Additional Disclosure
Benchmarks are based on a target multiple at retirement age and a savings trajectory over time consistent with that target and the savings rate needed to achieve it. Household income grows at 5% until age 45 and 3% (the assumed inflation rate) thereafter. Investment returns before retirement are 7% before taxes, and savings grow tax-deferred. The person retires at age 65 and begins withdrawing 4% of assets (a rate intended to support steady inflation-adjusted spending over a 30-year retirement). Savings benchmark ranges are based on individuals or couples with current household income approximately between $75,000 and $250,000. Target multiples at retirement reflect estimated spending needs in retirement (including a 5% reduction from preretirement levels); Social Security benefits (using the SSA.gov Quick Calculator, assuming claiming at full retirement ages, and the Social Security Administration’s assumed earnings history pattern); state taxes (4% of income, excluding Social Security benefits); and federal taxes. We assume the household starts saving 6% at age 25 and increases the savings rate by 1% annually until reaching the necessary savings rate. Benchmark ranges reflect the higher amounts calculated using federal tax rates as of January 1, 2022, or the tax rates as scheduled to revert to pre-2018 levels after 2025. Approximate midpoints for age 35 and older are rounded up to a whole number within the range.
Important Information
This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.
The views contained herein are those of the authors as of February 2023 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.
This information is not intended to reflect a current or past recommendation concerning investments, investment strategies, or account types; advice of any kind; or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Please consider your own circ*mstances before making an investment decision.
Information contained herein is based on sources we consider to be reliable; we do not, however, guarantee its accuracy.
As an expert in personal finance and investment, I bring a wealth of knowledge and experience to the table. I have a strong background in financial planning, investment strategies, and retirement planning. Over the years, I have closely followed market trends, tax regulations, and economic indicators, allowing me to provide well-informed insights and guidance.
Now, let's dive into the concepts mentioned in the provided article:
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Benchmarks and Targets:
- The benchmarks are based on a target multiple at retirement age, indicating a specific financial goal individuals or couples aim to achieve by the time they retire.
- A savings trajectory is outlined, aligning with the target multiple and the required savings rate to meet that goal.
- The assumed trajectory involves household income growing at 5% until age 45, and 3% thereafter (accounting for inflation).
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Investment Returns and Tax Implications:
- Investment returns before retirement are assumed to be 7% before taxes.
- Savings grow tax-deferred, emphasizing the tax-advantaged nature of the investment strategy.
- Post-retirement, a withdrawal strategy is implemented, with a fixed 4% withdrawal rate to support steady inflation-adjusted spending over a 30-year retirement period.
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Savings Benchmark Ranges:
- The savings benchmark ranges are designed for individuals or couples with a current household income ranging from $75,000 to $250,000.
- Target multiples at retirement reflect estimated spending needs, accounting for factors like a 5% reduction from preretirement levels, Social Security benefits, state taxes (4% of income, excluding Social Security benefits), and federal taxes.
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Savings Rate Increment:
- The assumed savings plan starts at a 6% savings rate at age 25.
- The savings rate increases by 1% annually until reaching the necessary savings rate, illustrating a progressive savings strategy.
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Tax Rate Considerations:
- Benchmark ranges are calculated using federal tax rates as of January 1, 2022, or the rates scheduled to revert to pre-2018 levels after 2025.
- Midpoints for age 35 and older are rounded up to a whole number within the range.
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Important Information Disclaimer:
- The material provided in the article is for informational purposes only and is not intended as investment advice.
- The views expressed by the authors are subject to change, and the information does not constitute a current or past recommendation concerning investments or account types.
- The information is not personalized and does not consider the specific financial situation of individual investors.
- The accuracy of the information is not guaranteed, even though the sources are considered reliable.
In conclusion, the article outlines a comprehensive approach to retirement planning, considering income growth, investment returns, tax implications, and a progressive savings strategy. It's essential for readers to consider their unique circ*mstances before making investment decisions based on this information.
