Need to save 10% of your gross income for retirement?
Fact or Fiction
Many financial experts recommend setting aside at least 10% of your gross income for retirement, is this enough, too much, or just right? 10% might be a good starting point but this soÂ called rule ignores several important factors like the return that the money can earn, how long someone has to build a nest egg and the lifestyle someone wants to maintain.
If you want to maintain your current lifestyle in retirement or even have a better lifestyle in retirement then 10% probably won’t be enough. First of all retirement is about having fun, enjoying the fruits of your labor. The last thing you want to do after you retire is sit around your (hopefully paid for) home, get fat, have a heart attack and die early. Therefore, even after you retire you will want to stay busy but just doing things you enjoy: travel, hobbies, gardening, exercising, etc. Enjoy the best years of your life and make them last as long as possible, but make sure you have enough money to cover your fun!
There are hundreds of calculators that you can find online to help you figure out how much money you will need to save for retirement and how much you need to save each week/month/year in order to reach your goal. I have a few suggestions that will help you maxamize your retirement savings and income.
First, and most important be debt free way before you are close to retirement age. If you are young and have no debt don’t start. If you are young and have debt start now paying off that debt and saving for retirement. If you are middle aged you might need to pick up another part time job to get that debt paid as quick as possible. It will be well worth the sacrifice in the future years.
Once you are debt free start saving like you have never saved before. The number one thing to remember is that you can’t have too much money so why set a cap on how much you need to save. The more you save now the greater your wealth will be in your golden years. 10% is a good base amount to save but should be no where near your goal. Imagine if you are 30 years old and have no mortgage, car payments, or credit card debt how much money you could save.
Finally, once you retire watch your money. Just because you have retired doesn’t mean you need to quit following a budget. Know how much money you have and how much you will continue to need in the future. If you reach the age of retirement reward yourself, but remember you still don’t deserve more than you can afford!