There’s nothing like a nice, round number like 10% to consider when saving for retirement. But is this really the best advice on retirement savings?
In today’s episode of Your Money Minute with Tracy Stewart, CPA, I want to talk about considerations when deciding how much to save for retirement. We’ve all heard the classic rule of thumb, “You should save 10% of your gross income and put it toward retirement savings.” This is not BAD advice, but it also doesn’t take into consideration your retirement goals. Let’s discuss.
The first point worth mentioning is to define what “gross income” is. Gross income is the total amount you earn from working before taxes, social security, health insurance and any other expenses are taken out. This is the BIGGER number — not what is actually deposited in your account.
If you plan to travel during retirement, or expect that your spending may change from where it’s at now, this 10% amount may be too low to meet your financial needs during retirement. Make sure you are clear on what you want out of retirement.
I have several great resources on planning for retirement including:
- Have You Got What It Takes to Retire?
- How Can Minimalism Help Your Retirement Savings Goals?
- 8 Ways to Fix a Retirement Savings Shortfall
Consider your own needs. Where do you want to be during retirement? How do you want to be spending your money? Be sure to plan well and save accordingly.
Financial independence is unbelievably liberating. Just knowing your future finances are in check can save you many restless nights and stress-filled days.
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