#TBT: How Much Should You Save In Each Decade of Your Life?


Trying to conceptualize your retirement years, how long you plan to live, and exactly how much money you will need for all those years ahead, is enough to make anyone's head explode. Sometimes the easiest way to tackle big projects, is to break them down into a bunch of little projects. That is exactly what should be done in the process of planning for retirement...especially in the planning process.

Today, I wanted to share and touch upon an article that I recently came across on Business Insider - trying to figure out how much you should be saving for retirement in every decade of your life. Whoa. It seems really daunting, but it really isn't when you have the ability to break it all down.

One of the first rules of investing is to save early and save often. This is the easiest way to build wealth over time and also to maintain financial security, but namely to take advantage of compound interest. "Paying yourself first" is not something to be taken lightly -- you will most definitely need that money in one form or another in the future more so than you would today.

But what EXACTLY is the correct amount that you should be "paying yourself" in each decade of life?

Well, since we cannot give you exact numbers - because everyone's income levels are different - what we can do is show you what that savings looks like on a percentage of your take-home pay over time. David Bach, author of the book "The Automatic Millionaire," created this table for an individual's working years and notes how much should be saved for retirement AND emergency savings (IMPORTANT: TWO DIFFERENT ACCOUNTS!) over each decade during your working years. The younger you are, the less you'll need in emergency savings since it is more often than not fairly easy to find a new job. However, if you're nearing retirement, finding a new job after being laid-off (for fired) is not so easy to do, and therefore more emergency money is necessary.

Over time, your earnings ought to increase as well, but note that the percentage of money that should be allocated to your retirement ALSO increases over time. Despite having increasing money over time, it helps if you can learn to be dependent on a much lower amount of money to live comfortably. Doing so enables you to build up a much larger nest egg when you're finally ready to stop working.

This article was originally posted on GradMoney on January 17, 2018.

Featured Posts
Search By Tags
No tags yet.

© 2018 by Jennifer N. Coombs and GradMoney. Proudly created with Wix.com

 

All rights reserved. Use of this Site constitutes acceptance of our terms and conditions and privacy policy.

 

Restrictions: The material on this site may not be reproduced, distributed, transmitted, cached or otherwise used, except with the prior written permission of GradMoney or Jennifer N. Coombs.

 

Disclaimer: All data and information provided on this site is strictly the author’s opinion and does not constitute any financial, legal or other type of advice. GradMoney, nor Jennifer N. Coombs, makes no representations as to accuracy, completeness, suitability, or validity of any information on this site and will not be liable for any errors, omissions, or delays in this information or any losses or damages arising from its display or use. We also do not make any personal investments on behalf of readers, nor do we offer specific trading recommendations to readers. GradMoney is not a licensed broker dealer. All investment actions as a result of GradMoney’s articles are to be made at the discretion of the individual investor. All investments contain risks; GradMoney assumes no liability for any loss of income or principal.

 

All questions or inquiries my be directed to the attention of Jennifer N. Coombs.