📖 Ditch the Misconceptions: You Might Not Need Ten Times Your Current Income to Retire
Retiring solely on Social Security isn't always the best plan. Currently, the average retired worker collects $1,918 a month, equating to around $23,000 per year. If this doesn't seem like enough income for you, it's time to strategize your savings.
When Fidelity advises saving 10 times your final salary by age 67, it's prudent advice for many. But don't be disheartened if you end up retiring on less. The need for a ten-fold salary isn't a hard and fast rule for everyone.
The Misconception of the 10X Rule
Saving 10 times your salary in a 401(k) or IRA might be something you require, depending on your specific circumstances. However, if your goal is to downsize your lifestyle during retirement, you might be just fine with less money stored away.
Remember, while working, you often need access to high-priced housing and amenities, which can add up. When retired, you have more leeway for where you live – it could mean swapping an expensive city condo for a less costly home outside of the city, downsizing to a lower-priced house, or even selling your property altogether.
Additionally, you may have more time to take care of everyday tasks such as cooking, cleaning, and household maintenance yourself, reducing outside costs. As you age, you might also entertain the idea of local trips instead of extensive travels, again saving money.
Tailoring Your Retirement Savings Goals
Instead of focusing on the 10 times your salary saving rule, think about what you want your retirement to look like. Decide where you'll live and how you'd like to spend your days. Then, estimate the cost of that lifestyle and use that to determine how much savings you think you'll need.
Additional Income Sources to Consider
Keep in mind that Fidelity's 10 times your salary saving standard may incorporate certain assumptions that don't apply to your situation. Some people do not have access to a pension, while many retirees choose to work part-time or continue their careers. Both of these factors can impact the amount you'll need in retirement.
Ultimately, retirement savings guidelines should serve as a starting point. Personalize your savings strategy to best fit your circumstances and goals.
To supplement your retirement income, exploring part-time work or continuing your career could be beneficial. With additional earnings, you might not need as much money saved from your retirement funds.
In light of retirement living costs reducing significantly, using retirement savings solely for discretionary expenses might be feasible. For instance, opting for a less expensive home or spending less on travel can free up funds otherwise allocated for these costs.
