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How Much Should I Save?


"What is a good percentage of your income in general you should invest each month?"

First of all, I am going to assume two things about your question: 1) you are asking about what percentage you should save to have enough for retirement and 2) you are looking to retire with a similar standard of living to what you are enjoying today.

The major factor to consider in answering your question is the age you first started to save for retirement.  In general, if you were between the ages of 25 and 35 when you first started saving, you should have saved and continue saving 10-15% of your gross income per year; between 35 and 45, 15-20% of your gross income; and between 45-55, 20-40% of your gross income.  Not only do the percentages increase the longer you wait, but the likelihood of you getting where you need to be decreases because you have less time to withstand a downturn in the market.

These percentages also assume that there will be additional income at retirement from social security and that there is an appropriate and consistent asset allocation for the money that is being saved and invested.

The percentages above assume nothing about employer matching in a qualified retirement plan.  You could include your employer matching percentages as part of your saving percentage; however, I discourage you from doing so.  I would recommend targeting the recommended percentage above and use your employer match as additional security.  A big reason for this is the uncertainty surrounding the future of social security.  If social security is no longer available when you retire, you will be happy you contributed more than the amounts suggested above.