I have a solid 30 working years ahead of me. Retirement is not exactly in sight.I know a lot can change in 30 years including promotions, inflation, family responsibility, and health. Therefore, it is difficult to know exactly how much to save now to fund retirement.

You might be in the same boat. You also might have clicked this post hoping I would tell you exactly what you need to save each month to be prepared to retire.

I won’t be doing that, and I will explain why.

What I will do is propose some methods and habits that will help you meet your retirement goals and build wealth.

1. Save, Save, Save

Saving money is not exactly exciting. Buying the newest iPhone® is exciting. Upgrading your car is exciting. But saving? Not so much. 

Do you know what else is exciting? Being able to retire comfortably and spend your time exactly how YOU want.

Practically speaking, save as much as you can.

Try to work your way up to saving 15% of your income. If your employer matches any of your contributions, you can count the match towards your 15%! If cash flow is tight, start at 5%. Every few months, or whenever able, bump your contributions up 1%. You may not feel the pinch in your budget if you slowly increase your savings.  

2. Share Your Raise

The feeling of earning a well-deserved raise is pretty satisfying. It is easy to put the extra cash in our pockets and say, “I earned this.” It disappears into our budget as our standard of living creeps higher and higher without notice.

I propose that you spend half of each raise on yourself and direct half to your retirement savings.

For example, let’s assume you can only afford to contribute 7% of your salary to your 401(k). Thankfully, your employer matches 3%, so you are up to a 10% contribution. Your performance review comes up and you get a 4% raise. Great news! Now what do you do? You immediately increase your contribution by 2%. You are then free to treat yourself with the other 2%, because you really do deserve it!

Why I Won’t Give You a Number

There are a few reasons why I won’t simply give you a dollar amount you need to save to prepare for retirement. For one, every person’s situation is SO different. 

Some people will max out their social security and have pensions, so they won’t even need to use their retirement savings. Others may have medical issues that lead to early retirement, so they need to save much more than average. Some will continue to work part time just to keep busy, so they draw less from the retirement savings than expected.

I can’t speak to a wide group of people 20 – 30 years from retirement and give one number or even one formula.

It also wouldn’t be helpful for me to give you a number due to the powerful, sometimes frightening, effect of inflation working against you. Inflation has averaged around 3.5% per year over the long term. Sounds fairly low, right? It doesn’t sound so low when you consider that what costs $50,000 now could cost $140,000 by the time you retire (30 years). Saving enough each month now to prepare for that is likely unattainable. 

However, you also have the power of inflation working for you

Generally, your income should increase with inflation as well. This may be through cost of living adjustments or actual pay raises. Saving $2,500/month when you are earning $50,000/year might not be doable, but it is much easier when your annual salary has inflated to $85,000.  

A financial advisor will consider your entire unique situation and guide you towards a savings rate that works for you. Likely, your savings will increase just a bit each year with inflation.

Don’t Compare Yourself to Your Peers.

You may hear coworkers discuss maxing out their 401(k) contributions or a friend say they are on track to retire by age 55. It is easy to get discouraged if you haven’t had the same projections.

Keep working hard, keep saving, and actively prevent the lifestyle creep.

Focus on what you can control and keep looking forward! A fulfilling retirement awaits!