How Much Should I Save Each Month for Retirement?

Monthly investments build your nest egg for retirement.

Tax Sheltered Savings

Many investment counselors point clients to 401(k) plans and Individual Retirement Accounts. Matched asset 401(k) and IRA plans are not subjected to income taxes and are considered a tax sheltered savings account. However, these accounts have a maximum amount that an individual can contribute to them each year. This restricts savers' abilities to invest in tax-free savings accounts for amounts exceeding $5,000 annually.

Additional Savings Vehicles

CNN says most consumers should plan to put away 20 percent of their income toward retirement accounts. This is a substantial increase over the 10 percent that experts have endorsed for many years, and exceeds the maximum contribution limits for 401(k) or IRA plans.

Bottom Line

Setting goals for retirement can be a very personal decision. Deciding how much to set aside will be based on an individual's goals and needs after he retires. Although a good baseline begins at 10 percent of total income, additional funds can make an easier transition to retirement.

References

• MSN: How much do you need to retire?
• Think Glick: How Much Should I Save Each Month and For Retirement
• CNN.com: Why the 10 percent solution is actually 90 percent wrong