With the stock market constantly rising and falling, it’s hard to predict what kind of luck you’ll have when you retire and how much you should be saving so you don’t run out of money. One financial expert, however, has found the magic retirement savings rates for most people.


Professor Wade Pfau, who teaches at financial planner school American College, looked at market returns between 1871 and 2009. Using that wealth of data, he crunched the numbers to find the “safe savings rates” that would guarantee retirement income in any kind of market (bear or bull).

If you have 30 years to save and want to replace 50% of your income, use a 60/40 asset allocation (60% stocks and 40% bonds) and save 16.62% of your salary every year. More proof that saving early pays off: If you have 40 years until retirement, the savings rate drops to 8.77%. Here’s the chart with various assumptions:


The good news is the savings rate can include employer matches (something you definitely shouldn’t pass up). And just figuring out how much you should be saving can dramatically improve your chances of reaching your retirement goals.

Check out the link below for the full study details.

Safe Savings Rates: A New Approach to Retirement Planning over the Life Cycle | Journal of Financial Planning via CNN Money

Advertisement