Everyone wants to know how much they need to save for retirement. Countless news articles, blogs and other various media outlets are dedicated to this very topic. What is the magic formula you might ask? According to G.E. Miller, this formula you have been wishing for does not exist. In his article, How Much Should I Save? , Miller performs a myth buster-like analysis on such theories as the “Save 10% for retirement rule”.
Not one of us on this great earth is exactly like anyone else. We have different goals and dreams and will each need to forge our own path to get there. Do you plan on working until you are 70 and living out a simple life watching Wheel of Fortune and knitting on the couch throughout your retirement years? If so, good for you! Saving 10% of your income supplemented with Social Security benefits may suit you just fine. Do you wish to travel the world when you reach 55? Retire at 45? Obviously these are very different goals requiring very different paths and rates of savings.
How about instead of starting with a savings rate, you start your plan based on the lifestyle you wish to live? What is it going to take to get there? The savings rate in America is unfortunately less than 5% while only 15% of those aged 44-54 have saved over $250,000. While there is may not be a magic formula to reach retirement utopia, it most certainly starts with a greater savings rate than that.