Saving Ten Percent of Your Salary for Retirement is Not Enough

Here's an article from Yahoo where a reader writes in asking about the "save 10% of your income for retirement" rule. The author says that while this is a widely promoted rule-of-thumb, that it's not really that valid as a true measure of what any of us should be saving for retirement. He spends the next several paragraphs telling why this isn't a good rule until he eventually gets to the punchline:

The only real way to tell if you're actually headed toward a secure retirement is to do a more comprehensive analysis that takes into account such factors as how much you already have saved, how much you're saving on a regular basis, how your money is invested and then forecasts a nest egg you're likely to have and how much annual income you can reasonably draw from it in retirement.

This is what I did when I set my retirement number. It was a detailed process, but by the time I was finished I felt like I had a pretty good handle on what I needed to save.

Now I just need to sock away money like a squirrel stores nuts for winter to be sure I hit that big number. (and, by the way, I'm saving for college costs at the same time.)

Comments

[Terry]

College is highly overrated. I saved up $4,000 for college costs by the time I graduated high school in the early 1970s ($20K or so in today's dollars) and blew it all on college. I graduated with student loan debt and today I earn my state minimum wage. College was a complete waste of several years and tens of thousands of my hard-earned dollars, and I have nothing to show for it but a worthless piece of paper I cannot even sell.

[DK]

Terry -

If the best you can find with a college degree is a *truly* minimum-wage job that is not college's fault, it your own.

The average Wal-Mart worker makes $10.64 an hour, and most employers will pay 75 cents or so above the minimum to keep out the riff-raff. And the most basic of office-temping jobs will earn 2-4x the minimum wage. Get real.

[Molly]

I have to admit I don't think 10% is going to be enough for me. I do put at least 10% away but when I look realistically at what my generations future looks like I don't know that it will be enough. However, it is even more frightening to look at those around me. My husband and I are in our early 30's we have jobs that offer 401ks and a pension(for now) for my husband. Bottom line we are better of than most. I don't believe medical costs will go down. I also believe that Social Security will not be available for us when we retire. So since the day I graduated from college I have been socking it away. But most calculators and financial advisors estimate a 8-10% return on your accounts if you stay invested over the long term. I have been invested since I was 21 and I have never seen that kind of return. Between fees and downturns I don't think those are realistic numbers to estimate your future on.

[Zook]

So let me get this straight. Terry went to college in the 70's, 30-years ago and now only makes $5.15 an hour?

You managed to save the equivalent of $20K [says you] in the 70's working part-time going to high school for college, but now you make $10,000 a year full time?

What are you doing? Smoking doobies in your moms basement blaming all of your woes on George Bush?

[Zook]

I think I have already saved roughly 6-7% of our income for the year and it's March 18th.