If you are one of the lucky few who can save a large portion of your income applaud yourself, because it is a great opportunity for you to set yourself up for the future. But many of you are thinking how can anybody save that much with all the numerous bills in our lives? I have known personally a few people who actually save 30% for retirement and still been able to live life happily. Granted their situation might have been better than the average person and it might take you a while to inch up to that savings level, but believe me you can do it to.
Listed the below are the reasons I feel individuals with certain money scenarios can manage to save 30% or more for retirement or emergency savings. See below for a list of examples how one can save 30% for retirement.
Save 30% for Retirement:
-Anybody still living at home with their parents
-Anybody who has a roommate or shared living arrangement.
-Anybody who has paid off their mortgage
-Anybody with no debt other than the mortgage or rent payment
-Anybody with an above average income of 85K+
-Anybody who has a rent / mortgage payment of 15% or less of take home pay.
These are the scenarios where the average person can exceed and be above average savers. Granted if you have a ton of debt then you have to first pay that down immediately. When you finally get over the debt hump then you can slowly inch up the retirement savings by 2% every quarter till you reach the 30-35% ratio if you fall under the 6 scenarios I mentioned above. If you do not then you will be doomed. Obviously I’m joking but if you do not want to be stuck in a 9-5 job forever then please follow the guidelines above and save those green backs. If you are hesitant then just try it out for a month or two and then see how it goes, it never hurts to try things out. Frugal living will only help you with the overall picture of having some security in the future.
What if you have more than one option to save dollars?
If your employer offers you a few options to save under the umbrella of your company’s savings plan then by all means use it. For example Profit sharing, Stock options with discounts, pretax-401K, and after tax Roth 401K. I think for each individual the picture might not be easily painted, but you can break things up to have a favorable tax advantageous portfolio for yourself. Speak with your accountant if you have one, and if do not have one, ask someone in the finance department where you are employed what’s the best mix you should be using. (They might already implement a favorable system for their own accounts)
If I had to divvy things up between all of these accounts I would do it like this:
- 15-20% Pre-Tax 401K (If you reach the max amount of 17K, then allocate to other funds)
- 10% After Tax Roth 401K
- 5-10% Stock Option Plans (Some offer 5-15% off the publicly traded stock price)
Well I hope you can take my advice and sock away those pennies if you are living 1 of the 6 money sceanarios mentioned above. If you do not then oh well it’s you’re life, but believe me nobody has ever looked at a 100K account and said, Why did I save so much money? HaHa Usually it’s the other way around and people say, Why didn’t I save more?
Comment if you save 30% for retirement.
Rich Uncle EL
I can tell you that I am rocking all three of your suggested options! For me, I just try to hit the max of all my tax-advantaged plans and then go after my regular taxed accounts.
The other big advantage of saving this much – you really learn to live on a modest income and appreciate what you have (instead of wanting a bunch of unnecessary things).