How Much Should I Save?

The short answer?  As much as you can afford.

Various articles will try to tell you what you need to save for retirement based on your age.  The conclusion of each chart though?  The earlier you can start off saving, the better.

Forbes has the following chart:

What this chart tells us is that the earlier you start saving, the less percentage of your income will be required to save in order to have a healthy retirement.  For someone who is 25 years old, saving roughly 15% of one’s income all the way up to retirement will produce the same level of retirement living as someone who starts saving when they are 40, but has to save 43% of his or her income.  In a nutshell, the earlier you start saving, the better.

Do I practice what I preach?  ABSOLUTELY!

I save 15% of my pretax income towards my retirement.  I don’t stop there.  I also save an additional 40% of my after tax income towards my future.  This includes a company sponsored 401k, a Roth IRA, and a taxable brokerage account.  I am still able to enjoy the money I make now through entertainment, going out to eat and travelling, but I have placed a high emphasis on making sure I have an excellent post-work life.

Don’t feel like you have to save every extra penny.  Find ways where you can maximize your savings and have a wonderful quality of life.

Make sure you are taking advantage of a company 401k plan if you have the opportunity.

Open a Roth IRA if you haven’t already.  I’m serious about this one!!!

Save first, spend later.

Budget Smart, Invest Wise

 

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