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How Much Should You Save and Withdraw for Retirement?

Older couple discussing how much to withdraw from their retirement savings

One of the most important questions to answer as you plan your retirement is how much money you need. The answer depends on a lot of factors, from your potential longevity to your lifestyle to how much you’ll be getting from Social Security. However, according to Fidelity, there are four key guidelines that retirement planning should carefully assess.

Consider working with a financial advisor as you plan for retirement or update those plans.

What Fidelity Found, Based on When a Person Retires

Financial advisor preparing to advise clients on retirement planning

Not surprisingly, the longer you work and save and the later you retire, the less money you’ll need in your retirement fund. For anyone born in 1960 or later, the full Social Security retirement age is 67, with lower benefits if you retire earlier or more for each year you delay collecting until age 70.

“The age at which you choose to stop working can have a big impact on how much income you need from your own savings,” Fidelity says. “This, in turn affects the values for other retirement guidelines —savings rate, savings factors, and sustainable withdrawal rates.”

Here’s what they found:

Retirement Guidelines Based on Age at Retirement

Age at RetirementIncome Replacement From SavingsSavings as Multiple of Current IncomeSavings RateWithdrawal Rate
6255%14X25% yearly3.9%
6550%12X19% yearly4.2%
6745%10X15% yearly4.5%
7040%8X11% yearly4.9%

How Fidelity Developed Its Retirement Guidelines

To come up with its guidelines, the brokerage looked at yearly savings rates, a savings factors (savings milestones), income replacement rates and potentially sustainable withdrawal rates. “They are all interconnected, so it is important to keep each in mind, and to understand how they work together as you save for retirement and monitor your progress,” the brokerage said in its report.

Fidelity’s researchers assumed no pension income, continuous employment (no layoffs), uniform wage growth and contribution amounts increasing with the wage growth. They also stress tested their guidelines to be successful in nine out of 10 market conditions across a broad range of investment mixes.

Bottom Line

Senior couple on their way to discuss retirement savings withdrawals with their financial advisor

To help people determine how much money they need to retire, Fidelity researchers developed four guidelines: a yearly savings rate, a savings factor, an income replacement rate and a potentially sustainable withdrawal rate. These general rules of thumb can help you retire comfortably.

Tips on Retirement

  • One way to get help planning for retirement is to work with a financial advisor who can help you answer all your questions about retirement options. If you don’t have a financial advisor yet, finding one doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have free introductory calls with your advisor matches to decide which one you feel is right for you.  If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Check out our no-cost retirement calculator to see how you are progressing towards your retirement savings goals.

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