RETIREMENT: WHAT’S A SAFE SAVINGS RATE?

pdfDownload AEWM Wealth Report

Overview

Previous studies have emphasized the strategy of consistent saving practiced throughout one’s career to meet retirement income goals. However, these studies generally assume a consistent savings rate starting at age 25 until retirement.2 Unfortunately, that’s not a common scenario. Because starting salaries are often just enough to pay for a worker’s cost of living, many people do not actually start saving on a regular basis until their 30s or 40s.

Furthermore, a consistent savings rate is generally aligned with cost-of-living increases, but there are two problems with this. First, workers typically increase their income during the early portion of their career at a much higher rate than inflation. This is usually accomplished by early promotions or switching jobs to procure a substantial increase in salary. Second, because the personal savings rate at the beginning of a career tends to be quite low, it doesn’t account for the ability to increase the percentage of income workers can save as their salaries increase — for example, from a 2 percent salary deferral on up to 10 percent later in their careers.

 

Connect With Us

We would love to have the opportunity to earn your business. Email us directly, call us (Weekdays, 9am – 5pm, Central Standard), or use the contact form.