Today we are going to talk about the age-old question of: how much should I save?
How Much Should I Save?
The short answer is: it depends. There isn’t such a thing as one-size-fits-all, especially when it comes to your finances. It depends on your goals, your situation, and how long you’ve been saving. For example, someone who starts to save when they’re 20 is naturally going to have to save a lot less than someone who starts in their fifties. It really does depend on your situation. And at Wealthquest, we would tell you to talk with an expert, allow them the opportunity to get to know you, your situation, your goals and that way you can really marry that, your goals, with an appropriate savings percentage. Even though it depends on your situation, you’ll hear some generic advice out there telling you to save 15% or 20% towards retirement. It’s exactly that – generic advice. It’s not tailored to your specific situation, towards your goals, and that’s really what you want.
Where Should I Be Saving?
At Wealthquest, we recommend chatting with an expert. Give them the opportunity to get to know you, to know your goals, and your unique situation. That way you can really marry your goals with an appropriate savings percentage. A common question we hear is I want to save 20%, where should I save it? And again, it depends. There are some unique situations, but generally this is a really good order of operations of where to save.
First we would say, go to your employer. This is probably where you get a match. When you contribute, your employer matches and that’s essentially free money and a really great opportunity. You need to take advantage of that. Second, we would say go to your IRA, Roth or traditional. Even though you don’t get that match, you tend to have a little bit more flexibility than your employer plan. It’s a really good place to save. After that, if you still need to save more to get to that 15 or 20% we’d say it’s okay to go back to your employer. Even though you don’t get that match, you still receive some sort of tax advantage when you contribute to that employer sponsored plan.
Why Am I Saving?
So now we know how much we’re saving. We know where we’re saving. Something that we like to encourage our clients to think about is why are you saving? We’d tell you that it gives you a lot of freedom and flexibility; freedom to keep working because you want to, not because you have to. It gives you freedom to retire, to spend that money on people that you love and on experiences. It also gives the opportunity to be generous and it gives you a lot of freedom and flexibility down the road, and that’s really valuable.