Seeing the financial tip of the day threads got me thinking about retirement recommendations you commonly see in particular most sources will say to save at least 10-12% of your income annually into a retirement account like a 401k plan. I wonder why you rarely see a recommended $ amount to save per year? Even the IRS limit for IRAs & 401ks is based on $ limits
The reason I ask this is because you take a person making $30k per yr saving 10% vs someone making $90k per year saving 10% turns out to 3x the amount being saved per year by the higher income individual. Factor compounded interest over 30-35 years makes a big difference. Now I realize these are simple examples with fixed income over a number of years but you get the idea.
The key point is both individuals once in retirement will pay the same $ for many living expenses such as property tax, vehicles, fuel, food, utilities, medical expenses, prescription cost, recreational expenses on hobbies or vacation
So how do you predict 10% will be enough for retirement across all levels of income when factoring facing future equal expenses?
Now I realize it’s not practical for someone making $30k to save 30%+ towards retirement & maybe that’s the reason the general guideline is 10% minimum.
Just food for thought
The reason I ask this is because you take a person making $30k per yr saving 10% vs someone making $90k per year saving 10% turns out to 3x the amount being saved per year by the higher income individual. Factor compounded interest over 30-35 years makes a big difference. Now I realize these are simple examples with fixed income over a number of years but you get the idea.
The key point is both individuals once in retirement will pay the same $ for many living expenses such as property tax, vehicles, fuel, food, utilities, medical expenses, prescription cost, recreational expenses on hobbies or vacation
So how do you predict 10% will be enough for retirement across all levels of income when factoring facing future equal expenses?
Now I realize it’s not practical for someone making $30k to save 30%+ towards retirement & maybe that’s the reason the general guideline is 10% minimum.
Just food for thought
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