Fidelity said employees should have the equivalent of their annual salary in savings by age 35 in order to reach the first benchmark en route to reach that goal.
To keep pace, individuals should then plan to have saved twice their salary by 40, four times their salary by 50, five times by 55 and six times by age 60.
Though many people will need more income, particularly at higher salaries, saving eight times your annual pay by age 67 should leave most workers with approximately 85 percent of their pre-retirement income in retirement, Fidelity stated.
The nation's largest 401(k) administrator said these guidelines are designed to help families and individuals become more active in their retirement planning.
Craig Israelsen, associate professor in the School of Family Life at Brigham Young University, said that while the body is designed to heal itself if it gets injured, curing financial ills takes intense individual effort.
“We have to be much more intentional with regard to our financial health,” he said. “There really is no “silver bullet.””
He suggested saving at least 10 percent of income or as much as feasible, develop and maintain a record-keeping system for receipts, tax records, important papers, medical records, etc. Prepare a 12-month estimate of income and expenses — an Income and Expenditure Statement — each year. Develop and follow a monthly or weekly spending plan. If married, prepare and monitor the family budget as a couple, not separately.
Israelsen said family and individuals should purchase insurance as protection against major loss. He also said that working toward home ownership is a worthy goal.
He also said that investing for retirement and other important goals sooner rather than later will pay big dividends on the long run.
No reason to wait
“Even when paying off loans, you can begin building an investment portfolio,” he said. “Invest in 401(k) retirement accounts (at work), especially if your employer matches a portion of your contributions.”
In addition, consider investing in a Roth Individual Retirement Account if your employer does not match your 401(k) contribution, he said.
Jim Hoch, tax manager for Salt Lake-based certified public accounting firm HEB Business Solutions, said developing a net worth statement would also serve as a helpful tool in assessing financial health. He said net worth is calculated by subtracting expenses — regular monthly costs — from financial assets — personal and retirement savings, stocks, bonds, etc.
“Determine if your net worth is growing,” he said. “If not, then you know you have to change your budget and save more.”
Hoch also said that optimizing individual payroll withholding is a key component of maximizing the ability to monitor personal or family finance.
“You should always withhold the amount of tax that you’re expected to pay,” he explained. “You don’t want a big refund because that money could be used as savings or to pay off debt early.”
He said it makes more sense to figure out the point where you break even or owe a little rather than give the government “an interest-free loan.”
Noting that some people use their tax return as a savings plan, he said, “It’s not smart.”
“Put it into an automatic savings plan (through payroll deduction) instead of giving it to the IRS or the state of Utah,” he said.
It's about discipline
Hoch said that no matter what your income level may be, being a good money manager takes discipline and the mindset to control your financial destiny.