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How much should I save for retirement?

Is there a rule of thumb based on my age and/or income that I should be saving each year? I am still a number of years away from retirement, but how should I be thinking about this now to make sure I am on track!


Related Topics: Financial Planning, Saving, Debt and Credit, Investments
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Dennis Cherenkov
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By Dennis Cherenkov - Primerica Financial Services
Answered 11 months ago

Great question,

First I would recommend putting a strategy together. Until you get out of debt (except the mortgage) and build up a solid emergency fund, you should not dwell much on retirement at all, maybe contribute about 1 -2% of your income if your “net” take-home pay stays the same and in order to take advantage of a company match. Otherwise if you have debt for example credit card debt at 20-30% interest, it would not make sense to invest for retirement where on average you might get 12% return in a mutual fund. Once you are debt free and financially stable, then contribute about 15% of your income towards retirement and focus on becoming TOTALLY debt-free including the house. Once that is accomplished I am sure you will get a bunch of offers from people to “help” you with your finances. :)

Here is a great course that I highly recommend.
http://www.daveramsey.com/fpu

Let me know if this helps thanks.

Dennis
www.dennischerenkov.com

Burt Williamson, MBA, CFP®
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By Burt Williamson, MBA, CFP® - PlanPrep - The source for excellence in financial planning
Answered 12 months ago

You can calculate this yourself with some of the tools on the web. Most major TV stations have amazing resources.

The only rule of thumb I use is this: divide your after-tax spending goal by your portfolio. If it is 4% or less, you can retire now. If it is much greater than 10%, you have a lot of saving ahead of you.

There can’t be any rules of thumb for saving due to the number of variables you need to consider: your target retirement date, how much you plan to spend, for how long, what rates of return and inflation you expect, any sources of income you may have from Soical Security and/or a pension, matches and contributions from your employer, as well as any stock option grants and restricted stock you may receive.

The best assurance you have to achieve your goal is to oversave. I hope this helps.

You can watch my video about preparing for retirement at:
http://www.youtube.com/watch?v=QGGewcJISoI

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