Create the plan you need for the retirement you want
Developing a thoughtful comprehensive written retirement plan that considers an individual’s needs and expectations as well as personal saving and investing behaviors is essential to achieve a successful retirement outcome.
Retirement savings checkpoints
- Achieving a financially successful retirement requires a disciplined approach to saving, spending and investing that is guided by a comprehensive, well-defined retirement plan.
- This chart helps a couple gauge how much they should have saved and invested today based on their current age and household income to be on track for a similar lifestyle in retirement.
- This chart assumes a gross annual savings rate of 10%, reflecting that a higher annual savings rate is recommended especially in periods of lower expected returns.
- If an investor does not currently meet the required checkpoint value, a written retirement plan is a recommended next step.
Income replacement needs in retirement
- When it comes to expectations for retirement, many people do not know how much they may need to spend in retirement, especially if they are many years away from retirement.
- The good news is that less annual income is needed in retirement because saving will no longer be required, and expenses and taxes may be lower.
- This chart illustrates how much income a $150,000 household may need to support an equivalent lifestyle in retirement. It shows the percentage of current income that may come from Social Security and what the household may need from personal savings across taxable and tax-advantaged accounts. It is this combined amount that the checkpoint chart above is using to calculate each checkpoint value.
Income replacement needs vary by household income
- The percentage of income that a household must replace for retirement varies based on the amount of pre-retirement household income. This is a good starting point from which a more personalized plan may be tailored.
- An overall income replacement rate of 70-80% of pre-retirement income may be sufficient to maintain a similar lifestyle in retirement; however, the percentage of income replaced by Social Security is based on pre-retirement household income. The lower the pre-retirement household income, the higher the proportion of retirement income that may be replaced by Social Security. The higher the pre-retirement income, the less replacement income that Social Security may provide, and the more that will be required from personal savings.
- Higher savers tend to be accustomed to a more modest lifestyle. As a result, not only do they accumulate wealth for retirement, they may need to replace less income, thereby increasing their likelihood of success.