The Rising Rate of Retirement Savings: How Much Do You Really Need to Save?

The rate of retirement savings is on the rise, with nearly a third of companies now starting workers saving at 6% of their salaries or higher. This is double the share of organizations that did so a decade ago, according to a report by Vanguard Group cited by The Wall Street Journal.

Previously, setting a default contribution rate of 6% was seen as too burdensome for younger workers and too paternalistic by some. However, companies are now viewing this as a positive step towards helping employees save for retirement and take advantage of employer matching contributions.

With this shift in retirement savings trends, the question arises: How much do you really need to save for retirement? There are several guidelines you can use to calculate this, such as the 4% rule, the 80% of pre-retirement income rule, and the 10 times your annual salary by age 67 rule.

Experts recommend saving 10% to 15% of your pre-tax income annually for retirement, but this can vary based on factors like life expectancy, current spending and saving levels, and lifestyle preferences in retirement. If you find yourself behind on saving for retirement, there are ways to catch up, such as maximizing your company’s 401(k) match, increasing your income, and diversifying your retirement savings strategies.

Overall, the increase in retirement savings rates is a positive trend that can help individuals better prepare for their golden years.