One of the biggest fears for retirees and near-retirees is that your money won’t last in retirement. Making your money last in retirement for possibly 30 years or more, not knowing what lies ahead is daunting. So this week, I’m sharing with you some ideas from my financial planning background and my experience helping many clients make the transition into retirement with confidence, in order to help you better understand your chances of running out of money in retirement. 

Today, I’m sharing with you my favorite shorthand calculation for figuring out how much you should have saved for retirement. 

A few years ago, Fidelity Investments did an extensive study which found that you’ll need about 10x your current income saved by the time you retire, assuming you retire at age 67. There are a number of assumptions used in this study, so you may consider looking into this more. I’ll link to the results of the study in the show notes of this episode, which is episode 282. 

Fidelity Study - https://www.fidelity.com/viewpoints/retirement/how-much-do-i-need-to-retire

So if you need about 10x your annual household income saved by the time you retire, assuming you retire in your mid-late 60s, and you and your spouse make $100,000/year, you’ll need $1,000,000 saved at retirement, to help ensure that you will be able to maintain your standard of living in retirement. 

I like this approach of using a multiple of your income, because it just works. If you make $50,000/year, you’re going to need a lot less income in retirement to maintain your lifestyle, compared to a surgeon who is used to the lifestyle based on $700,000/year of income. $1,000,000 is probably more than enough for the $50,000/year earner, but it would be dangerous for the surgeon making $700,000/year to transition into retirement with a nest egg of $1,000,000.

Now the good news is that Fidelity also backtracked their numbers to help you see if you’re on track before age 67. Using their numbers, you should have 6x your household income saved at age 50, 7x by age 55, and 8x by age 60. 

If you’re behind, don’t fret. You can kick it into gear with higher savings or consider working longer to close the gap. 

That’s it for today. Thanks for listening. 

My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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