MONEY HACKS: How Much Should I Be Saving for Retirement? 

A question that's always a hot topic in our one-on-one coaching sessions: How much should I be saving for retirement? It's a question that's been around for ages, but the foundation of the answer really hasn’t changed much in the last 20+ years but the thought process about ways to save has certainly evolved.

In this episode, we're talking about the different options available and considerations to make for your retirement savings. We'll explore the factors that go into determining the right savings rate for your retirement goals. From your current age and income to your desired retirement lifestyle. Plus, we'll discuss some common pitfalls to avoid when saving for retirement and share some tips for maximizing your savings potential. So, if you've ever found yourself wondering if you're saving enough for retirement, you're in the right place.

Any money questions you’d like answered? Our Money Hacks series is created from conversations we have with employees, investors, savers, and all people planning for their financial futures. What topics are on your mind for our next episode?

Video Transcript:

Hey, this is Alex Assaley and it's episode 112 of Money Hacks. Thanks so much for joining me. A question that we get in a lot of one-on-one coaching sessions is, how much should I be saving for retirement? This is an age-old question. One of the first things I thought about when I started working as an advisor for retirement plans 17, 18 years ago is helping people identify how much you should save in order to get on track for your retirement income needs.

And the foundation to that answer hasn't really changed over the last 17 or 18 years, but the thought process around ways to save has certainly evolved with some of the new features inside of 401k plans and individual retirement accounts like Roth 401ks, for example, which are now prevalent among, you know, almost every 401k plan.

So, the short answer is it depends. It depends on a lot of factors, like how much time you have until you're going to retire, and how much you've saved already. What you want to do in retirement or how much money you're going to need in retirement but generally we encourage individuals to save somewhere around 12 to 15 percent of their pay into their long-term savings, into their retirement accounts, and that can be inclusive of any employer matching, or employer discretionary contribution that you might receive.

But there's a catch to that 12 to 15%. If you're really early on in your career and you're just getting started the more, you can put in a 401k is great. But we also recognize that you have other financial priorities and goals to jumpstart your, your career in your life. Things like maybe paying down student loan debt or paying down or paying off credit card expenses that you might've incurred to move to a new city to start a job, or maybe.

Just having enough money to make ends meet if you're living in a higher-cost-of-living area. So, it's a tradeoff between ensuring you're saving the right amount for your long-term savings, while also being cognizant of these other financial goals and priorities that you might have between now and retirement.

So maybe to be a little more specific, we have software on our MyMoneyNav website that allows you to dial in your exact savings. What you should be saving for retirement to get you on track for those retirement years, whether that's at 62, 67, or 70 years old, you can plug in your current assets, and your current profile into this lifetime income score and know if you're on track or know how much you should be saving to get on track.

So that's one way you can look at this. But the other part. Again, is making sure that you're also saving for these other life milestones or priorities that you have perhaps cemented in your mind or as hopeful aspirational goals you want to reach in the next three, five, or seven years. Make sure you're putting that money aside and other types of accounts that are not 401k or IRA accounts, essentially accounts that you can get access to in the short term.

And the reason why I stress that is What we don't want to happen is for someone to do a great job saving for their retirement in their 401k or in their IRA. And then five, six, seven years from now, be in a position where they really want to buy a place. They want to buy a house, but they haven't saved in vehicles to pay for a down payment or closing costs, or moving expenses.

And you get to this decision point where perhaps you're thinking about maybe taking a loan or taking a taxable and penalty distribution, a hardship distribution out of your qualified plans to fund that home purchase. That essentially negates all that great work you did in the prior years. So in short, you know, probably somewhere between 12 to 15 percent is the right savings range for most investors, but it really depends on a number of factors.

And don't forget to think about your financial goals today, tomorrow, and for your long-term retirement, and build a strategy that encompasses all that, so you can make the best decisions for your financial picture. Hope this helps. If you have additional questions, if you have thoughts about this, feel free to share them with us on social, or reach out to our team, and we look forward to seeing you soon.