Join Early Retirement Today
Reply
 
Thread Tools Display Modes
Fidelity: Save 10x Income by 67!
Old 09-12-2018, 06:04 PM   #1
Full time employment: Posting here.
nvestysly's Avatar
 
Join Date: Feb 2007
Posts: 599
Fidelity: Save 10x Income by 67!

I began to log in to my Fidelity account today and saw the quip shown below on their home screen:

From our experts

How much to retire?
Fidelity's rule of thumb: Try to save 10x your income by age 67

I continue to be amazed at how few financial planners/brokers/etc. want to talk about expenses. Yes, there are lots of ways to slice and dice the subject and at a young age you really have no idea what your expenses will be later in life. But come on Fidelity... Really? Is this the kind of advice that gives people a warm and fuzzy feeling? I guess it provides a goal - a target - and if you don't have any target this is better than nothing.

The problem is (and I'm preaching to the choir) income has very little to do with the matter at hand. If you're living off a small fraction of your income then 10x your income may be overkill in a big way. If you're maxing out expenses and spending every penny then 10x is not enough. If you're living way beyond your means and in over your head in debt then 10x won't be nearly enough!

Argghhhh! I'm a longtime Fidelity customer and will continue to use their services. Fortunately I don't need their retirement "advice."
Attached Images
File Type: png Fidelity_Advice_Yikes.PNG (5.6 KB, 339 views)
__________________
Dreamin' of Streamin'
FIRE'd at 52 on 7/8/11
nvestysly is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-12-2018, 06:37 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
I have a feeling that they gravitated towards an income guide because many folks wouldn’t even begin to understand what their retirement expenses will be. If they did, do you think we’d see the “can I retire now?” type posts? Income is something most people can wrap their heads around.
COcheesehead is offline   Reply With Quote
Old 09-12-2018, 06:37 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Nov 2015
Posts: 2,691
10x of what.... I'll be retired for 12 years by then, so 10x of my income in retirement? Seems to be rather baseless.
bobandsherry is offline   Reply With Quote
Old 09-12-2018, 06:52 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2016
Location: Colorado
Posts: 8,971
Quote:
Originally Posted by bobandsherry View Post
10x of what.... I'll be retired for 12 years by then, so 10x of my income in retirement? Seems to be rather baseless.
The OP didn’t share the whole chart. They give guidelines for other ages too.
COcheesehead is offline   Reply With Quote
Old 09-12-2018, 07:10 PM   #5
Recycles dryer sheets
 
Join Date: Jan 2018
Location: Ypsilanti
Posts: 142
I don't see anything wrong with it. It is easy to understand, Fidelity even calls it a 'Rule of Thumb', and undoubtedly intended for their early 30's clients rather than early 60's clients.

Also reveals the anticipated trend toward later retirements.
MI-Roger is offline   Reply With Quote
Old 09-12-2018, 08:22 PM   #6
Full time employment: Posting here.
nvestysly's Avatar
 
Join Date: Feb 2007
Posts: 599
I didn't intend to withhold information... I simply didn't realize there was an entire article available on the subject. You can read it at the link below. No idea how long this link will be active.

https://www.fidelity.com/viewpoints/...need-to-retire

Since the link will likely "die" at some point, one version of the larger chart as well as the fine print are shown below. Yes, I see they are providing a rule of thumb and I suspect I used similar rules of thumb early in my accumulation mode. The fine print does refer to living on less money than your final year of income and there are even varying degrees of savings needed depending on whether you aspire to a "below average" or "above average" lifestyle during retirement. Using their rules of thumb, DW and I are living a lifestyle that is much, much below average (based on our final year of income) and yet we spend as much now as we ever did. That simply reinforces my point that expenses, not income, are the true indicator of whether you have enough money to retire.

Fidelity1.PNG

Fidelity_fine_print.PNG

The table shown below is for DW and me. I made this several years ago, prior to retirement, when friends and family asked us how much we saved over the years. I didn't want to speak in terms of real dollars so I thought this table would be useful. In our early years we were behind on savings according to Fidelity but we eclipsed their rule of thumb by the time we were 50. I should add another line to the table. By the time we retired at age 52 the savings/expenses ratio was well over 33.
Attached Images
File Type: png personal.PNG (7.6 KB, 56 views)
__________________
Dreamin' of Streamin'
FIRE'd at 52 on 7/8/11
nvestysly is offline   Reply With Quote
For the saver who is all Thumbs
Old 09-12-2018, 08:45 PM   #7
Thinks s/he gets paid by the post
Mdlerth's Avatar
 
Join Date: Oct 2016
Location: The Shire
Posts: 1,504
For the saver who is all Thumbs

Consider that the advice is targeted toward a less sophisticated audience, one with a limited financial attention span. For such a customer, simple Rules of Thumb are likely to be the most effective form of guidance.

From that perspective, it's not bad advice. It starts by setting an achievable goal that doesn't scare away newcomers. Saving 10X one's pay is certainly less daunting than the 25X and higher ratios common here. Using the 4% Rule of Thumb, they could expect their stash to replace 40% of their income.

The article mentions age 67, the asymptotic Full Retirement Age for SS. The Social Security Administration estimates that the PIA will replace about 40% of the average workers income. Add those two forties and - Bob's your uncle! - the customer is looking at enjoying 80% of his career income in retirement. Again, right in the Rules of Thumb range.

Is this the optimum advice for every retiree? Of course not. But it doesn't need to be. It's a Rule of Thumb: simple, easy to understand, applicable to a wide spectrum of society.
__________________
Paying it forward is the best investment.
Mdlerth is offline   Reply With Quote
Old 09-12-2018, 08:56 PM   #8
Full time employment: Posting here.
 
Join Date: Jul 2013
Posts: 953
Between my pension, my SS, DW's SS, and a 15 year renewable annual contract with Uncle Sam, and two real estate contracts for property that I am selling, I have more lined up than what my best year ever was. Ignoring RMDs!


FireCalc produces a number that I will have to put some effort into spending that much, I-orp says that I should keep working. Fidelity says that I am at a 145 score, which is pretty strong.



Nobody knows anything.
__________________
Well it's all right, we're heading to the end of the line...
Clone is offline   Reply With Quote
Old 09-12-2018, 09:20 PM   #9
Thinks s/he gets paid by the post
jimbee's Avatar
 
Join Date: Oct 2010
Posts: 1,217
Quote:
Originally Posted by Mdlerth View Post
Consider that the advice is targeted toward a less sophisticated audience, one with a limited financial attention span. For such a customer, simple Rules of Thumb are likely to be the most effective form of guidance.

From that perspective, it's not bad advice. It starts by setting an achievable goal that doesn't scare away newcomers. Saving 10X one's pay is certainly less daunting than the 25X and higher ratios common here. Using the 4% Rule of Thumb, they could expect their stash to replace 40% of their income.

The article mentions age 67, the asymptotic Full Retirement Age for SS. The Social Security Administration estimates that the PIA will replace about 40% of the average workers income. Add those two forties and - Bob's your uncle! - the customer is looking at enjoying 80% of his career income in retirement. Again, right in the Rules of Thumb range.

Is this the optimum advice for every retiree? Of course not. But it doesn't need to be. It's a Rule of Thumb: simple, easy to understand, applicable to a wide spectrum of society.

Yep, plus they won't be paying 7.65% payroll tax.
jimbee is offline   Reply With Quote
Old 09-13-2018, 05:28 AM   #10
Thinks s/he gets paid by the post
 
Join Date: Mar 2014
Location: Dallas
Posts: 1,150
Quote:
Originally Posted by nvestysly View Post
I guess it provides a goal - a target - and if you don't have any target this is better than nothing.
I have always been taught to "Aim higher/farther, not better" so if you miss then you will be still close to the target. Having an easy target means you will be a lot closer to the failure but then again everyone is taught to be "special" now a days. What do I know?
pjigar is offline   Reply With Quote
Old 09-13-2018, 05:55 AM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 11,233
I love Fidelity and it probably is a good guideline for the masses. However one's budget for expenses is much more important than that multiplier.
We cut our expenses by 60% our last 4 years and if we multiplied our final salaries by 10% for our savings number, I would never be able to retire.
__________________
TGIM
Dtail is offline   Reply With Quote
Old 09-13-2018, 07:33 AM   #12
Dryer sheet wannabe
 
Join Date: Nov 2017
Posts: 23
I never liked those multiple of income guides. I get it that it is a rule of thumb and just a guide. I always wondered why wouldn't someone just stop saving at 35 if they already have 2x their income if they were going to retire at 67 anyway on 10x income? Even just a 6% return over 32 years would yield approximately 14x income.


I suppose it could be because someone could be making $40,000 at 35 and by 45 is making $80,000 and thus the goalposts have moved a bit.
Filetmerlot is offline   Reply With Quote
Old 09-13-2018, 08:13 AM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
samclem's Avatar
 
Join Date: May 2004
Location: SW Ohio
Posts: 14,404
I understand that it is just a rule-of-thumb. Is it useful? If a person is going to set aside money every month (i.e. deprive themselves of present spending), isn't it worth their time to "invest" a few hours to think about this issue and come up with a target they understand? This would seem important to make them comfortable in how the figure was derived and that it will meet their spending needs. It would also serve to to assure themselves that it is really buck-up their motivation to stick to the savings plan. How motivational is it to think "well, I read this rule of thumb. It doesn't have anything to do with my real projected spending and I don't know if it will be way too much or too little. I'll just stick with it and skip the vacation this year." Seems unlikely.
samclem is offline   Reply With Quote
Old 09-13-2018, 08:17 AM   #14
Thinks s/he gets paid by the post
GravitySucks's Avatar
 
Join Date: Feb 2014
Location: Syracuse
Posts: 3,501
MegaCorp had Fido running the 401K program. My last year there was the first time someone from Fido came by to give a presentation. (I choose to work and live in the corporate hinderlands) The rep gave a presentation on matching dollars (shocked so many co-workers left that money on the table.), 3 leg stool, the 80% rule, 25x rule etc.
He stayed around for private questions after and I explained my situation and how I didn't understand how the 80% rule worked. He said it's a simple rule of thumb they give as most people are overwhelmed just thinking of personal finance. The comment that stuck was "Half the people in the room today are not even contributing the full company matching amount. How can I expect they would be able to put together a detailed future budget. "
So these Rules of Thumbs aren't for those of us that run spreadsheets and multiple FirCalc and RIP runs, they're for those who don't want to put the time in on planning FIRE.
For what it's worth, I just looked at my latest budget estimates and it's real close to 80% of my last year's income.
__________________
“No, not rich. I am a poor man with money, which is not the same thing"
GravitySucks is offline   Reply With Quote
Old 09-13-2018, 08:27 AM   #15
Thinks s/he gets paid by the post
 
Join Date: Jun 2013
Posts: 1,019
We are not the target audience. We are the outliers. Our ratio of expenses to income is much lower than "normal". We understand finance much better than the masses. I see the Fido headline as a wake-up call for the masses. It will catch the attention of some, and they will be motivated to dig deeper, and maybe some of them will even become like us.
Which Roger is offline   Reply With Quote
Old 09-13-2018, 09:25 AM   #16
Full time employment: Posting here.
nvestysly's Avatar
 
Join Date: Feb 2007
Posts: 599
Quote:
Originally Posted by Which Roger View Post
We are not the target audience. We are the outliers. Our ratio of expenses to income is much lower than "normal". We understand finance much better than the masses. I see the Fido headline as a wake-up call for the masses. It will catch the attention of some, and they will be motivated to dig deeper, and maybe some of them will even become like us.

I'm still struggling with the idea that I'm an outlier. I know it's true and I've come to accept it on some level but I have a difficult time understanding why everybody (well.. okay, most people) won't take time to give reasonable consideration to their financial situation in life. So many problems in our society stem from the fact that individuals are not financially solvent. I hope you're right and this Fidelity chart will wake up many people and they'll begin planning appropriately for their financial future.

While I initially chuckled about the save 10x by the time you're 67 rule of thumb on the Fidelity web site I may actually take time to send it to family members.
__________________
Dreamin' of Streamin'
FIRE'd at 52 on 7/8/11
nvestysly is offline   Reply With Quote
Old 09-13-2018, 10:27 AM   #17
Thinks s/he gets paid by the post
Cobra9777's Avatar
 
Join Date: Jul 2012
Location: Texas
Posts: 3,024
I just read the fine print from post #6. Seems to be very comprehensive and well thought out. So, probably OK as a very general rule of thumb for people early in the accumulation phase. Certainly not intended for the already-retired financial geeks on this forum. I think many of the comments up to this point are very applicable to those in the 40-55 range and thinking about ER.

I think it's a bit unreasonable to expect a 29 year-old to research all the variables mentioned in the fine print, then put together a spreadsheet, run some Monte Carlo simulations, etc, etc... just to decide whether to "skip the vacation this year," as one poster put it.

For most young people, thinking about spending in retirement is tantamount to thinking about whether the universe has an edge. Student loans, marriage, kids, cars, mortgage, college for kids, career trajectory, relocation, will spouse keep working or stay at home?... Those are the things they think about and SHOULD be thinking about.

I just tell my kids to try and save at least 20% of gross income, invest in low-cost equity funds, and LBYM... resist lifestyle creep as income rises. I retired at 52 and both my kids are WAY better off than I was at their age. And I was one of the outliers with a Lotus 1-2-3 retirement spreadsheet at age 29.

My kids are 26 and 29. I know how their minds work WRT lifestyle. They're still figuring out whether to keep their conventional jobs and buy a house in suburbia or start an off-grid homestead in rural Idaho. The lifestyle norms and expectations of prior generations do not always apply to Millennials. So for them, right now, yes, rules of thumb are useful. Once they are 40-ish, yes, I would expect a lot more granularity around spending needs in retirement and less reliance on rules of thumb.
__________________
Retired at 52 in July 2013. On to better things...
AA: 85/15 WR: 2.7% SI: 2 pensions, SS later
Cobra9777 is offline   Reply With Quote
Old 09-13-2018, 10:30 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jan 2018
Location: Tampa
Posts: 11,233
Quote:
Originally Posted by nvestysly View Post
I'm still struggling with the idea that I'm an outlier. I know it's true and I've come to accept it on some level but I have a difficult time understanding why everybody (well.. okay, most people) won't take time to give reasonable consideration to their financial situation in life. So many problems in our society stem from the fact that individuals are not financially solvent. I hope you're right and this Fidelity chart will wake up many people and they'll begin planning appropriately for their financial future.

While I initially chuckled about the save 10x by the time you're 67 rule of thumb on the Fidelity web site I may actually take time to send it to family members.
Think about it. It all starts in school with typically no personal finance classes. Wouldn't those classes be more important than economics for example?
__________________
TGIM
Dtail is offline   Reply With Quote
Old 09-13-2018, 10:53 AM   #19
Full time employment: Posting here.
EvrClrx311's Avatar
 
Join Date: Feb 2012
Posts: 648
Unfortunately the reason writers have to point out savings in such simple (and wrong) terms while avoiding the deeper mechanics is because the vast majority of people are so uneducated about financial mechanics in general.

The few articles that would actually explain the deeper mechanics would be tossed aside by the average reader, because our society as a whole prefers to have it's head in the sand when it comes to future planning and finances.

I believe these articles are written with the best intentions, in an effort to get people to start to think about important things. It's just the 9 out of 10 people don't care, or even know how to care, about their financial well being. Those people are not going to do the work to get to a better place, and no article is going to change that.

What we really need are financial education classes at the HS and college levels, that's the only way to start to change the interest and planning for those other 90% (or at least some portion of them).
EvrClrx311 is offline   Reply With Quote
Old 09-13-2018, 11:14 AM   #20
Thinks s/he gets paid by the post
GravitySucks's Avatar
 
Join Date: Feb 2014
Location: Syracuse
Posts: 3,501
Quote:
Originally Posted by EvrClrx311 View Post

What we really need are financial education classes at the HS and college levels, that's the only way to start to change the interest and planning for those other 90% (or at least some portion of them).
Ha! I was at a party a few months ago where many guests were high school and Jr. high school teachers.I

I'd rather they didn't give financial advice to the next generation.
GravitySucks is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Holding non-fidelity funds at fidelity panhead FIRE and Money 16 05-02-2013 07:37 AM
What %age of your household gross income do you save per year? web_diva FIRE and Money 76 06-03-2012 09:56 AM
Save 100% of Net Income? kjpliny FIRE and Money 18 04-11-2011 07:19 AM
My 2005 gross income: $96,500; How much can I save in my Roth IRA? SLC Tortfeasor FIRE and Money 2 01-02-2006 11:29 AM
What percentage of your gross income do you save? SLC Tortfeasor Young Dreamers 152 11-03-2005 07:12 AM

» Quick Links

 
All times are GMT -6. The time now is 09:41 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.