How To Save For Retirement: How Much Should I Be Saving If I Start Late?
Still haven’t started saving up for retirement? Learn how to save for retirement even if you start late.
We all know that the earlier you start saving for retirement, the better. But do most of us start saving early? Do we know how to save for retirement?
No. “When I turned 30 with barely anything in the bank, that was my wake-up call,” says Michelle, a customer support representative for an multinational firm. “I knew that I had to get my act together or risk living in poverty in my old age, but I just didn’t know how to start!”
How should I start saving for retirement?
If you’re anything like Michelle, here’s what you should know. The best way to start saving is to just do it.
But how much should you be saving if you start late?
The longer you delay starting your savings, the higher your savings rate should be. According to Forbes, for every year you delay, you have to add around 1% if you’re in your 20s. If you’re in your 30s, you add about 2%. That’s if you want to maintain a consistent savings rate that doesn’t change as you get older (even when your salary gets higher).
Here’s how much you should set aside if you want to retire at the age of 65 and maintain your lifestyle:
If you start saving at age 15, you only have to set aside 8% of your annual income for the rest of your life.
If you start at age 20, you need to save 11.1% of your annual income—again, for the rest of your life.
If you start at age 25, you need to save 15.4%.
At age 30, you need to save 21.4%.
At age 35, you need to save 30.1%.
At age 40, you need to save 43.2%.
At age 45, you need to save 64.2%.
At age 50, you should save 100%!!!
In other words, if you wait until you’re 40 before you start saving, you’ll have to drastically lower your standard of living if you want to retire at 65. Don’t wait until it’s too late. Set your savings goals, stick to them, and you’ll thank yourself for it later.