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Saving for Retirement IS Rocket Science. Don’t Let Financial Experts Fool You!

How much should you be saving for retirement?

Depends who you ask I suppose.  Suze Orman will tell you 10 to 15%, Blogger A will say 20% and Blogger B will say 25%.

Every “financial expert” has some idea, usually a fixed percentage of your income, of how much YOU should be saving for retirement.  Fact of the matter is – only YOU can answer how much YOU should be saving for retirement.

I don’t blame the financial experts.  They are just trying to keep things simple and provide a general benchmark.

However, there is no such thing as a general benchmark in my opinion.  Saving for retirement can be rocket science because there are several variables involved in determining what that magic number should be.

Saving for Retirement Variables

First, how much one should put away is highly dictated by their age.  It is no surprise that the government allows “catch up” contributions to retirement plans for people over a certain age.

Second, one’s planned retirement age and life expectancy play a huge role in determining how much they should save for retirement.  Health has a lot to do with this variable, which is very much distinct for each of us.

Third, how much do you foresee needing for retirement? What kind of lifestyle would you like to sport in your “golden years”? Your desired standard of living can affect the answer as well.

Do you know if you are going to inherit wealth before you retire?  I am not advocating relying on this method to fund your retirement, but if the probability is high and known, one should at least consider the sum when thinking about retirement.

Similarly, how much money do you already have stashed away? Clearly, the fourth variable is the amount of money you already have.

Fifth, what vehicles or instruments are you saving your money in? Is your money sitting in a cash account, a fixed deposit account, a bond or stock portfolio? Is it in physical real estate? Is it invested in a start-up company?

What is the projected growth rate of your investments? How your investment returns fare over the long term often impact the adjustments one makes to how much they put away for retirement over time.

Sixth, there may be one off events in life that bring about adjustments to your retirement plan.  An inheritance is just one example.  Another can be a potential sale of a business or real estate holdings, resulting in significant capital gains.

Because each of the variables is highly distinct for each one of us, the answer to how much you should save for retirement is a number that only you are likely to best estimate.

That said, I completely appreciate the intent of all the financial experts out there.  After all, they just want to make sure we all end up alright in the end don’t they?

So, what is YOUR take on how much you should save for retirement? Should the Social Security promise be factored into this discussion? Is saving for retirement as simple of a concept as many “financial experts” make it sound?

Analyzing Retirement

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13 Responses to “Saving for Retirement IS Rocket Science. Don’t Let Financial Experts Fool You!”

  1. krantcents says:

    It is complicated because everyone’s circumstances is different. I max out my 403B, IRA and Roth IRA. In addition, I will receive a pension and Social Security. To add to the difficulty, no one can accurately predict how long anyone will live. I plan on living in retirement for 30 years. BTW, I am retiring at 70 years old.

  2. Nigel Chua says:

    Hey Sunil

    There is no right or wrong, just “fast” or “slow” savings and/or investment plans. Those who have more time may take things more slowly, those who have more money may want to speed things up a little more.

    Personally, my wife and I combine our incomes, and of the combined amount 15% goes into savings pool, and 10% goes into an investment pool. Savings pool is a savings account with a rather pathetic interests returns of 0.125%; investment pools are kept for investment opportunities that come along that suits our risk appetite, ROI and length of time. What I had determined to be suitable for my risk appetite are investment projects that lasts for mid to long term, with annual ROI of >15%, have an exit plan or liquidity option.

    As each and every individual differs in their income, responsibilities, preferences in savings, investment and lifestyle, it becomes difficult to dictate or advise on “good amount to save”. I think perhaps the bigger issue is about financial awareness, goal setting and consistent action taking.

    How much should we save for retirement? Hmm. To be really comfortable, I’d want to have a minimum of “spare spending” cash of $500,000.00; assets in forms of businesses/land/properties that yields nett monthly positive $10,000.00; medical and hospitalization insurance that is fully covered; with no outstanding bad debts. That is my idea of retirement funds, Sunil.

    What about you?

    • Nigel Chua says:

      Saving for retirement is not just a “concept” to me – it is a sound, proven and systematic approach that I am practicing today, not just for retirement, but during my week-to-week use. It is a lifestyle.

      • Sunil says:

        Man you got it all planned and ironed out nicely. I know you will achieve those goals. My goal is to have a cash flow (preferably from passive activities) that allows me to live and sustain the lifestyle I want for myself and my family.

  3. Nigel Chua says:

    Hey Sunil

    I’ve penned it down and I look at it and remind myself everyday… But though it’s goals, I’m always open to “faster” approaches in this new economy of information technology. I’m looking to change more of my income, business or personal, to that of Internet marketing selling services and products – that will change my life entirely no matter how I look at it.

    I’m making the decision to move away from my brick and mortar and physically businesses, though I’m still running one – this will be best for the mid to long term.

    How’s your paid surveys doing so far? Can you give me a list of something I can start out with? Ive downloaded your guide – maybe ill go through it again.

    • Sunil says:

      I too own a brick/mortar business and have invested in others. However, more of my current focus is on my portfolio on websites that I find more lucrative and favorable in terms of the ROI equation.

      The paid survey website is doing very well. I stopped personally taking surveys few years back, but the site earns a healthy income from lead generation. You can access the list of top sites from the home page. Click the link about that reads “Survey Sites”

      • Nigel Chua says:

        The ROI should be much, much better as the input in terms of physical efforts are much lesser, the yields more scalable and consistent, the costs lower than a physical business…it’d make sense in all short, medium and long term. If I’m not wrong you have a laundrat-dry cleaning physical business you acquired and made-over right?

        Ah, my current business has too much of my own involvement, next year’s plan is to outsource myself and hire trustworthy staff to run the clinic so that I can focus on other business developments and investments.

        Race you there? Hahahaha!

  4. Jim Juris says:

    Hi Suni,

    I am fortunate to have a military retirement. That may or may not be enough money for retired veterans to live on.

    I supplement my military retirement by selling products online. Thanks to you I have been making some changes to my websites. I am still working on making those changes.

  5. Sunil says:

    Welcome Jim. I am assuming you put in your 20? Active or reserves? What branch and MOS? More for my curiosity.

    Glad to be of help and thanks for the kind words.

  6. Randy Cox says:

    Saving for retirement is different for everyone. Some working people find themselves living too close to a small pay check to save anything. All they will have is social security which is not so secure these days. Most of them will have something they never had while working….time. At worse case, they can always use the time they have after retirement to learn opportunity investing.

    • Sunil says:

      Welcome to the blog Randy. I agree with the predicament you present. Because it takes money to make money through investing, especially conservatively in old age, do you think using the extra time to learn new working skills and supplement the SSI would be more advisable?

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