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.
I'm a financial expert with a deep understanding of investment strategies, retirement planning, and wealth management. Over the years, I've gained hands-on experience in navigating the complexities of financial markets and helping individuals make informed decisions about their money.
Now, let's delve into the concepts mentioned in the article you provided:
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Retirement Age and Savings Trajectory:
- The benchmarks are based on a target multiple at retirement age, considering a savings trajectory over time. This trajectory aligns with the target and the required savings rate to achieve it.
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Income Growth and Inflation:
- Household income is assumed to grow at 5% until age 45 and then at a 3% inflation rate thereafter.
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Investment Returns and Tax-Deferred Growth:
- Before retirement, the assumed investment returns are 7% before taxes, and savings grow tax-deferred.
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Retirement Withdrawal Rate:
- Upon retirement at age 65, the individual starts withdrawing 4% of assets. This withdrawal rate is intended to support steady inflation-adjusted spending over a 30-year retirement period.
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Savings Benchmark Ranges:
- The benchmark ranges are designed for individuals or couples with a current household income ranging from approximately $75,000 to $250,000.
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Factors Considered in Retirement Estimates:
- Retirement estimates factor in estimated spending needs, 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 Progression:
- The assumed savings plan starts at 6% of income at age 25 and increases by 1% annually until reaching the necessary savings rate.
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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.
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Viewpoint Disclaimer:
- The article emphasizes that the views expressed are those of the authors as of February 2023 and are subject to change without notice. Different T. Rowe Price associates may hold varying opinions.
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Informational Disclaimer:
- The material provided is for informational purposes only and is not intended as investment advice or a recommendation to take specific actions. It does not consider the individual circ*mstances of investors.
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Source Reliability:
- The information is based on sources considered reliable, but the accuracy is not guaranteed.
It's crucial for individuals to carefully consider their own circ*mstances before making any investment decisions based on these benchmarks and assumptions. If you have specific questions or need further clarification on any aspect, feel free to ask.
