Two-thirds of 401(k) participants polled for a recent J.P. Morgan Asset Management report said they could better plan for retirement if their employers helped them “understand their numbers”—that is, get a handle on such specifics as how much they should be saving and how much money they should have in retirement accounts to ensure a secure post-career life.
Given the many uncertainties involved in making projections decades into the future, it’s impossible to expect precise targets. Still, some figures can provide general but still valuable guidance. Here are four key numbers that can make retirement planning less daunting and at the very least get you going in the right direction until you come up with a more customized plan.
If you save this percentage of salary each year throughout your career, you’ll have a reasonable chance of building a nest egg that will be able to support you comfortably for the rest of your life. Indeed, this report from the Boston College Center for Retirement Research estimates that’s how much the typical U.S. household should save each year in order to maintain its pre-retirement living standard in retirement.
But while 15% is a good benchmark for most people—and, if nothing else a good starting point—your household may not be typical. You may have to save at a higher rate if, say, you’re getting a late start on retirement planning or you envision living large in retirement. Or you may be able to get by with a somewhat lower savings rate if you get an early start or if you have other resources, such as a traditional company pension, you can rely on to generate retirement income.
To get a more accurate sense of how much you should set aside annually based on such factors as your age, how much you’ve already saved, the percentage of your pre-retirement income you think you’ll need after you retire and how many years you expect to spend in retirement, you can rev up MONEY’s How Much Do I Need To Save For Retirement calculator.
Subtract your age from this number and you’ll come away with a pretty good estimate of how much of your retirement savings should be in stocks. So, for example, a 20-year-old would stash 90% of his or her retirement portfolio in stocks with the remaining 10% invested in bonds, while a 50-year-old would have a more moderate mix of 60% stocks and 40% bonds.