Here’s the most cookie cutter answer I can fairly give you: And the millennial personal savings rate is even worse. Sadly, 10% is more than 2X the average American personal savings rate of 4.6%.
44% aged 44-54 have less than $10,000 in total savings.These dismal savings levels are mostly why you probably won’t receive an inheritance, because the average retirement savings are dismal:
If that’s all you’ve saved, you better hope and pray that Social Security benefits dramatically increase (highly unlikely) or that you die pretty quickly after retiring. What is the reality of 10% savings? Well, assuming you keep up with inflation and work 40 painstaking years, you’ll have effectively replaced only 4 years of income for retirement. This is probably one of the oldest bits of advice in the personal finance memesphere, and it keeps rearing its ugly head over and over. You’d be foolish to take this advice and even more foolish to give it.Īnd then there’s the old adage of “you should save 10% towards retirement”. And what if you put your “financial priorities” 20% towards paying off student loans, leaving zero for retirement or other goals? At least you got your nights out and cable TV, I suppose.Does a mortgage qualify as an “essential” or a “debt payment financial priority”? Not sure, but this cookie leaves a lot of room for interpretation.Only 20% towards “financial priorities” like debt payments, retirement, and savings? Meanwhile 30% (50% more) towards superfluous stuff like “nights out” and “121 channels of cable”? That’s a short cut to the poor house.Does the person we are prescribing this solution to have a main goal of early retirement, buying a house within 2 years, paying off $50k in credit card debt? We just don’t know or care, with the cookie cutter approach. There is no customizing towards personal goals at all.Hammer, anyone? The more you make, the higher your percentage of savings should be.
This could be the worst financial advice anyone could EVER give you. First and foremost, it presumes that you should spend up to your level of income.There are so many things wrong with this prescription, it’s challenging to list. “50% should be reserved for essentials (think housing and food), 30% should be allocated for lifestyle choices (things like nights out and 121 channels of cable), and at least 20% should go toward what we call “financial priorities,” which include debt payments, retirement contributions and, of course, savings.” Here’s a gem of one I found a while back, which they (I’ll save their reputation with anonymity) prescribe as the “50/20/30 Rule”: So when I see other supposedly legitimate personal finance sources try to cut some cookies, it makes me want to gouge my eyes out with a spork. For me or anyone to give you a cookie cutter answer in terms of a percentage or specific dollar recommendation would be doing you a great disservice. These are all questions that beget more questions in order to qualify a serious answer. … and expecting one identical numerical response for everyone.
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