How Much Should Employees Have Saved Up For Retirement So Far?

© Jakub Krechowicz -
© Jakub Krechowicz -

I’ve just come off of a three-week road trip, where I zig-zagged across the western half of the U.S., speaking to a variety of workforces on planning for retirement.

One common question I heard again and again from many of the mid-career employees was “how much should I have saved up so far?” towards their retirement nest egg.

Similar to my journey as I traveled from one workplace location to another, I knew what the final destination was on the map, but it was just as important to know how many miles I had driven and how many more miles to go so I would know when I had to stop for gas or take a pit stop.

Most workers are now familiar with the general rule of thumb that they need to save enough while they’re working in order to replace at least 80 percent of their income in retirement. There are lots of great online calculators that project whether an employee is on track for this goal, but what employees wanted from me was just a quick formula they could do in their head to estimate if they had saved enough so far based on their age.

Here’s what they should have saved

Thanks to a recent Fidelity report issued in September, I was able to share the following milestones that employees could easily calculate:

  • At age 35, workers should have saved at least 1 times their current income;
  • At age 45, workers should have saved at least 3 times their current income;
  • At age 55, workers should have saved at least 5 times their current income;
  • At age 67, a pre-retiree should have saved at least 8 times their current income before retiring.

To determine these benchmarks, Fidelity assumed the employee would make continuous contributions to a workplace plan beginning at 6 percent and escalating 1 percent per year until 12 percent, that they receive a 3 percent employer contribution during their entire career on a salary that increases 1.5 percent over inflation, and earn an average return of 5.5 percent in their portfolio.

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Estimates on what retirees will need vary widely

However, Aon Hewitt has a higher threshold that employees should reach at retirement, and that is 11 times their final pay, to factor in inflation and post-retirement medical costs. To give your employees a snapshot of where they are towards these two varying targets of 8 to 11 times their income, it is helpful to use the tools your plan provider has available.

Don’t wait for your employees to find these calculators online, instead have the projections run for them or send them the link directly if you have a tool available, such as Financial Engines.

Since it’s open enrollment season, don’t overlook your retirement plan, even though most plans allow participants to make changes throughout the year. Include an evaluation of the employee’s current deferral rate to project if that’s enough to hit these savings guidelines, and then encourage your workforce to increase their 401(k) contributions or sign up for auto-escalation at the same time they are making their annual health insurance decisions. That way they’ll know they’re on track to their retirement destination.

This was originally published on the Financial Finesse blog  for Workplace Financial Planning and Education.

Linda Robertson is an experienced financial planner with, the nation’s leading provider of unbiased financial education programs to corporations, credit unions and municipalities with over 400 clients across the country. Her focus is on retirement and tax planning, and her background includes positions with NationsBank, H & R Block, and Metropolitan Life. Contact her at .