Northeast Wisconsin
  • Northeast Wisconsin
  • April 2018
Written by 

How much should I save?

Did you ever wonder how much of your income you should save for retirement? Financial advisors may offer some general guidelines, although there are so many different recommendations that this can be confusing and discouraging.

For years many advisers suggested using an 80-10-10 ratio, living on 80 percent, saving 10 percent and donating 10 percent of income. However, college costs have risen dramatically and many employers dropped pensions in favor of employee savings plans like 401(k) plans. Other trends like longer life expectancies, rising medical costs and inflation have also affected advice on how much to save.

Today, depending upon whom you ask the rule-of-thumb advice might be to save 10 percent, 15 percent or “as much as you can” of your income for retirement. People often have other financial goals like building an emergency fund, saving for college and paying off debt. If you are determined to live frugally or have a large disposable income, you may be able to save 15 percent or more of your income for retirement and make progress on these other goals. However, before assuming that’s how much you should save, use an online calculator or work with a financial planner to estimate how much you need to save.

Financial planners would rather personalize their advice to fit your situation rather than use general rules of thumb. Individuals have different situations, including different incomes, assets, employer provided retirement benefits, Social Security benefits, needs and goals. Some people may not need to save 15 percent or more of their income. Depending upon your situation, your planner may suggest other smart financial moves like paying down high interest debt and building an emergency fund.

According to the St. Louis Federal Reserve Bank, the real median household income in Wisconsin was $59,817 in 2016. With a median income, if a 401(k) retirement savings plan is offered at work, employees may struggle to find the money to save. If people are paying the employee share of health insurance premiums, state and federal taxes and Social Security, saving 10 percent or 15 percent of pay can be very challenging.

If you can’t save what the planner or calculator suggests, explore options like beginning receiving Social Security at a later age, working part-time in retirement and gradually increasing your savings. Try bumping up your savings whenever you get a raise. The earlier you start saving for retirement the better off you will be.

There are good reasons why today’s general guidelines often recommend saving more than 10 percent of your income for retirement. But rather than using general guidelines, it’s wise to analyze your own situation and calculate how much you need to save.

Alan Prahl

Alan Prahl is the Education Leader with FISC, the Financial Information & Service Center. He has an undergraduate degree from the University of Wisconsin in Madison and law degree from Hamline University. A nonprofit program of Goodwill NCW, FISC provides financial counseling and coaching, including a no-cost, no obligation 30-minute consultation with the “counselor on call.” To learn more, call 920-886-1000 or visit

Subscribe Today
Community Partners Directory
Find a Complimentary Copy
Community Calendar