How Much of Your Income Should Go to Retirement?

How much of your gross income should go toward retirement?

Great question.

And the knee-jerk answer is simple.

As much as possible.

Retirement gets to you quicker than you think. I call it chapter two.

If you’re working right now, you probably have some type of accumulation plan. 401k, 403b, 457, SIMPLE IRA, SEP IRA. Something where you’re putting money away and hopefully getting a match from your employer.

That money is growing. Or at least, hopefully growing.

But here’s the part most people miss.

There is no perfect percentage.

Key Takeaways

There is no universal percentage for retirement savings
The best approach is saving as much as possible without hurting your lifestyle
Pre-50 should focus on growth, not annuities
Retirement planning shifts to income in your 50s and beyond
Your income floor determines whether additional planning is needed
Balance saving and living instead of delaying enjoyment

There Is No Perfect Percentage

Everyone wants a number.

10 percent. 15 percent. 20 percent.

There is no number.

The right amount is what you can put away without affecting your lifestyle.

That’s the answer.

And I’ve been doing this a long time. Morgan Stanley, Dean Witter, Paine Webber, UBS, now The Annuity Man.

The biggest mistake I see?

People live like they’re broke when they don’t have to.

Don’t Live Like Braveheart

A lot of people take the “hold, hold, hold” approach.

Save everything.

Delay everything.

Wait until retirement to enjoy life.

That’s a mistake.

Because sometimes, people don’t make it to that point.

Or they get there and can’t enjoy it the way they thought they would.

You need to find a balance.

Save for the future, but live your life now.

What You Should Be Doing While Working

If you’re still working, your job is simple.

Use your accumulation plan.

401k, 403b, 457, whatever it is.

Put as much as you can into that plan without wrecking your lifestyle.

That’s it.

And for most of you under 50, listen closely.

Do not buy annuities.

Keep your money in growth assets.

There are exceptions, but for 99.9 percent of you, it’s growth, growth, growth.

When the Strategy Changes

Everything changes once you get closer to retirement.

Call it your 50s.

Call it lap three coming home.

Now we’re not just talking about growth.

Now we’re talking about:

Income
Principal protection
Lifestyle

Now we’re asking a different question.

Focus on Your Income Floor

If you’re nearing retirement or already there, the focus shifts to your income floor.

Write it down.

What’s coming in every month?

Social Security
Pension
Required Minimum Distributions
Rental income
Dividend income

Now compare that to what you actually need.

Be honest.

What do you want your lifestyle to look like?

Travel?

Eat better?

Upgrade your lifestyle?

If your income floor covers it, great.

If not, there’s a gap.

And that gap needs to be solved.

At that point, the real question becomes:

What would it take to contractually fill that income gap?

That’s something you can actually model and see in real numbers using the annuity calculators here: https://www.stantheannuityman.com/ annuity-calculator/