If you're just starting to save for retirement, you might be wondering exactly how much of your salary you should be setting aside. Here are a few retirement-planning points to consider.
How much are you making right now at your job? Does your salary cover all your bills and leave you with some left over? Are you in debt? Many retirement-planning experts recommend stabilizing your current position and paying off debt before saving for retirement.
If you're young, you're likely on the low end of your earning potential. As you advance in your career and earn raises and bonuses, the best thing you can do for yourself is to keep your spending habits static and use the extra money to fund your retirement plans.
Part of savvy retirement planning involves choosing a goal for your retirement. For example, if you know you want to retire young, say, at age 55, you'll need to save much more aggressively for retirement than you would if you wanted to retire at 65 or 70. Early retirement also affects where you choose to put your money--many retirement plans come with steep penalties and taxes if you withdraw your funds before age 59 1/2.
If you plan to keep roughly the same lifestyle you have now, most retirement-planning experts recommend saving enough to cover 80 percent of your expenses for 30 years, adjusting for inflation. Of course, if you plan to travel or live large during retirement, you'll need to pad this number.
Thanks to the magic of compound interest, the earlier you start retirement planning, the less you'll have to save over the long haul--and the better off you'll be once you hit retirement age. If you have no previous retirement savings, here's a ballpark amount of how much of your salary you should be saving for retirement, depending on your age: