It’s simplistic, but not easy; spend less than you make and be intentional with the saved portion. Dave Ramsey has taken this very easy concept and built a profitable empire around implementing common sense financial planning into bite-sized processes. Of course, it doesn’t hurt that his show is super entertaining and fun to listen to. So how much should you be saving for retirement?
A lot of financial advisors might say 10 or 15% of pay. While that is easy to remember and calculate, sometimes the answer is less clear. For someone that is getting a really late start to retirement saving, the answer may be much more than 15%. Likewise, if you are blessed to work for an employer who has really rich retirement benefits and you are a younger worker, you may get away with saving less and still be adequately prepared for the golden years. Other variables such as retirement age, standard of living in retirement, health and potential inheritance also have huge implications in factoring how much you should save.
Unfortunately, we know the vast majority doesn’t save enough, but with advances in modern technology, saving is easier than ever. It’s quick and easy to set up a payroll deduction into your 401(k), an EFT into your IRA or Roth IRA, or an automatic bank sweep from your checking to your savings account. There are plenty of apps who will gladly skim your spending and add small amounts to an investment or savings account for you. Even with all these convenient tools, it still boils down to the basic principal; you have to spend less than you make and be intentional with the saved portion.
Now the hard part, find five or ten minutes this week to take action and increase your savings by 1%! Chances are you won’t even miss it and if you do, maybe you need to adjust the spending a bit.
For those that that want to really dig into what their savings percentage needs to be; our office can help using sophisticated financial planning software.
As always, we hope you find the WMR both informative and interesting. Have a nice week!
Trevor N. Coe, CFP