I’ve always said that you should save a dime out of every dollar you make as a general rule of thumb. But what if you’re playing catch-up later in life trying to save for retirement?
Way before the Internet, back when people actually went to bookstores to buy books, the top selling book in Canada was The Wealthy Barber. It had a cute story line about how wealthy customers would sit down to have their hair cut and they would complain to the barber about how broke they were.
One day, the barber suddenly retired and his clients were left trying to figure out how in the world a barber was able to retire. He never made a lot of money, but he always saved 10 cents of every loony he made. Meanwhile, his wealthy customers who didn’t save dough had to continue going off to work day in and day out.
The reality is that life happens and many of us don’t get around to saving. The young especially don’t focus on it. Yet starting young is the best time because it lets your money compound over time. That compound effect can create financial security, if not outright wealth for you.
If you’re getting started saving for retirement later in life, the dime out of every dollar rule won’t cut it for you. So for you, The Baltimore Sun has crunched the following numbers:
- If you start saving at 35, you need to save 20 cents out of every dollar to have a comfortable retirement at a reasonably young age
- If you start saving at 45, you need to save 30 cents out of every dollar
- If you start saving at 55, you need to save 43 cents out of every dollar
As you can see, the longer you wait, the more you have to save and the harder it becomes.
One final thought: Saving money is a choice. There’s no requirement that you do it. If saving is not something that’s important to you, it simply means you’ll probably have to work longer. There are no right and wrong answers here, so don’t feel guilty if you’re not saving. What’s right for me may not be right for you.