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Fidelity 45% Rule Formula:
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The Fidelity 45% Rule is a retirement savings guideline that suggests saving 45% of your annual income multiplied by the number of years until retirement. This rule helps individuals estimate the total savings needed for a comfortable retirement.
The calculator uses the Fidelity 45% Rule formula:
Where:
Explanation: The formula calculates the estimated total retirement savings by multiplying 45% of your annual income by the number of years until retirement.
Details: Proper retirement planning is essential for financial security in later years. The Fidelity 45% Rule provides a straightforward method to estimate the savings required to maintain your lifestyle during retirement.
Tips: Enter your annual income in dollars and the number of years until retirement. Both values must be positive numbers.
Q1: Is the 45% rule applicable to everyone?
A: While it's a useful guideline, individual circumstances may vary. Factors like desired retirement lifestyle, other income sources, and inflation should be considered.
Q2: Should I include all sources of income?
A: Yes, include all taxable income sources to get the most accurate estimate of your retirement savings needs.
Q3: How does this rule account for inflation?
A: The rule provides a basic estimate. For more precise planning, consider adjusting for expected inflation rates over your savings period.
Q4: What if I have existing retirement savings?
A: This calculator estimates total needed savings. Subtract your current retirement savings from the result to determine how much more you need to save.
Q5: Can this rule be used for early retirement planning?
A: Yes, but early retirement may require a higher savings rate due to longer retirement duration and potential healthcare costs.