Retirement Planning Guide
Saving: How Soon and How Much
A well-tested and true piece of advice is to start saving as soon as possible and for as long as possible. The rates of return on investments can have a powerful growth effect on retirement savings accounts. If you wait to save until later, you will miss out on returns that you could have had earlier. In addition, these returns are added to your principal and then compounded.
The amount you need to save (Table 3) will depend on your replacement rate.
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| Example
George needs to replace around 42% of his pre-retirement income with pension benefits, a 401k account or other savings. If George is 35 and has 30 years until retirement, he (or his employer) will need to put aside 14% of his income annually to achieve the desired replacement rate. If George waits until age 45 to begin saving, then he will need to put aside 24% of his income annually.
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