Retirement Savings Benchmarks Made Easy: Base Pay vs Total Compensation

 Retirement Savings Benchmarks: Base Pay vs. Total Compensation

🌟 Introduction

• Retirement planning can feel scary and overwhelming for many people.

• The biggest concern: Will I have enough money to last through retirement?

• The second concern: Am I on track to retire when I want to?

• With so many retirement calculators and financial models available, the results can be daunting and inconsistent—different tools often give very different answers.

• Fidelity offers a simple chart that provides a baseline: by certain ages, you should have saved a multiple of your annual salary.

• Example: By age 60, Fidelity suggests you should have saved 8× your salary.

• But here’s the issue: What counts as “salary”? Is it just your base pay, or does it include overtime, shift differentials, and bonuses?

• This blog clarifies that question and helps you choose the benchmark that fits your retirement goals.

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📊 Fidelity’s Guideline at a Glance

• Save 1× your salary by age 30

• Save 3× by age 40

• Save 6× by age 50

• Save 8× by age 60

• Save 10× by age 67

• These are broad benchmarks, not rigid rules. They’re meant to keep you on track, not dictate your exact retirement plan.

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📊 Base Pay (Conservative Benchmark)

• Definition: Fixed annual gross income, excluding overtime, shift differentials, and bonuses.

• Pros:• Stable year to year

• Easier to plan around

• Ensures essential lifestyle covered

• Cons:• May underestimate retirement needs if extras are consistent

• Doesn’t reflect full lifestyle spending habits

• Best For:• Those who want a reliable, conservative target

• Those planning to live below their means in retirement

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📊 Total Compensation (Lifestyle Benchmark)

• Definition: Full annual gross income, including overtime, shift differentials, and bonuses.

• Pros:• Reflects actual lifestyle

• Aligns savings with spending habits

• Higher target encourages more saving

• Cons:• Fluctuates year to year

• Harder to predict

• May set unrealistic targets if extras are irregular

• Best For:• Those who expect to maintain their current lifestyle in retirement

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✅ Practical Takeaway

• If overtime/differentials are rare or unpredictable, use base pay as your benchmark.

• If they’re consistent and long-term, include them in your salary calculation.

• Many people use base pay for their “must-have” savings target, then treat overtime/differentials as bonus contributions to accelerate progress.

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🧭 Key Insight

• Retirement savings guidelines are flexible tools, not rigid rules.

• Your choice depends on whether you want a conservative floor (base pay) or a lifestyle-matching target (total compensation).

• Either way, the goal is to align savings with the retirement life you choose.