The Household Savings Dilemma: Why 15 Percent is the Magical Number

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Scraping away money for a vacation or orthodontic braces may be your immediate goals, but there are more important factors to consider as you move from decade to decade. Retirement is the time of life where you don’t want any financial worries. You’ve worked hard all of your life, and it’s time to enjoy the spoils. For a comfortable retirement, however, you’ll need to plan your savings well before your 60s or 70s. Get to know the trick to saving for a comfortable retirement by focusing on a 15-percent value. It makes a huge difference in your life.

 

Social-Security Downside

 

CNBC reports that every age bracket should have a certain savings amount based on your annual salary. This strategy may seem like a lot of money to have saved in just your 30s alone, but it’s crucial to be self-sufficient on a financial level. Social Security may offer about 40 percent of today’s seniors’ incomes, but that value can drop in the coming years. The 15-percent savings rule gives you a large enough savings to cover some fluctuations in the marketplace if government subsidies become an issue in the future.

 

The Medical-Insurance Game

 

When you retire, you won’t have an employer’s medical insurance anymore. You’ll rely on the federal government’s insurance while subsidizing it with your own policy. It’s not unusual to pay a large amount of medical bills during your retirement either. Thousands of dollars over the course of your golden years must be allocated to just basic care. If you have a chronic ailment, plan on spending even more money. The 15-percent rule creates some wiggle room in your retirement to be cared for as necessary. As you grow older, you don’t want to skimp on any medical procedures or appointments that will improve your quality of life.

 

Long-Term Care Concerns

 

Nursing homes and other long-term care facilities are understandably expensive, and they’re crucial to your well-being. Many people start with the 15-percent rule and increase it to 20 percent if they want to seek out more luxurious facilities in their retirement years. You might invest in a self directed IRA as a way to gain even more returns too. Because long-term care is a probability during retirement, it’s always better to save for it with the 15-percent rule and allocate the funds to other pursuits if you end up not using it. Being prepared is the goal with any savings plan.

 

Your Life Expectancy

 

Most retirement plans assume that you’ll be retired for about 20 years. This time frame used to be accurate, but people are living for a lot longer during retirement. It’s not unusual for one person to live into their 80s or 90s. Ideally, plan on a long life to age 100 so that the 15-percent rule works in harmony with your Social Security. You’ll have a comfortable retirement without the worry of running out of money. This concern shouldn’t define your golden years.

 

Look to Your Employer

 

You might be interested in the 15-percent rule, but it seems too difficult. Take a look at your retirement account as it pertains to your employer, reports the Teachers Insurance and Annuity Association of America. Many employers match their employees’ savings percentages up to a certain value. If your employer matches to a 6-percent level, you should do the same. Your total savings for retirement ends up at 12 percent. This value is incredibly close to the 15-percent goal. Simply increase your savings amount by one percent each year until you hit the goal value. You’ll hardly notice the difference in your paycheck.

According to Forbes, saving money with a conservative perspective is the best course of action. You won’t gain a lot of returns in just a few years, but decades of savings will give you a reasonable, interest rate of around 6 or 7 percent. Prioritize your retirement with the 15-percent rule so that your golden years are bountiful.

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Damien is very passionate about health, cooking, diet plans and anything that has to do with staying fit. He specializes mostly in real estate and home improvement as a writer. He grew up in Oregon but now is a resident of Salt Lake City, where he has fallen in love with the snow and the people.