By Chuck Jaffe, MarketWatch

BOSTON (MarketWatch) Most financial rules of thumb have been around for decades, offering guidance like Subtract your age from 100 to determine the percentage of assets you should hold in stocks, or To retire comfortably, your investments must generate 75% of your final salary.

The advice is more imprecise than incorrect, but it frequently is used as gospel. As the late Lynn Hopewell, former editor of the Journal of Financial Planning, once told me: Rules of thumb are for people who want to decide things without thinking about them.

While the market may be welcoming a new round of easing, there was no joy among savers. Chuck Jaffe reports. (Photo: Getty Images)

This week, however, Fidelity Investments unveiled what amounts to a new financial rule of thumb, in the form of retirement-savings guidelines based on its research, effectively laying out a road map that allows workers to check their progress at key points along the way.

The take-away on the research is likely to be considered the next financial axiom: Employees need eight times their ending salary to meet basic retirement income needs. That is the target that people will now be setting and the number they will be aiming for, rather than making decisions about a personalized, appropriate savings level.

Before Fidelitys research moves from suggestion to perceived financial guideline and, potentially to rule of dumb, its important to understand what the company was attempting and how it intends its numbers to be used.

For starters, Fidelity didnt just give the final target number, but rather set up checkpoints markers on the road of life where someone might want to measure their progress toward the ultimate goal. While acknowledging that every individual situation differs based on someones desired retirement lifestyle, Fidelitys target is replacing 85% of pre-retirement income.

Right off the bat, that means they have changed the older rule of thumb that talked about needing your investments to generate three-quarters of your pre-retirement income.

Having sufficient funds to generate 85% of your final salary by age 67 will require hitting the benchmark number of eight times final salary, Fidelity said.

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Chuck Jaffe: New rules for a rewarding retirement

(MoneyWatch) Is your retirement on track? Fidelity Investments has a simple retirement savings check-up to help you figure that out.

Based on the Boston-based investment company's calculations, the average person who needs to replace about 85 percent of their working wages, would need to accumulate a nest egg worth eight times their ending salary. This 85 percent figure is a relatively common assumption, which assumes that you don't dramatically change your lifestyle in retirement. Naturally, if you're a big spender, you could need more. If you're someone who spends only a fraction of your wages and expect to pay off your mortgage and other debts before retirement, you could need considerably less.

How do you know if you're on track to hit this eight-times wages goal? By age 35, you should have saved an amount equivalent to one-times your annual salary. So, if you earn $50,000 annually, you'd want $50,000 in your retirement savings plan. By age 45, you'd want three-times your salary. Assuming you now earn $80,000, that means you need $240,000 in savings. By age 55, when you're (maybe) earning $100,000, you should have $500,000 invested for retirement.

More Americans living paycheck to paycheck4 money-smart things you're doing now What are the best retirement calculators?

Sound impossible? Not if you start saving just 6 percent of your income at age 25 and boost your contributions by just 1 percent per year until you're contributing 12 percent of wages, according to Fidelity. Fidelity also assumes a fairly conservative long-term portfolio growth rate of 5.5 percent annually; that your wages will increase by 1.5 percent per year; and that you'll receive Social Security benefits to defray some of your income needs in retirement. The fund company figures you'll retire at age 67.

Not satisfied with Fidelity's analysis, or not certain how to get back on track if your savings fall short of these benchmarks? Check out Kiplinger.com's Retirement Savings calculator. It's the best of the many dozens of retirement savings calculators that I've tested over the years. What makes it better than the rest is that it's simple to use, but also allows you to factor in all your potential sources of retirement income, which can include company pensions and home equity. Better yet, if your savings fall short, it tells you just how much you need to save each month now to have the amount you'll need when you stop working.

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How to do a simple retirement savings check-up

Most experts agree that your retirement portfolio's asset allocation--its mixture of stocks, bonds, and cash--will have the biggest impact on how much it grows, as well as its risk level.

Unfortunately, retirement savers seeking guidance on formulating an appropriate asset allocation may have a hard time knowing where to look. Sure, you could certainly do worse than adopting Jack Bogle's simple formula: 100 minus your age equals how much you should hold in stocks. But what if you want to come at the problem with a greater sense of precision? What if your personal situation puts you outside the norm--perhaps you're lucky enough to have saved far more than you'll ever need, or you've not saved enough and are playing catch-up?

Thankfully, you don't have to fly blind. Here are some key information sources you can turn to when crafting your own asset-allocation plan. You may find it useful to sample an array of different opinions; you're apt to find a comforting convergence among various sources of guidance on this topic.

How the Pros Do ItTarget-date funds, which are designed as one-stop investments appropriate for your retirement date, are incredibly handy for do-it-yourself investors interested in building their own portfolios. Target-date funds offer a shortcut for helping to figure out how much is appropriate for someone like you to invest in different asset classes.

Looking at target-date fund holdings is like peering into what professional managers would do with your money. Once you have a sense of how different professionals would invest, you can take the parts you like and leave what you don't. It's important to take a look at target-date offerings from a couple of different fund companies--funds for the same retirement date can vary substantially based on glide-path philosophy and types of holdings.

Morningstar's Target-Date Fund Series reports do a good job of summarizing the glide paths, as well as the pros and cons, of various target-date series. Some target-date programs maintain very high equity allocations before and even during retirement, a stance informed by the view that longevity risk--that is, the chance that you'll outlive your assets--should outweigh concerns about short-term fluctuations in an investor's principal.

Funds in T. Rowe Price's Retirement series, for example, generally have above-average equity weightings relative to other target-date funds in that same age band. Meanwhile, other target-date fund series have steered a more conservative, bond- and cash-heavy course, in the view that big stock weightings add more volatility than most people need or want, which in turn could lead to panic-induced selling amid stock market downturns. American Century's LIVESTRONG series, for example, is generally lighter on equities during the accumulation phase than most target-date series, though its portfolios maintain relatively higher equity weightings for those nearing or in retirement. Thus, sampling an array of opinions from target-date funds geared toward investors in your same age band can help get you in the right ballpark; Morningstar analysts' favorite series are those from T. Rowe Price, American Funds, JP Morgan, and Vanguard.

Morningstar's Lifetime Allocation Indexes, informed by the research of Ibbotson Associates, provide another vantage point on the asset-allocation question. In addition to providing separate asset allocations for various time horizons, the indexes also allow customization by risk profile for each age band: conservative, moderate, and aggressive. In addition, the indexes also show suballocations for various asset classes--they recommend percentage weightings in Treasury Inflation-Protected Securities and commodities, for example.

The Customized View Morningstar's Asset Allocator tool provides another, goal-based view of asset allocation, harnessing your own portfolio information if you've saved one on Morningstar.com. The tool calculates how likely you are to meet financial goals based on your current portfolio value, monthly investments, time horizon, and asset mix.

For example, how much would someone retiring in 2045 need to invest each month to accumulate $1 million? Set the number of years to 34 and financial goal to $1,000,000, and enter your current savings and monthly investments.

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Is Your Retirement Portfolio's Asset Allocation on Track?

In June, Robert Benmosche, the chairman of the insurance giant American International Group, said an increase in the retirement age was unavoidable. What surprised many is how high he predicted the age would go.

"Retirement ages will have to move to 70, 80 years old," Benmosche told Bloomberg. "That would make pensions, medical services more affordable. They will keep people working longer and will take that burden off of the youth."

Currently, Americans are eligible for early retirement at 62, and full retirement at 66. The loss of retirement funds during the economic downturn forced many to acknowledge that they would have to work longer. But Benmosche's statement shocked many. Will people really have to work a decade or more longer than they expected to make ends meet in retirement?

The answer is yes, according to some retirement experts. A number of factors, accelerated by the Great Recession, are now forcing people to change the ways they save for and think about retirement.

"Most people didn't have enough retirement savings before the downturn. The downturn was the two-by-four hit over the head that made them realize this result," says Steve Vernon, the president of Rest-of-Life Communications, a company that helps people adjust the way they save for their post-work years.

The U.S. government has already acknowledged that the official retirement age will need to increase further than the already-revised 67 years. But doubts about the long-term solvency of Social Security linger. And the need for retirees to find funding beyond the government entitlement is making the official age obsolete anyway.

"The idea of retirement is morphing into a period of time where you work for an extended period, perhaps not making as much money or as many hours, but you still bring in money and keep going," Vernon says.

He says there are two primary reasons for the change:

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The escalating retirement age

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.

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Retirement rule of thumb from Fidelity

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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.

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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.

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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.

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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.

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How to Cut Costs in Retirement