financial plan

How Much Of Your Annual Income Should You Save For Retirement?

How Much Of Your Annual Income Should You Save For Retirement

How much should you save for retirement?  You probably don’t have enough saved.

It might not surprise you to find out that a lot of Americans are saving 0% of their annual income for retirement. Surveys suggest 21% of Americans don’t save anything. So, you might be one of these people yourself.

But even if you are one of the people saving for retirement, you might not be saving enough.

According to an article at CNBC…


“And those who do save, Bankrate finds, aren’t setting aside a lot: 20 percent save only 5 percent or less of what they make, and 28 percent save 6 to 10 percent. Just 16 percent are saving more than 15 percent of their income.”


So, how much should you be saving each year for retirement? The article says between 10 and 20 percent of your annual income.

Read the source article

So, only about 16% of Americans are saving enough. That means you are most likely not saving enough for retirement. Statistically, this is just the safe bet.

Are We Talking About Savings Or Investments?

I want to take this moment to clear up some confusion I see while reading a lot of personal finance articles.

A lot of people are using the word “savings” when they really mean “investments”. I see it all the time. The article will be talking about saving x dollars per month or year or whatever, and then go on to talk about what that money can grow into at 7% interest.

If we are talking about getting a 7% return on our money, we are really not talking about “saving” money and putting it under your mattress, or in a low yield savings account (which is just about the same). We are really talking about sending less than your income and investing the “extra” money so it will grow over time.

So, I don’t want you to look at the fact you might not be saving enough money for retirement and think you need to start hoarding money under your mattress. While that is better than not saving at all, the real way to reach your retirement goals is to invest that money.

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Let’s put all this in context of what we talk about at this site.

The point I’m trying to make is this…

Just by bringing to your attention that you are probably not saving enough money for retirement is not going to accomplish anything. You probably know that already. And just by bringing it up, you are probably not going to say, “Alright, I’m going to start to save 20% of my yearly income now.”

If your income and budget allowed you to save more for retirement, you probably would have been doing it by now.

Saving enough for retirement is going to be a little more involved than just saying you are going to save more. You are going to have to DO something. In a lot of cases, you are going to have to CHANGE something about your financial situation and how you manage your money.

If you are not on the path to financial security, and statistically it looks like not a lot of people are, it is time to sit down, come up with a plan and prioritize implementing the plan above all else.

The retirement future is not bright for a lot of people. And no matter how old you are right now, you need to start doing something about yours if you are not part of that 16% saving correctly.

The good news is, you can make up for lost time by getting better returns than other investment opportunities.  That is what I do.

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The point is, if you are not on the path to financial security, you are going to have to do something else, or something different.