KEEP RETIREMENT SAVINGS A PRIORITY RETIREMENT …

FINANCIAL WELLNESS

TRADE-OFF CONSIDERATIONS

For investors, retirement savings is a top priority. Here are some T. Rowe Price rules of thumb for how much a typical investor should be saving for retirement and suggested factors to think about when managing competing priorities and financial constraints.

HIGHER PRIORITY

RETIREMENT

EMERGENCY RESERVE

DEBT

COLLEGE

LOWER PRIORITY

KEEP RETIREMENT SAVINGS A PRIORITY

RETIREMENT SAVINGS-- HOW MUCH?

Investor's Age:

Savings Benchmark:

30

half their salary saved

CONSIDER

SAVING AT LEAST

15% of current salary (includes company match)

CONSIDER MAXIMIZING ANY COMPANY

MATCH

35

1x their salary saved

40

2x their salary saved

45

3x their salary saved

50

5x their salary saved

Investors can consider increasing gradually, for example by 2% each year, building towards the 15% target.

55

7x their salary saved

60

9x their salary saved

Age-based savings benchmarks are based on an assumed retirement age of 65, and a savings trajectory over time needed to achieve a target savings amount. In determining age-based savings benchmarks, we assume a savings rate of 6% at age 25 and increase the savings rate by 1% annually until reaching the necessary savings rate to achieve the target savings amount at retirement. (We assume 3% of the savings rate is attributable to employer contributions.) While we believe most people should aim to save at least 15% (including employer contributions), the necessary savings rate can be higher or lower depending upon marital status and household income which we assume is between $75,000 and $250,000 ("Tested Salaries"). 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. In determining the target savings amount at retirement, we assume 4% of assets will be withdrawn at age 65 (an annual withdrawal rate intended to support steady inflation adjusted spending over a 30-year retirement). The withdrawal amount is calculated as the income that we estimate is necessary to support spending in retirement minus estimated Social Security benefits. (That withdrawal amount divided by preretirement income equals the "Non-Social Security Income Replacement Ratio"). The Non-Social Security Income Replacement Ratio, which varies widely for the Tested Salaries, reflects estimated spending needs in retirement (including a 5% reduction from preretirement levels); Social Security benefits (using the 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 (based on rates as of January 1, 2019). While federal tax rates are scheduled to revert to pre-2018 levels after 2025, those rates are not reflected in these calculations. The age-based savings benchmarks are good starting points for benchmarking your progress, but circumstances vary by person, and over time. The savings benchmarks cannot guarantee retirement income of any specific amount and may not be applicable for those with earnings that vary widely from the Tested Salaries. The assumptions used may not reflect actual market conditions or your specific circumstances, and do not account for plan or IRS limits. These savings benchmarks assume you'll be dependent primarily on personal savings and Social Security benefits in retirement. However, if you have other income sources (e.g., pension), you may not have to rely as much on your personal savings, so your savings benchmark would be lower.

EMERGENCY RESERVES

DEBT MANAGEMENT

Save the minimum (maximizing company match) for retirement and build your emergency reserves. An emergency reserve is the second most important thing to fund after retirement.

Continue saving the minimum (maximizing company match) for retirement and pay off high interest debt. Then, consider increasing retirement savings back toward 15%.

Fund an EMERGENCY RESERVE in the amount of

3to6

months of expenses

Put away an amount equal to

20%

of salary

Build within

1 2 to years

Manage debt and plan to live on

70%

to

80%

of salary

VS.

If debt payments are prohibiting retirement savings consider:

Targeting high interest debt (credit cards) and accelerate payments

Set a time table of 1?3 years

Continue making regular payments on other kinds of debt.

When choosing between emergency reserves or paying off debt, the priority should be to establish the emergency reserve first, then tackle debt. The emergency reserve can allow an investor to get through a large unexpected expense or loss of an income source without having to raid retirement savings or overuse credit cards.

COLLEGE VS. RETIREMENT

Investors who have reached the retirement savings benchmark based on age and current salary are in a better position to reduce their retirement contributions and fund a college account.

NEXT STEPS

1. Review your savings needs and current financial situation.

2. Understand the trade-off considerations for your priorities.

3. Talk to a financial professional about putting a plan in place to make retirement savings a priority and to help address your other priorities.

All investments involve risk, including possible loss of principal.

This material is provided for general and educational purposes only, and not intended to provide legal, tax or investment advice. This material does not provide recommendations concerning investments, investment strategies or account types; and not intended to suggest any particular investment action is appropriate for you. Please consider your own circumstances before making an investment decision.

? 2020 T. Rowe Price. All rights reserved. T. ROWE PRICE, INVEST WITH CONFIDENCE, and the bighorn sheep design are, collectively and/or apart, trademarks of T. Rowe Price Group, Inc.

T. Rowe Price Investment Services, Inc.

CCON0051807 202002-1006649

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