Are You Saving Enough?
Fidelity Investments

  
Whether you've been saving for years or are just getting started, one fact is undeniable: to help make sure you're able to enjoy the retirement you envision, you have to not only save, but also have a plan.

There are two key steps to starting the planning process:

1. Understand how much you'll need to have saved in order to retire comfortably
2. Determine your savings rate — the amount you'll need to save each month or year to reach your target

Once you complete these key steps, there are several other tasks that will help to ensure the success of your retirement plan. You'll need to determine the type of accounts you should use, choose your investments, and then take precautions to protect your savings. From there, the focus becomes managing your plan on an ongoing basis. We'll guide you through this process after you get your plan underway.

Step 1: Determine How Much You Will Need
A key concept in retirement readiness is establishing the amount of annual income you'll need from your savings during retirement. How much of your current — or future — income will you seek to replace in retirement? Retirement income and expense needs vary greatly among retirees so taking even a few minutes to estimate expenses can yield a better result for your own situation. Of course, the closer you are to retirement, the easier it may be for you to estimate this figure.

You'll need to take into account a number of variables, including:

• How much you currently have saved
• How you are invested (your asset allocation)
• When you plan to retire
• Any income you expect in retirement, such as Social Security, pensions, or other annuities
• How long your assets need to last
• Your spouse or planning partner's situation

To get useful results, these calculations and projections can't really be done on the back of an envelope. Fidelity offers you comprehensive retirement planning tools to gather all this information and let you test different ideas with your own personal data.

Step 2: Determine Your Savings Rate
After you've estimated the amount of your annual income to replace with savings, the next step is determining a savings rate that will get you there.

If your retirement is some years away, making it more difficult to accurately estimate how much you'll need at retirement, you'll still want to focus on maximizing your savings rate and take advantage of tax-deferred savings plans. More specifically, putting away 10% to 15% or more of your gross income can be a useful target to aim for. If your employer matches your contributions, take into account that percentage as part of your total savings rate. Similarly, you'll want to take into account any pension income you're expecting to receive in retirement as a factor that may affect how much you need to save.

Whether you're closer to retirement or it's still years away, there are a number of ways you can help to give your savings a boost.

Once You Establish a Savings Rate
Is the savings rate higher than you expected or more than you feel you can manage today? The important thing is to save as much as you can right now. As your situation changes — you get a new job or raise — you should consider increasing the amount you are saving.

With a good plan, you'll be able to achieve the best retirement possible.