What percentage of my salary should I be saving each month?

Everyone wants a comfortable retirement, but research says Americans don't save as much as they should.

It's really had to give a number - because everyone is different

The problem is that beyond the advice to "pay yourself first" it becomes very individualized. The amount you should be saving depends on your age, your current income, your plans for the future and for retirement, your current assets, your current amount of debt, the return you can expect on your money, and many other factors.

My father taught me from my very first paycheck to take 10% off the top and put it into savings. If you do that long enough, eventually it becomes second nature. That’s a good place to start, but if you need other investments too. If your company has a 401K plan, and allows pre-tax contributions, that’s a great way to sock away savings before you ever see it. Just about any financial planner would agree that 10% isn’t going to cut it when age 65 comes around.



I think that a good goal is to work toward saving 10% of your income in a regular savings account, 10% in a pre-tax 401K plus an annual planned contribution to a IRA account at the allowed IRS maximum (currently $4000 for people under age 50). When your regular savings reaches a benchmark amount, invest all but $1000 in a mutual fund or similar and begin building it again.



The great thing about saving 20%, 30% or more of your current income is that you’re already living below your means! Your victory is that much closer. When you retire, your necessary income is easier to replace. In other words, if you make $50,000 today, and you save 30% of it, you only need to take out $35,000/year from your savings to replace it. (After inflation and blah, blah blah....)



All that is easy to say, the hard part is actually DOING it. The best pieces of advice I can give are:

1) Start Small -- 1% is better than nothing. 2% is better than 1%. If you’re saving nothing, start a small IRA contribution, or a small savings account. Make regular contrubutions and gradually increase them. You get a 3% raise? Half of it goes straight to savings. Get a gift or an inheritance, sock half of it away before you do anything else.

2) Out of sight, out of mind -- Automatic deductions are GREAT. If the money is never in your hand, you won’t even think about spending it. If you’ve got a 401K, take the pre-tax deductions. If your employer does automatic deposit, have part of your paycheck go directly to savings. If you can, have your IRA contribution taken automatically too.
Sources: http://www.fincalc.com/ret_02.asp?id=6

by Myrealana