No, you don't need to save double your salary for retirement by the time you're 35

The Tip Jar is BMTN editor Adam Uren's column on how to spend, save, and live with confidence.
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A story by MarketWatch gained a bit of steam this month when attention turned to one of the claims in it from retirement expert Fidelity Investments.

"By 35, you should have twice your salary" saved for retirement, Fidelity said in the piece.

So, if you're a 35 year old in Minnesota earning $40,000, yep, you should already have $80,000 squirreled away in retirement accounts.

Before I moved to Minnesota, I was finance reporter in London covering the British pensions market, and was regaled daily with proclamations of what the golden number is for retirement saving from various financial firms.

They would propose differing sums and methods, sometimes slightly tweaked from the same release they'd put out the year before – it's almost like they wanted to grab headlines that encourage people to invest more in retirement products, for some reason.

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Stateside, I thought the consensus was that you should have saved your annual salary by 35, but I must have missed the goal post-shifting memo from Fidelity.

The company says you now need to have saved the equivalent of your annual salary by the time you're 30, but by 35 you need twice that.

It prompted predictable responses from millennials on social media.

Well look, I'm not a retirement adviser earning seven figures a year (sadly) to tell people they should be saving more, but I like to think I have a knack for common sense when it comes to money.

Which is why I'll tell you that, in my opinion, the answer to the age-old question "How much do I need to save for retirement?" is as follows:

Save as much as you can afford.

Estimations like Fidelity's come across as tone-deaf because they rely on figures alone.

Don't get me wrong – if you can save twice your salary then that's fantastic and well done you. But the target doesn't take into account the financial pressures people are living under.

Take Greater Minnesota, for example, those in their 20s and 30s have to deal with lower monthly incomes than those living in the metro, while those in the Twin Cities are increasingly having to fork out a significant chunk of their monthly incomes to find a place to live.

Wage rises aren't exactly shooting into the stratosphere right now, all the while the cost of living continues to surge (St. Paul, for example, had one of the nation's highest non-housing cost of living rises in 2017).

By the time you're 35 there's also a decent chance you'll have one or more kids of your own – good luck saving twice your salary once that happens.

Where Fidelity is absolutely correct is that you need to start saving early. Take advantage of your company's pre-tax 401(k) program and make sure you max out your employer's contributions, sign up for an IRA and squirrel away whatever you have left over.

The benefits of compound interest on investment income get increasingly larger the older you get, so the earlier start the more chance you have of saving a significant chunk that will see you through retirement.

You can check out my previous column on the benefits of 401(k)s here.

Every dollar you put away now will help you when you come to retire – just don't fret if you haven't banked double your salary yet, lord knows I haven't!

The Tip Jar is BMTN editor Adam Uren's column on how to spend, save, and live with confidence. Read past columns here.

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