September 26, 2016

How Much Should I Be Saving?

I am so glad you are asking this question because now I don’t feel so alone.

If you’re like me, you wake up in the middle of the night wondering if you are doing it all right. I mean how do you really know if you’re saving enough and what is really enough?

What I always wanted to know is how much does everyone else have saved. How am I doing compared to others? Well lucky for us Generation Y-ers, the Center for Retirement Research at Boston College released its brief, How Much to Save for a Secure Retirement, in November 2011.

I am going to share some information with you. Then, I want to ask you to step out of your comfort zone and share with us.

Before I do this, I want to note that this study assumes that we will get Social Security. Since I think that is a funny joke played on us, I would suggest saving more than the guidelines. But, since that’s what they are, it is really up to you to decide how much you will save and what your personal financial goals and lifestyle will be.

The results below assume you’re a medium wage earner (which the study identifies as someone with an annual salary of $43,084 in 2010).

Here’s how the combinations work out:

If you start saving at age 25:

— Retire at 62: Save 22 percent of pay

— Retire at 65: Save 15 percent of pay

— Retire at 67: Save 12 percent of pay

— Retire at 70: Save 7 percent of pay

If you start saving at age 35:

— Retire at 62: Save 35 percent of pay

— Retire at 65: Save 24 percent of pay

— Retire at 67: Save 18 percent of pay

— Retire at 70: Save 11 percent of pay

If you start saving at age 45:

— Retire at 62: Save 65 percent of pay

— Retire at 65: Save 41 percent of pay

— Retire at 67: Save 31 percent of pay

— Retire at 70: Save 18 percent of pay

So what does this mean? If you make $43,000 a year and you’re 25, you should be saving: $9,460 per year to retire at the age of 62.

What if you are making $110,000 a year? To retire at 62, the goal would be to save: $24,200 per year. This is approximately $2,000 a month. Now, the older you get, the higher that percentage goes.

So, here is my deal. I am no where close to that. Last year, my fiancé and I saved $1,600 a month and I thought we were doing great. Then, we took all of our savings (minus the emergency fund) and bought a house. Today, I am happy if I save $700 a month and I am 28.

So, if you are feeling brave, how about you share your information with us? Do you measure up to the goals? 

Anna Domzalski is a staff writer for the Financial Bin. Anna will soon begin her role as Dean of Financial Bin University and will soon conduct online budgeting classes. She can be reached via email at Anna@FinancialBin.com(Image: vichie81 / FreeDigitalPhotos.net).
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