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Friday, June 22, 2012

Are You Saving Enough?

There are numerous online calculators to show how much you will save over a period of time given various assumptions.  One that has a bit of a different slant is a calculator provided by Morningstar that tells you the rate at which you should be saving.  It also has a paper that is readable by the layman that explains some of the assumptions underlying the research.

The calculator only takes a few seconds and is worth visiting on an ongoing basis as events change in your life.

Begin by going to Morningstar's home page.  Scroll down to find:
Source: Morningstar

Click as indicated.  You come to:

Source: Morningstar
As you can see, you only have 3 inputs.  Notice also the link " a study."

The study is by Ibbotson Associates, well-known academic researchers in the field, and, as mentioned above the write-up at the link, explains some of their underlying assumptions.  The link also includes a useful table as a guide to how much you should have save at various ages and income levels.
The results should be viewed as a guide and adapted to individual circumstances fitting the overall financial plan.

I put in 45 for the age, $100,000 for income, and $200,000 for retirement savings.  The calculator found that with these inputs the saving rate should be approximately18% to replace 80% of  income in retirement.

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