How to do a simple retirement savings check-up

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(MoneyWatch) Is your retirement on track? Fidelity Investments has a simple retirement savings check-up to help you figure that out.

Based on the Boston-based investment company's calculations, the average person who needs to replace about 85 percent of their working wages, would need to accumulate a nest egg worth eight times their ending salary. This 85 percent figure is a relatively common assumption, which assumes that you don't dramatically change your lifestyle in retirement. Naturally, if you're a big spender, you could need more. If you're someone who spends only a fraction of your wages and expect to pay off your mortgage and other debts before retirement, you could need considerably less.

How do you know if you're on track to hit this eight-times wages goal? By age 35, you should have saved an amount equivalent to one-times your annual salary. So, if you earn $50,000 annually, you'd want $50,000 in your retirement savings plan. By age 45, you'd want three-times your salary. Assuming you now earn $80,000, that means you need $240,000 in savings. By age 55, when you're (maybe) earning $100,000, you should have $500,000 invested for retirement.

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Sound impossible? Not if you start saving just 6 percent of your income at age 25 and boost your contributions by just 1 percent per year until you're contributing 12 percent of wages, according to Fidelity. Fidelity also assumes a fairly conservative long-term portfolio growth rate of 5.5 percent annually; that your wages will increase by 1.5 percent per year; and that you'll receive Social Security benefits to defray some of your income needs in retirement. The fund company figures you'll retire at age 67.

Not satisfied with Fidelity's analysis, or not certain how to get back on track if your savings fall short of these benchmarks? Check out Kiplinger.com's Retirement Savings calculator. It's the best of the many dozens of retirement savings calculators that I've tested over the years. What makes it better than the rest is that it's simple to use, but also allows you to factor in all your potential sources of retirement income, which can include company pensions and home equity. Better yet, if your savings fall short, it tells you just how much you need to save each month now to have the amount you'll need when you stop working.

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