This is a great article about how much to save. Let me know your thoughts.
Dimensional Fund Advisors, a Texas-based investment management firm with more than $281 billion of assets under management, recently released a study that shows that the vast majority of retirement savers are not saving enough for their golden years. Results of the study were reviewed in a Market Watch article by Robert Powell.
For years, the standard response to the question “How much should I be saving for retirement?” has been 10 percent of one’s pre-tax income. Two associates of DFA, Marlena Lee and Massi DeSantis, wrote in their paper that “simple rules of thumb do not work for many people.
”It turns out that the most appropriate first step in establishing a retirement savings rate is to determine how much of your projected retirement income will be funded by personal savings. These personal savings can include 401k plans, IRAs, other qualified plans or after-tax retirement accumulation accounts.
General guidelines about how much of your pre-retirement income you should plan on replacing in retirement do exist. These guidelines are based on a person investing in a combination of equity and fixed dollar investments, with the percentage of the current equity allocation equal to 120 minus a person’s current age.