How much of your income should you be saving for retirement?
It’s impossible to know the precise amount. There are too many unknowns, including how much you’ll earn during your career, the age at which you’ll retire andhow long and how well you’ll live in retirement. But I’d say 15% is a reasonable target, assuming you want to have a decent shot at maintaining your pre-retirement lifestyle after you call it a career.
In fact, the Boston College Center for Retirement Research recommends a 15% savings rate for the typical household.
If you can’t manage 15%, fine. Start with a lower percentage — say, 10% — but try to increase your savings rate by at least one percentage point each year until you get to 15%.
If your company offers a 401(k) or similar plan, you’ll want to jump all over that. For one thing, the amount you contribute annually to a 401(k) — $17,500 is the maximum this year, $18,000 in 2015 — is deducted from your income. So you don’t pay tax on your contribution and any investment gains until you withdraw the money, ideally in retirement.