Comparing Three Major Levers You Can Pull On Your Retirement Portfolio
--Investor begins working at 25, but saving at 35
--12% savings rate
--50%stock/50% bonds asset allocation
--Salary starts $30k and rises with age
Initial plan, portfolio at 65: $474,000
Change to 80/20 allocation: $577,000
15% savings rate: $593,000
**Begins saving at 25: $718,000**
DING DING DING!!!
I share because I think this is very important in regards to efficiency and balance. Not helpful if you are no longer 25, but I do share for any young person who comes across my blog.
Our personal average retirement savings rate since age 24 is 12%. I get a lot of comments that we must not be saving enough or will have to work for 50 years. Considering we are well on track to retire at age 50, I am not worried about it.
Of course, we contribute more when we can, and that is important too. I just happened to notice the other day that our "average retirement savings since having kids" was 14%. I think this is counter-intuitive for many. It is most often assumed that our retirement is being sacrificed (with my spouse not working). The opposite is more the case. It's easier to save a bigger percentage of a smaller income. We simply don't have to save as much? (Some years we have put away 20% to retirement; those were our smallest income years, when 20% was just not that much money). That's all there really is to it. But it isn't setting us backwards because the smaller income is more than enough for us to live on and is a fine base for savings percentage.
We personally plan to save more over time. We are savers, and we like to prepare for the worst. That said... I would say that we are pleasantly surprised how well our retirement savings is doing. We've already done the heavy lifting, no doubt about it. Which is kind of ironic because it doesn't necessarily feel like it. IT feels like retirement has been more on the back burner than we care for, due to kids and economy and medical woes. It's nice to look back and see our steady/consistent contributions working for us over the long haul.
Our personal rule of thumb has been to never put less than 10% of post college income to retirement. We started with that, and then got a lot more serious about retirement savings in our 30s. (Maxing out retirement vehicles, around age 30).
P.S. I notice one very important lever left out of this discussion. Fees and costs. MyMoneyBlog has also touched on this point in the past. http://www.mymoneyblog.com/lower-costs-higher-returns-again-...
Retirement Savings Advice (For the Young)