Rule 1: Save 15% of Income Including Employer Match
Still broadly valid for a 25-year-old starting today. The 15% target (including employer match) is calibrated to replace 70–80% of pre-retirement income over a 35-40 year career at 7% average return. For late starters (35+), 15% is insufficient — needs to increase by 3–5% per decade of delay.
401k savings rate needed by starting age to replace 75% of pre-retirement income
| Start Age | Required Savings Rate (15% works?) | Adjusted Rate if Starting Late |
|---|---|---|
| 25 | Yes — 15% sufficient | N/A |
| 30 | Marginal — 18% better | +3% |
| 35 | No — needs 22%+ | +7% |
| 40 | No — needs 28%+ | +13% |
Rule 2: 1×, 3×, 6×, 8×, 10× Salary Milestones
Fidelity’s salary multiple benchmarks: 1× salary by 30, 3× by 40, 6× by 50, 8× by 60, 10× by 67. These remain reasonable guides but assume salary growth tracks inflation. High-income earners who see rapid salary growth need proportionally higher multiples.
Still valid as benchmarks, but only as directional guides. They assume spending in retirement equals 75-80% of final salary, Social Security provides the remainder, and retirement lasts exactly 30 years. Longer life expectancies in 2025 suggest a 10.5–11× target is more appropriate.
Rule 3: The 4% Withdrawal Rule
Withdraw 4% in Year 1 and adjust for inflation annually. Originally calibrated for 30-year retirements. For retirements expected to last 35–40 years, 3.5–3.7% is safer. The original Bengen research used 50% stocks/50% bonds — a more equity-heavy allocation supports the original 4%.
Rule 4: Don’t Touch Your 401k Until 59½
Strong rule. Early withdrawals incur 10% penalty + income taxes = 32–42% immediate loss, plus destroyed compounding. Exceptions exist (Rule 72t, SEPP payments) for structured early access. The rule holds.
Rule 5: Invest Aggressively When Young
100% or near-100% equities in your 20s and early 30s is supported by research. The 100-minus-age allocation rule (55% stocks at 45) is now considered too conservative — most advisors use 110 or 120 minus age.
Test the Rules Against Your Numbers
Enter your age, salary, and current balance — see which benchmarks you meet and where adjustments are needed.