Opinion: How Much Should You Save for Retirement?

Daniella Cressman

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Mohamad Hassan

Disclaimer: This article is accurate and true to the best of my knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

Saving for retirement is a goal that seems so far in the future for many of us.

It can be challenging to even visualize just how much we would need to save to support ourselves if we were to quit our jobs.

On the other hand, it can be overwhelming for folks who didn't save as much as they probably should have when they were younger and daunting for twenty-somethings who desperately want to retire early.

IS IT WISE TO RELY SOLELY ON SOCIAL SECURITY?

The short answer is no: the money you receive from social security will vary significantly depending on a myriad of factors.

"Even if you're able to wait until age 70 for a fatter check, Social Security should not make up your entire retirement income plan. According to the SSA, retirees on average receive 40% of their pre-retirement income via the program. So make sure you are saving elsewhere." —Mallika Mitra

You'll want to save some money elsewhere so that you are not fully reliant on this program.

HOW MUCH SHOULD YOU ACTUALLY SAVE FOR RETIREMENT?

Honestly, you should probably save more than you think you should, because, even if you have a large sum of money to support yourself, you never know when you might have to deal with medical expenses, including travel in some cases, or preventative healthcare costs, especially as you get older.

"...You don’t have to be certain about your future to make a plan. If you want to have a lifestyle in your retirement consistent with the one you have during your career, Fidelity’s rule of thumb is to try to save 10 times your income by the time you’re 67. That means saving one times your salary by the time you're 30, three times your salary by age 40, six times your salary by age 50 and eight times your salary by age 60." —Millika Mitra

Basically, it's important to start saving a significant amount sooner than later if possible.

WHAT PERCENTAGE OF YOUR INCOME SHOULD YOU SAVE?

The specific amount will likely vary considerably depending on your personal and professional goals and lifestyle preferences, both now and later in life.

That being said, saving at least 15% of your income while you're employed is recommended in order to maintain the same level of comfort financially as you reach old age.

"Once your paycheck hits your bank account, it can be hard to part with any of it. That's why it's best to automatically divert some money to your retirement account first, before you can touch it. Fidelity recommends saving 15% of your income to reach that 10 times your salary savings goal by the time you're 67. That percentage includes your employer’s match, if you have one." —Millika Mitra

Honestly, I would highly recommend saving even more than that if you can.

WHERE SHOULD YOU SAVE SUCH A LARGE SUM OF MONEY?

You'll want to contribute your retirement savings to a Roth IRA or a Traditional 401(k).

Compound interest will work in your favor if you are in your twenties!

That being said, it's extremely important to invest in financial assets such as dividend stocks, fine art, index funds, and physical real estate if possible—Doing so can help you build your wealth and have multiple streams of income landing in your account regularly as you reach retirement.

It never hurts to have a little extra cash on hand!

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Canadian-American author writing about local politics, personal finance, & dining in Albuquerque.

Albuquerque, NM
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