How Much You Should Save BY AGE (Fidelity's New Rule)

I get asked a lot how much money should I have saved by age 40 age 50 age 60 it seems like this question is on everyone's mind especially with all the advice floating around out there one of the most popular set of guidelines comes from Fidelity Investments today we're going to take a closer look at what they recommend and whether these numbers should be considered universal or just one way to think about your financial [Music] Journey so according to Fidelity here's a quick rundown of their savings benchmarks by age 30 you should have saved the equivalent of your annual salary by age 40 they say three times your salary by age 50 six times and by age 60 eight times your salary finally by the time you retire 10 times your salary let that sink in it can be a little bit intimidating right depending on your age time could be on your side if you're younger you have more time to catch up if you're a bit older you might have to do some extra savings but here's the big question is this a universal rule that everyone should follow the answer is it depends as we break this down let's talk about the downside of following these benchmarks too rigidly they are guidelines and they can be helpful they don't account however for your unique financial situation and everyone's different not everyone has the same in income or expenses or goals for that matter for instance someone with a higher salary they might find these targets easier to hit while someone who's had say a nonlinear career path they might find these numbers a bit discouraging the age you plan to retire now that can have a huge effect on the amount that you need to save the longer you can postpone retirement by the way the lower the savings Factor will be delaying your retirement it gives your savings a longer period to grow you'll have fewer years in retirement and Social Security would likely be higher that's assuming that it's still available when you get there let's hope so so let's say Max for example he plans to delay retirement until age 70 he's going to need to save about eight times his final income to sustain a pre-retirement lifestyle Amy on the other hand she says I'll retire at age 67 so she will need to save 10 times her pre-retirement income and then we have John now he plans to retire at age 65 he's going to need to save at least 12 times his pre-retirement income then there's another variable how you want to live in retirement will your expenses go down or will you spend as much as you do now or during your working years if you plan to live below average your Factor will naturally adjust down if you plan to live above average your Factor will likely have to adjust up or you might have to work a little longer so it's either delay retirement or that factor is going to go a bit higher also life happens unexpected events like medical expenses job loss or even a global pandemic gosh we don't want to go back to that era those things can derail the best laid Financial plans so if you're falling short of these benchmarks it's important that you don't panic there's time your financial Journey it is your own and these numbers they should serve as a guide not a rigid rule let's look at the upside these benchmarks can be incredibly useful as a general framework they give you something to aim for and I believe they can help you stay on track with your long-term savings goals for those who like structure and clear targets without a doubt they can provide some motivation and a sense of direction now I think a better idea is developing a financial plan solid planning without question can help you determine how much to save and very importantly the required rate of return to reach your goals now another positive is that gu guidelines they emphasize the importance of starting early and I can never stress that enough you've heard that the earlier the better and that's because we have this very powerful thing called compounding so the earlier you start saving the more time your money has to grow and it is a powerful thing so even if you're behind right now the best time to start is today even if it's a small amount get started Max your 401K plans if you have one available do whatever you can to improve your savings rate if that means not going out to dinner as much if it means not buying that extra Gadget that you wanted whatever it takes to save more is going to be a huge part of your success down the road is Fidelity's advice a universal rule not really it is helpful and I believe this guideline can be used effectively but remember everyone's personal picture as it relates to finances It is Well personal the key is to understand your financial situation to set realistic goals and to make a plan that works for you now if you found this video helpful make sure to hit that like button subscribe for more content like this and be sure to share it with people that you believe might benefit from this kind of information and let me know in the comments where are you on your savings Journey I'd love to hear thanks for watching and I'll see you next time on we're talking money