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New estimate urges would-be retirees to save 8 times income
This is an archived article that was published on sltrib.com in 2012, and information in the article may be outdated. It is provided only for personal research purposes and may not be reprinted.

How much should you save for retirement?

Think eight.

As in eight years of your final yearly salary before you say goodbye to your job and head off for your golden years.

That's according to Fidelity Investments, the nation's largest holder of employer-based 401(k) retirement accounts, and a higher total than advisers have recommended in the past.

If you make $50,000 in your last year of working (or estimate that you will), you should have $400,000 saved, Fidelity financial planners say. If you make less, then you won't need as much. But if you make more, you should have more stashed away to ensure a comfortable retirement.

"The average worker may replace 85 percent of his pre-retirement income by saving at least eight times his ending salary," according to a Fidelity statement.

The timetable has people working and saving until 67 and living until 92.

Boca Raton, Fla., financial planner Mari Adam said the Fidelity retirement savings goal is doable. "I like this way of measuring," she said. "It's easy to understand."

In fact, in an earlier newsletter to clients, she offered a timetable in which a potential retiree accumulated as much as 10 to 12 times their annual salary by retirement.

The recommendation "cuts some slack to workers," Adam added. "Everyone is so tired about hearing that they are not doing enough. People are saying they can't save more."

Some people may, in fact, not need to save as much as eight times their salary, said Deerfield Beach, Fla., financial adviser Chris Nichols. Those with pensions may only need a fraction of that, he said. Even people without pensions can opt to work longer. That way they will get larger Social Security checks, meaning they don't need to save as much,

Another factor is people living simply and not needing as much income in retirement, both Adam and Nichols said.

Today's baby boomers, however, "have more stuff," and more of them want luxuries such as cable television that an earlier generation didn't require, Adam said.

One way to cut expenses in retirement is to pay off a mortgage, typically the largest living expenses, said Blair Shein, a financial planner who is on the board of the nonprofit Financial Planning Association of Greater Fort Lauderdale.

Some people may actually be better off paying down debt, such as credit card expenses, than saving, he added. Once savers get their credit card balance paid off — an average of about $4,700, according to the Credit Karma website — then they can start using the money for retirement savings, Shein said.

He recommends saving on a regular basis to ensure a nest egg. Having money automatically withdrawn from a paycheck to place in retirement savings, such as a 401(k), helps people save without thinking about it, Shein said.

"You don't want to leave free money on the table," said Jeanne Thompson, a Fidelity vice president.

Saving early helps. It allows savings to earn compound interest, Thompson added.

But if you don't end up with as much as you think you should have, Thompson said, then you can think of getting a part-time job in retirement. —

Saving tips

Starting early helps • It allows money to earn compound interest

Cut expenses • Pay off a mortgage and pay down debt, such as credit cards

The rule of eight • Sock away that many years of your final yearly salary before retiring

Savings • Although circumstances vary, advice comes with comfort in mind.
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