Fidelity says 8x

wabower

wabower

Touchdown! Greaser!
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Wayne
final annual salary necessary for basic retirment needs with stairstep goals defined at various ages. Hadn't seen this particular formula before, but found it interesting. Google Fidelity 8x for the article.

Me no savvy link stuff.
 
8X seems slim to me if I retire at 65 (or even 67) and live to 92. Obviously no one at Fidelity shares my need to buy Avgas. :)
 
This is more encouraging and seems a little more realistic than most of the retirement planning tools. Most I have seen tell me I'll be a couple of million dollars behind at 65. Hell, if I put all of my salary into retirement accounts until I retire, I still wouldn't catch up. I don't plan to move into a Manhattan penthouse! I'm convinced that a loft of those retirement planning tools are developed by college econ students.

What I have consistently questioned is that assumption that we'll need 85% of our pre-retirement income after retirement. Some sources have that number higher. By the time I retire I'll have been totally debt-free for several years, and could probably get by on less than half. Of course avgas could become a significant factor, so I'm still going to sock away what I can. :)
 
everything on there seems very realistic except...

• Social Security payments are factored into the replacement income ratio of 85 percent.

at age 25 I don't have a snowball's chance of seeing a penny of the $ i'm paying in to social security
 
I have run with both groups, first as a charter member of the IAFP (financial planners) and now as a "retired" guy, although I think the current definition of retired is that somebody else just occupies the office that was yours for a while and you keep on doing whatever it was that made you rich to start with.

The consensus of guys I talk to in the N. Dallas area, some of whom own planes and some who don't, is that our nut is ~$80k plus social security. But none of us owes anybody a dime, no extravagent life-styles other than airplanes, Harleys, and a few boats, vacation houses, etc. and almost everybody still does something that creates some income; not because we particularly need it, but
to keep from going smack-dab nuts sitting around. If a smoking plane deal or other such opportunity arises, we all have a little extra stashed away to handle it without drawing any undue attention from SWIMBO.

If grandkids knew they will get most of it, I'm sure they would encourage me to work more, but there's no chance they will ever know until it's over.
DaleB said:
This is more encouraging and seems a little more realistic than most of the retirement planning tools. Most I have seen tell me I'll be a couple of million dollars behind at 65. Hell, if I put all of my salary into retirement accounts until I retire, I still wouldn't catch up. I don't plan to move into a Manhattan penthouse! I'm convinced that a loft of those retirement planning tools are developed by college econ students.

What I have consistently questioned is that assumption that we'll need 85% of our pre-retirement income after retirement. Some sources have that number higher. By the time I retire I'll have been totally debt-free for several years, and could probably get by on less than half. Of course avgas could become a significant factor, so I'm still going to sock away what I can. :)
Click to expand...
 
I think any "study" which purports to offer a number without knowing the specifics of your individual circumstance is selling something. Just an opinion.
 
From the article:

Fidelity's 8X saving guideline also makes the following assumptions:

• The calculation assumes a lifetime hypothetical average annual portfolio growth rate of 5.5 percent.
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That's actually a very reasonable number now.

Somebody needs to send this article to CalPERS. Earlier this year, they lowered their rate to 7.5%, but only earned 1% the next quarter. Boof.


• The employee's income grows by 1.5 percent per year over general inflation with no breaks in employment or savings.
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This may be a difficult proposition.
 
Fidelity? Selling something? Including financial products and advisory services?

Surely you jest.

Threefingeredjack said:
I think any "study" which purports to offer a number without knowing the specifics of your individual circumstance is selling something. Just an opinion.
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Gotta love those advertisement 'studies'.

Just a number, no factors to account for individual differences in overall financial plan. It clearly makes no difference whether you retire with a 150k salary and own your house outright or whether you retire with a 70k salary and owe 110% on your shack.

8x yup that's the number :loco:.
 
They don't mention what portion of the retiree's ending salary is spent. If you assume they need, say, 80% of that, then the article is saying that you need 10x your annual expenses in savings. This is not realistic, as it would only last between 5 years (worst case) and 33 years (best case)*. This is nowhere near enough to last the length of retirement. If you want to live for 40 years on a retirement nest egg, you need something like 25-30x your annual expenses.

*http://www.firecalc.com/ It simulates a portfolio by running through as many 40 consecutive years of historical market returns that are available. (40 just being the case i ran for this example)

Also, it doesnt pass the smell test. How the hell can a portfolio last when you are withdrawing 10% of its value each year??
 
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I don't think any estimate of what you need is really going to be that close other than saying that more is probably better. Some people I know spend quite a bit in their retirement while some are pretty frugal. One thing I will say, though, is that if you manage to live until you are quite old and no longer able to care for yourself your expenses are going to go up, sometimes exponentially.
 
jasc15 said:
Also, it doesnt pass the smell test. How the hell can a portfolio last when you are withdrawing 10% of its value each year??
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You might gain more than 10% in a year... you could lose some too.. but if you assume an annual gain of 5.5% that offsets the money you withdraw every year
 
dell30rb said:
You might gain more than 10% in a year... you could lose some too.. but if you assume an annual gain of 5.5% that offsets the money you withdraw every year
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5.5% is conservative, but let's assume you gain that every year, and there is 3% inflation every year. You cannot withdraw more than 2.5% a year and expect it to last. That requires 40x your annual expenses. 10% withdrawl rate will not last long except under the most absolute favorable conditions for several decades. Not going to happen.

8x your ending salary will only work if your spending is only ~30% of that. How many people are saving 70% of their income?
 
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Funny thing. Over the last several years (mind, I'm 39), I've substantially increased the amount that I put in a retirement account (over 20% of my income - probably closer to 30%), by reorganizing my employment status and introducing a profit sharing retirement plan. I also suspect that I'll be able to increase my income more than inflation over the next few years, slightly increasing the $ that I'm putting away.

Do most people save more as they get older?
 
All projections are based on a set of assumptions. If they are adequately disclosed, the reader is free to decide if he thinks they are reasonable.
weilke said:
Gotta love those advertisement 'studies'.

Just a number, no factors to account for individual differences in overall financial plan. It clearly makes no difference whether you retire with a 150k salary and own your house outright or whether you retire with a 70k salary and owe 110% on your shack.

8x yup that's the number :loco:.
Click to expand...
 
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