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June 01, 2007

Required savings rates

Everyone knows it's important to save for the future, especially for retirement. How much you need to save depends on how soon you get started, says N.C. State University's Mike Walden.

"So let me give our listener some guidelines: First of all, how much you need to save for your retirement is crucially -– crucially –- going to depend upon when you begin saving," says Dr. Walden, a extension economist. "For example, if you are a typical young worker, say age 30, and you plan on getting Social Security, in order to reach standard replacement income levels when you retire, you will need to save about 10 percent of your income. So figure on banking 10 percent of your income each year toward your retirement.

"But if you wait until you are age 40 to start ... saving, then you have to save 18 percent of your income. And if you wait until age 50, you are going to have to put away about a third -– 30 percent of your income -- in order again to meet those targets for retirement living," he says. "So with saving for retirement, it's not all about how much you save, but it's more important when you start saving. And here, earlier is better."

Posted by deeshore at June 1, 2007 08:00 AM