September 2, 2014

15% is the New Retirement Number

CBS Moneywatch columnist Steve Vernon summarizes the results of research from the Center for Retirement Research at Boston College about how much you need to invest for retirement. The old 10% rule of thumb is history. The new number is 15% which is also supported by earlier research published in the Journal of Financial Planning. The key is starting young, but if you are no longer under 35 you may need to work longer, which is a trend as more "retirees" seek out new careers or self-employment. Check out Vernon's summary at: http://www.cbsnews.com/news/how-much-to-save-for-retirement/
Th e 15% is confirmed by a study at the Center for Retirement Research as reported in the Squared Away blog: http://squaredawayblog.bc.edu/squared-away/how-much-for-the-401k-depends/
They provide a table for age when savings starts and desired retirement age that provides a number (% of salary) and explanation. You can't wait until you're 45 and expect to retire at 62! A similar study was reported in the Journal of Financial Planning that provides even more detailed tables. One can plot how much they have already invested for retirement, their current age, current income, and % of income they plan to replace to find more precise estimates.  For a PowerPoint summary, go to National Savings Rate Guidelines on the FPW website under: http://www.usu.edu/fpw/schedule/powerpoints.htm
Based on research by Roger Ibbotson, James Xiong, Robert P. Kreitler, Charles F. Kreitler, and Peng Chen

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