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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.


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