studies and surveys. Why do you suppose this is a problem? Is it due to Americans' penchant to spend rather than save?

I don't think that the problem is as simple as that; we have suffered a huge paradigm shift. Americans are net savers over their lifetimes. As Elizabeth Warren (current Senate candidate, longtime consumer advocate and former special adviser to the Secretary of the Treasury for the Consumer Financial Protection Bureau) has said, most people invested in their homes and built equity as their main retirement asset.

As it turns out, that investment lost value since 2008. Homes are still quite hard to sell and illiquid in many locations, and most real estate experts will tell you that we're not through all of the foreclosures yet.

Other economic, societal and demographic shifts -- such as stagnant incomes, increased divorce rates, the number of grandparents raising grandchildren, rising medical costs, increased life longevity, et cetera -- contribute to the financial difficulties that many people now face as they reach retirement age.

What can Americans do to improve their retirement prospects at various points in their careers?

Regardless of where people are in their careers, to be prepared for an uncertain future, we should spend less than we earn and invest the difference. And the sooner people start, the better. Longer periods of time make achievement of financial goals more feasible due to the time value of money. (Editor's note: "Time value of money" is the value of money based on a specific amount of interest earned over a specific period of time.)

There's been a lot of talk lately about the demographic shift in many developed countries. Because of the shift to an aging population, an economic slowdown is forecasted in those countries. Do you think aging populations and economic slowdowns go hand in hand?

I'm not sure that I agree with the statement or its premise. Aging populations will provide growth to many industries such as health care products and other service sectors. In the U.S., the boomer generation is so massive that it drives consumer demand. What boomers want and need as they age will undoubtedly be a different mix of products and services compared to when they were in their 20s, 30s or 40s.

Excerpt from:
Save early, often to calm retirement chaos

LUBBOCK, Texas, Sept. 11, 2012 /PRNewswire/ --If you started retirement planning early in your career, it's good news by the time you hit your 40s.But for those 40-somethings just thinking about retirement it's like halftime in a football game.

Since football season is upon us, we'll use the gridiron analogy. Let's face it; working in your 40s really is like halftime in the big game. Your career is about half over, and it's time to stop the game, assess where you are and make any necessary adjustments to your plan. You have 20 years of work behind you, and roughly 20 years of work ahead. If you haven't been saving for retirement, it's time to get started. If you've been socking money away for years, then it's a good time to reassess where you are, and what you need to do over the next 20 years.

"Now more than ever, it's important to have both an offensive and a defensive game plan," said Brian Pitaniello, a partner with PFG Advisors. "In your 40s, you still need to have an offensive strategy to continue building dollars for the future. On the flip side, a defensive strategy is still just as important to have in place for the possibility of premature death, disability, economic crises and other unforeseen financial needs.

"Just like any football game, you have to have that half-time 'locker-room talk' about preparing for the worst but hitting the field with the mentality and the tools for ultimate success."

Pitaniello explained that if you've been ignoring retirement for some reason, or delayed facing the reality that you may one day be retired, then now is the time to act. It's halftime. It's time to regroup and prepare yourself for the second half of your career. No matter the age you begin, Pitaniello and PFG Advisors recommend the following checklist in creating a retirement strategy:

http://advisorspfg.com

CONTACT: Kim Davis, (806) 544-4255

This press release was issued through eReleases Press Release Distribution. For more information, visit http://www.ereleases.com.

Read this article:
Retirement Planning at 40-Something - Halftime of the Big Game

When it comes to saving for retirement, Americans are woefully underprepared. A study by Bankrate.com found that around 28% of Americans have no emergency savings. Similarly, another 21% of Americans have some savings, but only enough to cover expenses for three months. Couple that with the economic uncertainty of Social Security and Medicare, and you can see why many people are looking for unconventional ways to free up cash for retirement.

Here's a simple, albeit controversial, idea: don't have any kids. A 2011 report by the USDA's Center for Nutrition Policy and Promotion now puts the cost of raising a single child to the age of 17 at roughly $235,000. That's up 3.5% from the year before. Schooling, transportation, day care and feeding are the costs that are seeing the largest increases when it comes to raising a child. As expected, if a family makes more, the spending ratchets up exponentially. That would be quite the nest egg if you didn't have to allocate it for children, wouldn't you say?

No College CostsAccording to the academic think tank College Board, the average cost of just one year at a public university is around $21,000. If you're talking private school, the cost is nearly twice as much for just one year of tuition costs. Even more troubling is the fact that college costs are not included in the aforementioned $235,000. Just think how much cushier things would be for you and your spouse if you could boost your retirement portfolio by an extra $84,000.

Far Less StressAnyone who tells you raising a child isn't a source of gray hair is simply lying. Trying to balance kids and work, keeping your offspring on the straight and narrow and waging daily homework battles can result in a lot of stress for parents. By not having kids, you alone set the priorities for life, for work and for finances. Your retirement fund will also benefit.

More Free TimeJust imagine no PTA meetings, no carpooling, no Little League, no bake sales and no birthday parties. Your days before and after work will be free. If you want to be proactive toward retirement, you can put this time to good use by generating extra income. You could sign up to fill out paid surveys online, sell your stuff on the Internet or even start a side business. You'd be hard-pressed to make time for these financially beneficial activities with a household full of kids.

No Childcare PaymentsToday, both halves of a married couple generally work. The thinking is that the extra income can cover child care. According to the National Association of Child Care Resources and Referral Agencies, a year of child care can cost nearly $20,000. Not only can you save money by not having kids, you can generate a lot more of it.

No Need for an InheritanceIf you have kids, it's natural to want to leave something behind for them when you pass. If you don't have kids to begin with, you'll never have to worry about that. You can either spend the money during retirement, or you can leave your money to a charity

The Bottom LineIn many ways, having kids costs you dearly. Also, it's getting more and more expensive by the day. If you're single, or married with no kids, you might want to consider the notion of not having kids. The notion may seem radical to some. From a purely financial standpoint, however, there are plenty of perks to not having kids. Would you choose retirement over offspring?

More From Investopedia

Here is the original post:
How Not Having Kids Can Help You Save For Retirement