How Much Should I Save to Retire?
When saving for retirement, you want to target around 15 percent of your income to put aside for the future. This sounds like a really large number, but if you can do that for your entire career or even a good twenty years or so, the amount you will end up with will be tremendous and will likely allow you to live a lifestyle in retirement that is very similar to how you are living now.
When deciding what to do with that 15 percent, you want to start by taking advantage of any retirement savings plan matching that your employer offers. For example, a common employer match is 3 percent, so you want to make sure you’re contributing enough to get that free 3 percent. Then move on to funding your Roth IRA, a great retirement vehicle.
You'll want to target 15 percent of your income, but if that seems impossible right now, there’s no need to stress out and try to make drastic changes. Instead, start increasing the amount you’re saving each year by a couple of percent, slowly adjusting your budget to make room for that increased amount. It is helpful to have this savings automatically transfer from your bank account each month, allowing you to start thinking about it as a routine bill that you are paying to your future self. As you do this and ramp up your monthly savings, you’ll start to see your balances begin to grow very significantly and will be well on your way to providing for a great retirement for both you and your loved ones.
John Travis is a Financial Advisor at Richard Young Associates and is a Dave Ramsey SmartVestor Pro. Want to learn more about him and our other advisors? Find out more here.