Saving and Spending for Retirement: Here's What Fidelity Recommends

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.

Financial advisor preparing to advise clients on retirement planning

SmartAsset and Yahoo Finance LLC may earn commission or revenue through links in the content below.

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 Retirement	Income Replacement From Savings	Savings as Multiple of Current Income	Savings Rate	Withdrawal Rate
62	55%	14X	25% yearly	3.9%
65	50%	12X	19% yearly	4.2%
67	45%	10X	15% yearly	4.5%
70	40%	8X	11% yearly	4.9%

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.

A financial advisor can help you build a personalized retirement plan suitable for your goals. Get matched with a fiduciary advisor today.

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.