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Retirement Savings Guidelines

Engaging employees to help them get on track and stay on track with their retirement savings efforts.

Helping workers reach their retirement goals – a global approach

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The four key metrics of the retirement savings guidelines

There is a need for active engagement in the retirement planning process across the world. Employers, as part of their Workplace Investing offering, can play a key role in helping employees improve their retirement preparedness by offering clear guidelines and engaging tools.

Fidelity has developed an integrated and globally-consistent set of retirement savings guidelines based on 4 key metrics: a savings rate, savings milestones, a replacement rate, and a sustainable withdrawal rate to start people on the path to creating their retirement roadmap.

The four metrics are interconnected, so people are encouraged to keep each in mind, and to understand how they work together, as they save for retirement and monitor their progress.

The retirement guidelines, presented via engaging online widgets and simple visuals and text, aim to help people engage in the process of retirement planning by exploring the impact of  certain retirement planning actions, e.g., saving more, retiring later, making retirement lifestyle adjustments, among others. Ultimately, the guidelines serve as a starting point to ensure people are prepared for retirement and aim to maintain their desired lifestyle once they stop working.

Since its launch in the US, this framework has had a significant positive impact on both employees’ engagement around retirement planning, as well as on employers’ insights into retirement preparedness within their employee population. The guidelines have now been extended to the UK, Hong Kong, Germany and Japan and Canada in order to provide a locally relevant and globally comparable set of guidelines.

Fidelity’s global income replacement rate

What will my savings cover in retirement?

In most regions, pension support will provide an income base in retirement, with the rest coming from workplace and personal savings. But how much should come from personal savings?

The income replacement metric represents the approximate percentage of pre-retirement income (income at the point of retirement) that will need to be replaced annually by personal savings, after accounting for state/goverment pension, in order to maintain a pre-retirement level of spending in retirement. Part of this amount will come from employer contribution, as well as any income from previous employers. Total income replacement rates vary across regions due to variations in the composition and level of expenditures (personal consumption) and taxation, among other factors.  The contribution to income replacement from state/goverment pension support also varies meaningfully across countries due to differences in the form and level of benefits from state/goverment pension schemes. The net income replacement ratio represents the difference between estimated total income replacement and estimated state/goverment pension income replacement. This is the portion of retirement expenses that need to be funded from personal savings, expressed as a percentage of pre-retirement income.

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Fidelity's global savings milestones

How much do I need to retire?

This can be a complex question to answer, particularly when workers are years away from retirement. Fidelity has developed a set of age-based savings factors which offer a simple way of estimating and monitoring progress toward a retirement savings goal throughout one’s working life. These age-based savings milestones are expressed as multiples of current income.

Estimating how much you will need to save by the time you retire and along the way. Simply multiply your current income by age to
give you a savings target consistent with the savings balance needed to maintain your lifestyle in retirement.

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Fidelity’s global retirement savings rate

How much should I save each year for retirement?

To give workers a high level of confidence in their ability to maintain their lifestyle in retirement, it’s best to save consistently throughout one’s career. The savings rate is expressed as the percentage of pre-tax income that should be saved each year over the course of one’s working life. This figure may seem like a lot, but it includes all retirement savings across different accounts. Of course, you may not be able to do this every year, but there are always ways to catch up along the way and even small increases in the yearly savings rate can make a difference.

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Possible sustainable withdrawal rate

How can I make my retirement savings last?

One of the most challenging questions many retirees face is how much to withdraw from their savings in retirement. Withdraw too much and they risk running out of money. Withdraw too little and they may not live the life they want to in retirement.

John has $500,000 in retirement savings and plans to retire at age 65. Here’s how much he may want to withdraw each year.

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Regional variance of retirement savings guidelines

The values for these guidelines will vary across regions due to differences in a variety of region-specific assumptions including observed saving/spending behavior, taxation, structure of state/goverment pension and health insurance schemes, mortality, assumed retirement age, wage growth, inflation, and capital market assumptions. Individually and in combination, these differences in assumptions/inputs result in cross-region differences in guideline values.  It is important to note that while the guideline values may be different across regions, the underlying analytical framework that produces those values is globally consistent and produces guidelines that are locally relevant and globally comparable.

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Things to keep in mind

Fidelity’s guideline values - i.e. Income replacement rates, Fidelity’s savings milestones, Savings rates and Potential sustainable withdrawal rates - refer to personal and workplace savings amounts only, and exclude any state pension-generated income. To generate the retirement savings guidelines, the framework makes simplifying assumptions about a variety of factors, including retirement age, retirement horizon, wage growth, investment returns, and asset allocation. The base case used to generate the guidelines assumes a hypothetical 25 year old with no current savings, and no private defined benefit (DB) pension income or other private lifetime income sources. All calculations and outputs are expressed in pre-tax terms. Along the way, and particularly as people get closer to retirement, it’s always a good idea to work with a financial advisor to create a retirement income plan.

See how Fidelity’s guidelines work together in this retirement savings guideline calculation:

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To learn about how demographic shifts are changing the way people live and work, click here

Fidelity’s Retirement savings guidelines suite of articles, visuals and widgets

Experience how the guidelines come to life for employees around the world in order to engage them in starting their retirement planning conversation.

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Fidelity’s Retirement savings guidelines white paper

Learn more about the model that underlies the guidelines, including the assumptions and methodology powering the global results.

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Learn how demographic shifts are changing the way people live and work

Podcast: How to survive the demographics revolution


1. Global income replacement values reflect averages across the ranges of pre-retirement income (income immediately before retirement) as per the below regional ranges. Assumes no retirement savings balance before starting age. US: Represents household income ranging from $50k to $300k annually in the Consumer Expenditure Survey (BLS), Statistics of Income Tax Stat, IRS tax brackets; local and state taxes not included; retirement age = 67 for base case. UK: Represents household income ranging from £30k - £100k annually. Represents quintiles 3-5 from the Office for National Statistics Income and taxation data from 'The Effects of Taxes and Benefits on Household Income, 2014/15'. Expenditure data from 'Family Spending 2014' compendium; local and state taxes not included; retirement age = 68 for base case. Germany: Represents household income ranging from €24k-€100k annually. Represents deciles 4-7 from the Sample Survey of Income and Expenditure (EVS) via the German Federal Statistical Office (Destatis); local and state taxes not included; retirement age = 67 for base case. Hong Kong: Represents household income ranging from $HK25k-$HK150k per month. Represents deciles 6-9 from the Census and Statistics Department (Censtatd) publications backed by survey data. Income data from Quarterly Report on General Household Survey 2016 (latest data Q2 2016). Expenditure data from Data from Household Expenditure Survey 2014-15; local and state taxes not included; retirement age = 65 for base case. Japan: Represents household income ranging from ¥5million – ¥9.5million annually. Represents deciles 3-9 from the Ministry of Internal Affairs and Communications, 2014 National Survey of Family Income and Expenditure Survey; local and state taxes not included; retirement age = 67 for base case. Personal savings of 36% includes 28% savings + 8% RSLP. Canada: Represents household income ranging from $55k-$300k annually. Represents quintiles 3 - 5 from the Statistics Canada, 2016 Survey of Household Spending; local and state taxes not included; retirement age = 65 for base case. The term “Fidelity” can refer to one or both of Fidelity International and Fidelity Investments. Fidelity Investments and Fidelity International are separate companies that operate in different jurisdictions through their subsidiaries and affiliates.

2. Fidelity’s suggested savings milestones (expressed as multiples of current income at different ages) are based on our research, which estimates the savings balances at different ages that are consistent with the accumulation of savings necessary to maintain a pre-retirement lifestyle through retirement. In turn, these savings balances reflect an estimate of the region-specific % of preretirement annual income (assuming no pension income) through a planning age specific to each region that would be necessary to maintain that pre-retirement level of income in retirement. The region-specific income replacement targets were found to be generally consistent across a range of pre-retirement household incomes - income at the point of retirement. The savings milestone suggestions may have limited applicability if your pre-retirement income is expected to fall outside that range. Individuals may need to save more or less than the suggest savings rate guideline depending on retirement age, desired retirement lifestyle, assets saved to date, and other factors. Fidelity developed the savings milestones through multiple market simulations based on historical market data. These simulations take into account the volatility that a variety of asset allocations might experience under different market conditions. Given the above assumptions for retirement age, planning age, wage growth, and income replacement targets, the results were successful in 8 out of 10 hypothetical market conditions during accumulation and 9 out of 10 during retirement and where the average equity allocation over the full investment horizon was roughly 50% of more for the hypothetical portfolio. Remember, past performance is no guarantee of future results. Performance returns for actual investments will generally be reduced by fees or expenses not reflected in these hypothetical calculations. Returns will also generally be reduced by taxes. The term “Fidelity” can refer to one or both of Fidelity International and Fidelity Investments. Fidelity Investments and Fidelity International are separate companies that operate in different jurisdictions through their subsidiaries and affiliates.

3. Fidelity’s suggested total pre-tax savings rates (expressed as a % of pre-tax current income) are based on our research, which indicates that most people would need to contribute at these rates from an assumed starting age of 25 through an assumed retirement age specific to each region (see general disclosure for regional details on retirement ages) to potentially support an income level equal to region-specific % of preretirement annual income (assuming no pension income) through a planning age specific to each region. The region-specific income replacement targets were found to be generally consistent across a range of pre-retirement household incomes -- income at the point of retirement. The savings rate suggestions may have limited applicability if your pre-retirement income is expected to fall outside that range. Individuals may need to save more or less than the suggest savings rate guideline depending on retirement age, desired retirement lifestyle, assets saved to date, and other factors. Fidelity developed the savings rate targets through multiple market simulations based on historical market data. These simulations take into account the volatility that a variety of asset allocations might experience under different market conditions. Given the above assumptions for retirement age, planning age, wage growth, and income replacement targets, the results were successful in 8 out of 10 hypothetical market conditions during accumulation and 9 out of 10 during retirement and where the average equity allocation over the full investment horizon was more than 50% for the hypothetical portfolio. The term “Fidelity” can refer to one or both of Fidelity International and Fidelity Investments. Fidelity Investments and Fidelity International are separate companies that operate in different jurisdictions through their subsidiaries and affiliates.

4. This example is using US retirement guidelines and is for illustrative purposes only.

5. Yearly savings rate: The suggested annual rate of (pre-tax) savings over a full working lifetime. Savings milestones: Age-based savings targets expressed as multiples of current income. Income replacement rate: The percentage of pre-retirement income that an individual/household should target to replace annually from their personal savings (including workplace savings) in retirement in order to maintain pre-retirement lifestyle. Possible sustainable withdrawal rate: The real (inflation-adjusted), annual withdrawal amount expressed as a percentage of the initial (at retirement) asset balance.
Hong Kong savings rate - 20% savings rate is net of an assumed 5% MPF contribution from both employer and employee pay.
Japan’s income replacement rate - 28%, which excludes 8% income replacement from an assumed final lump sum salary payment of 2x annual pre-retirement salary. Canada’s income replacement rate assumes CPP enhancement, fully realised in base case (Current Age = 25).
The term “Fidelity” can refer to one or both of Fidelity International and Fidelity Investments. Fidelity Investments and Fidelity International are separate companies that operate in different jurisdictions through their subsidiaries and affiliates.

6. This example is using US retirement guidelines and is for illustrative purposes only.