How much should I save?
Knowing how much to save in your workplace retirement plan can help to ensure a comfortable retirement.
Find the right amount
Industry experts recommend saving 10 to 15% of your annual pre-tax pay, including any company match available.
That's a good starting point, but be careful with "one size fits all" strategies—especially where savings and investing are concerned. For example, an unmarried CPA with no debt would have a markedly different approach from that of a first-year teacher with two children and $10,000 in credit-card debt.
The key is to find a percentage you can live with, contribute as much as you can now, and strive to increase your savings each year.
Start saving wisely
Here are a few simple steps to help get you started:
- Draft a budget and determine how much you can reduce expenses to pay off debt or save for retirement.
- If your employer offers a workplace retirement plan, try to contribute at least enough to get your company's matching contribution. Otherwise you'll be leaving free money on the table.
- Pay off credit cards or other high-interest debt. Try to pay the maximum amount you can afford each month. Making only the minimum payment due will cost you more in interest and it will take much longer to pay off your balance.
- Build up an emergency savings fund to cover about 6 months of living expenses.
- Increase your retirement savings each year until you reach at least 10 to 15% of your pay.
Consider other strategies
One of the best ways to increase your retirement savings is to contribute more to your retirement plan every time your pay increases. Another is to reduce your spending and instead, invest that money promptly.
Simple changes, like bringing your lunch to work, cutting out cable TV, and canceling subscriptions can make a difference for your retirement future.