How much should I save for retirement?

One answer is 10x your annual income by age 67.

That is the answer given by a Fidelity report.

It may seem like an insurmountable task.

Luckily, we have the power of time and compounding on our side.

Savings milestones by age

The Fidelity report suggests the following milestones:

1. Age 30: 1x your annual income
2. Age 35: 2x your annual income
3. Age 40: 3x your annual income
4. Age 45: 4x your annual income
5. Age 50: 6x your annual income
6. Age 55: 7x your annual income
7. Age 60: 8x your annual income

That’s a hefty list.

I don’t think many of us in Singapore can meet those first few milestones.

But that’s okay.

What if I can’t meet these milestones?

First, take a deep breath.

This isn’t a pass or fail for your exam. It’s a brief checkpoint to see how you’re stacking up against certain goals.

And if you’re falling short, Fidelity suggests two options for you.

1. You could work longer

This helps out your financial situation tremendously. You have less years of retirement to pay for and more years of income to save up for it.

But do note that many retire before they intend to.

And if you’re not willing to work for that long, try option 2.

2. You could spend less in retirement

This is another way of conserving those retirement funds.

By spending less each year in retirement, we give our remaining funds the opportunity to grow and support us through the rest of our non-earning years.

I can’t meet these goals now! What can I do?

This is a common refrain.

At age 30-40, we’re in the messy middle.

If we’re in our 50s, what time do we have left?

For those of us earlier in life, Fidelity suggests that we “save more and invest for growth through a diversified investment mix”. A good suggestion, no matter what age we’re at.

For those of us above 40, Fidelity offers this sobering advice. “A combination of increased savings, reduced spending, and working longer, if possible”.

The next time you find yourself contemplating a big purchase, ask yourself this: “Would I be willing to delay my retirement by a year for this?”

Take heed of Fidelity’s closing advice.

“The key is to take action, and the earlier the better.”

Check out my guide on Saving and Investing to help you reach your money milestones.