What Percent of Your Earnings Should Go Toward Retirement?

The sad reality is that most Americans are not saving for retirement. And the ones that do have savings that fall short of conservative savings targets. That said, how exactly do you decide how much you should be saving for retirement? A general rule is to do about 20%, if you can. Most experts agree that if you can save 20% of your earnings consistently, things will usually work out for you. Also, depending on your income and career, you can take advantage of the Roth IRA. Of course, in your 20s it’s harder to save more because you’re not making as much as you typically will at later points in your life. But thinking through where to save and taking advantage of things that may not be available later are really good places to start. 

Switching from Saving to Spending During Retirement

Many retirees struggle to transition from saving to spending and spend far less than they can afford. This frugal nature results in retirees passing away with a lot of money at hand – money they could have used to live a better life while they were alive. According to Roshan, a major reason for this is that retirees are afraid of outliving their money; the saver in them is always worried about “rainy days.” Another explanation would be that they still haven’t shifted their mindset from saving to spending the accumulated money in retirement.

If you’re having a hard time spending in retirement, you can start by focusing less on spending and more on being happier. Spending should never feel like an obligation. So instead of constantly being worried about not spending enough, focus more on experiences or charitable giving. Experiences such as traveling and giving to charity tend to foster feelings of gratitude, therefore making it easier to spend more.

Links and Resources:

Michelle Singletary’s 15 money milestones for every age