There are ways it can be simplified
looked at the retirement planning decisions of a pension plan for 300,000 active duty U.S. Army service members. One of the key findings was that if the decision to participate in a pension plan required too much thought, people may not contribute at all.
According to the authors, “The difference in the estimated effects between the two types of emails suggests that at least part of the overall observed effect stems from highlighting a specific contribution rate rather than simply encouraging enrolment.” Trying to determine how much to save for retirement is not easy. Workers must consider whether to save, how much to contribute, which accounts they should use and what investments to buy.Tax Free Savings Accounts have been around for more than 10 years now and have largely benefited both low and high-income savers.
This estimate may also change depending on their investment risk tolerance and fees. Earnings increases would have an impact, as would life expectancy. I assumed a moderate risk tolerance, modest investment fees, steady salary growth, and an average life expectancy. Other adjustments to our calculations may be necessary if our notional saver expected to downsize in retirement or to receive an inheritance.
So, I am willing to suggest that a mid-career saver aims to put aside roughly 10 per cent of their income if they are looking for a quick answer to how to replace about half of their income by age 65. 10 per cent is better than nothing at all. However, the “right” amount could range from 0 per cent to 20 per cent, or less, or more.Getty Images/iStockphoto
Your investments should always match your risk tolerance, but the more exposure to stocks, the higher your long run returns will be despite the increased short run volatility. The higher your returns, the less you will need to save, the earlier you can afford to retire, and the more you can safely spend in retirement.Article content continued
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