When Americans were told they should have twice their salary saved for retirement by age 35, many were infuriated.
Good thing they don’t live in Hong Kong or Germany.
A recent Fidelity analysis looked at retirement savings milestones, and created an age-based guideline for each region. The Boston-based financial services firm looked at the U.S., U.K., Germany, Hong Kong, Japan and Canada, and analyzed factors including retirement age, withdrawal rates, annual savings rates and income replacement. For a 30-year-old, it was about equal for all regions — everyone should have as much as a year’s salary saved for retirement, with the exception of Hong Kong, where someone would need twice their salary saved.
After that, the figures jumped.
See: How to save twice your salary (or more) by age 35
As they age, these workers would need much, much more stashed away for retirement, the analysis shows. A 40-year-old American should have three times her salary saved for retirement, whereas a 40-year-old would need four times his earnings in Germany and five times as much in Hong Kong. Canada was the same as the U.S., and the U.K. and Japan would only need twice.
Skip to the average retirement age in these countries, and it’s (naturally) even more. In the United States, a retiree needs 10 times as much as their salary, compared with 11 times as much in Canada and 12 times as much in Hong Kong. Germany was the same as the U.S., and the U.K. and Japan were both multiples of 7.
It should be noted, these are just guidelines. Everyone faces different circumstances, and therefore need varying amounts of money by the time they retire. Some people may choose to rent or pay off a mortgage, while others may not have any housing obligations except for taxes and utilities. Some retirees may want to take more vacations, or have more medical bills to pay, or have intentions with their money, such as an inheritance for their children and grandchildren. These guidelines are also a cautionary tale for those who think they don’t need to start saving so early: “you can’t out-invest your way,” said Jeanne Thompson, senior vice president of Fidelity Workplace Investing. “Sometimes we hear ‘I can save less if I save more aggressively’ — markets are unpredictable.”
Income replacement rates also varied in these countries — in the U.K., retirees should aim to replace 35% of their preretirement income, which would be combined with their government pensions, whereas in Hong Kong, that rate is closer to 48% (partially because retirement age is earlier in this region, lifespan is longer and assumed investment returns are lower, the firm said).
Also see: How much money have America’s 30-somethings actually saved? Finally, they speak
Still, guidelines have been proven to strike a chord with savers. When MarketWatch shared an article about saving for retirement in your 30s on Twitter earlier this year, thousands took to social media and the comments section to air their frustrations. Many millennials said they couldn’t save for retirement because of their crippling student debt or other financial responsibilities, such as caring for children and parents. Some worried they would never get to retire. These figures should be used more as a way to measure where you are and where you’d like to be, and an inspiration to take steps to slowly but surely get there. “A guideline in a benchmark,” Thompson said. “If you’re not there, it’s OK.”
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Source : MTV
