Here's part eight of our series on the 12 financial rules that should (or shouldn't) be broken:
Rule No. 8: Save 10% of your income each year.
Verdict: Thumbs up. It’s a great habit to get into, and the earlier you start, the better off you’ll be. Be aware, however, that you may have to adjust the amount depending on your savings goals.
Let’s assume that your goal is retirement. You want to live on 70% of your current income (adjusted for inflation) when you stop working. At age 30, you’d have to save 11% of your income to reach that goal, according to an analysis by T. Rowe Price. Wait until age 40 to start saving, and the percentage jumps to 21%. But if by age 40 you had already saved an amount equal to your annual salary, you’d need to set aside only 14% a year.
Of course, if you want your investments to provide more than 70% of your pre-retirement income, you’ll have to bump up those figures. It’s best to work with a financial planner or use a retirement calculator to draw a more precise bead on how much you’ll need to save to reach your goal.
Short comment here: I agree.
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