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A comfortable retirement requires saving eight year’s salary

Retirement savers need to set aside roughly eight times their annual salary in order to live comfortably if they retire at age 67, Fidelity Investments said in a report Wednesday.

The Boston firm is the nation’s largest manager of 401(k) retirement assets and is in the business of persuading people to save more. It offered a plan for arriving at the eight times figure, suggesting that workers should save an amount equal to a year’s pay by age 35. If they have three times their annual salary at 45, and five times at age 55, they would be on track.

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Alicia H. Munnell, director of the Center for Retirement Research at Boston College, said the math tracks with her group’s research — but the eight times figure applies to people earning $100,000 or more.

“If you’re in a low-income group and you’re going to get most of your money from Social Security, you don’t need that high a multiple,’’ she said. By the center’s calculations, a person earning $50,000 would need about six times their annual pay saved at retirement; someone earning $25,000 would need four times.

The Fidelity guidelines are aimed at people who want to live on 85 percent of their pre-retirement pay annually after they stop working, and for that money to last 25 years. The model assumes a worker starts socking away funds in 401(k) and IRA accounts starting at age 25. That worker would start by contributing 6 percent of his or her pay, bumping that up by 1 percent a year until hitting 12 percent.

It also assumes a 3 percent annual employer contribution — something many workers can no longer count on. And Fidelity is presuming that the employee’s income grows by 1.5 percent per year over general inflation, with no breaks in employment or savings.

Jane Mancini, an investment adviser with I-Pension in Newton, said specialists may disagree on the details. But, “in general, giving an investor a target to hit helps them focus better.” She added, “The simple fact remains that everyone’s individual situation is different. Realistic assessment of your spending and saving will tell you how much you need to save.”

BC reported this year that baby boomers had an average of $42,000 in their 401(k) and IRA accounts in 2010. The group said many people will have to work to age 70 to save enough for retirement.

Beth Healy can be reached at bhealy@globe.com; Chris Reidy can be reached at reidy@globe.com.
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