The Golden Question: How much should I be saving for retirement?

May 08, 2019
We’re all aware of how crucial saving for retirement is. Not only for your future, but for a better peace of mind.

Whether you’re ready to start talking about it or not, it’s a concern most people have, regardless of age. No one really wants to “have to” talk about their financial future, but the fact remains the same. The earlier you start incorporating a solid, comprehensive retirement plan into your life, the higher chance you have of securing the future that you envision for yourself, and for your family.

Regardless of your current retirement saving efforts, there is always that nagging voice in the back of your head that asks “am I saving enough?”.

So what it is the ideal number or percent of your income that you should be saving for your future retirement?

The truth is, there is no golden number that every person should abide by. Retirement plans should be customized to your own set of financial, lifestyle and personal goals. Your end goal being, maximum financial wellness during your retirement.

There are also often times where the gap in anticipated expenses and priorities during a retirement period vastly differ between individuals. You might have a child at home that still relies on your income, even after retirement. That changes things. Or maybe, you’ll be paying off a second home that you bought later on in life. That also would require a deeper look into your current retirement savings and investment strategy.

Keeping those additional, anticipated expenses in mind, there are some key takeaways that we think can help to make retirement planning a bit more digestible. And for the most part, should be integrated into every successful retirement savings plan.

  1. Does your employer have a matching contribution program? If so, and if your current budget allows it you should try to contribute the full match. So, for example if they’re offering a maximum 4% contribution max, then you should also be contributing at least 4% to your 401k plan. If not, you’re essentially giving away free money that your future self could rely on.
  2. If your employer doesn’t have a matching contribution program…where do you start? We believe that saving 10% of your pay is a good start. That being said, during times of financial difficulty, you may need to lower this. And vice versa, during times of financial stability, you should reassess if it’s possible for you to be contributing more.
  3. 70%. That’s the percentage of your working income now that you ideally should aim to replace by the time you retire. Meaning that if you’re making $100k a year, you should have enough saved to provide an annual income of $70,000 per year in retirement. Some of that will be provided by Social Security benefits, so it’s a good idea to factor that in when you’re planning how much to save.

With all of that being said, your personal, professional and financial lives are constantly evolving. We believe that an effective retirement savings plan should evolve along with all of those changes. We know that financial jargon can sometimes get a bit complicated and saving for the future can feel incredibly overwhelming. Luckily, we consider ourselves to be somewhat an expert on the matter and are here to help along the way.

By Chandler Julian, CPA, QKA, AIF

Chandler serves as the firm's Chief Financial Officer.

Related Articles

Should you take a loan out of your 401k?

Should you take a loan out of your 401k?

During times of high financial stress, the idea of taking a loan out of your retirement savings fund can sound like the perfect solution. After all, it’s your money, right? Who wouldn’t consider taking advantage of money that you already have set aside for the future,...

read more
Millennials and Retirement

Millennials and Retirement

In today’s changing economic climate, younger generations are facing new obstacles in saving for retirement. In contrast to previous generations, Millennials are set to have fewer Social Security benefits, as well as less personal retirement savings from a 401(k) or...

read more

Subscribe to receive our latest posts.

ERISA CONSULTANTS BLOG DISCLAIMER

Articles posted on the ERISA Consultants Blog are provided for general informational purposes only. The materials and content are not intended to provide tax, legal, accounting, financial, or other professional advice. Readers are advised to seek out qualified professionals that provide advice for specific client circumstances. ERISA Consultants makes no warranties about the accuracy or completeness of the information contained in the published articles. While articles are generally published with the most up to date information, ERISA Consultants does not guarantee that the articles will be updated with the most recent information or reflect the most current laws and regulations. 

Third-party links included in any articles are not intended as, and should not be interpreted as, constituting or implying ERISA Consultants’ endorsement, sponsorship, or recommendation of third-party information, products, or services, unless expressly stated otherwise. ERISA Consultants is not affiliated with the owners or participants of any linked websites. The opinions expressed by any guest writers and/or article sources are strictly their own and do not necessarily represent those of ERISA Consultants. Please use caution when linking to other websites.

Information from the ERISA Consultants blog should be used at your own risk. Investing in securities involves risk, and there is always the potential of losing money. Past performance is not a guarantee of future results. Investment returns vary and may involve gains or losses.

Any articles or commentary included on the ERISA Consultants blog do not constitute a tax advice and cannot be used by any taxpayer to avoid penalties that may be imposed under the Internal Revenue Code on the taxpayer.