Dave Ramsey Says to Save 15% of Your Income for Retirement. Is That Enough?

"While Social Security benefits will help you fund your retirement, the fact that they replace only 40% of pre-retirement income means that, by themselves, they cannot provide you with a comfortable standard of living. Unless you're one of the small minority of workers who get a pension from your company, this means you must save enough to cover your costs and live the life you've hoped for in your later years."

"The Ramsey Solutions blog suggests that you save 15% of your gross income and that you put it into tax-advantaged retirement accounts on a monthly basis. In particular, Ramsey suggests putting this 15% into a 401(k) or an IRA every month. The big question is, will that be enough? If you listen to Ramsey and invest 15%, will you have the retirement security you deserve, or do you need to save more?"

"Ramsey's suggestion to save 15% of your income makes sense - for some people. However, your retirement savings needs are dependent on factors that are individual to you, so following basic rules of thumb like this doesn't always make sense. For example, if you are getting started with saving in your 40s or 50s, saving 15% of your income may not be nearly enough to allow you to save a sufficient amount of money to retire with no financial worries."

Social Security benefits replace only about 40% of pre-retirement income, so additional personal savings are necessary to maintain a comfortable standard of living. Workers without employer pensions must save to cover retirement costs and desired lifestyles. A common guideline is to save 15% of gross income into tax-advantaged accounts such as 401(k)s or IRAs on a monthly basis. That 15% target can be appropriate for some people. Individual circumstances determine adequacy. Starting saving in one’s 40s or 50s often requires saving substantially more because less time remains for compound interest, and early-retirement ambitions also demand higher savings rates.

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