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How much money you need to save to retire by age 65, according to Stanford researchers

Victoriiabulyha | Twenty20

If you want to retire by age 65, you should be setting aside 10-17 percent of your income. And that's if you start saving as early as age 25.

If you wait until 35 to start, you have to save 15 to 20 percent of your income to retire by 65. Keep in mind that this amount does not include your short-term savings, so it would be on top of any money you're putting in an emergency fund, for example.

That's what researchers at the Stanford Center on Longevity determined in a 2018 report that evaluated how prepared American families are for their golden years by comparing how much they're currently saving to how much they should be saving.

The Center determined those ranges by looking at two different projections — one from the Boston College Center for Retirement Research and one from consulting firm Aon Hewitt — that considered factors such as the rate of return on investments, salary growth, life expectancy and Social Security benefits.

The BC CRR found that workers who start saving at age 25 need to save 10 percent of their income to retire at age 65 at their current standard of living, while Aon suggested saving 17 percent.

The table below compares the two projections. The top of the chart shows the projection from the BC CRR (by economist Alicia H. Munnell) and the bottom shows the projection from Aon.

"We felt that BC was a little optimistic, meaning the targets were a little low, and the Aon report was a little pessimistic, meaning the targets they were calculating were a little high," says Steve Vernon, consulting research scholar at the Stanford Center on Longevity and one of the authors of the Stanford Center's report.

"But nevertheless," he adds, "most households weren't even meeting the optimistic targets."

Families age 25-64 are only contributing a median of 6 to 8 percent of their income toward retirement, according to Vernon's report.

"The vast majority of people are not on a path to save enough money so that they can retire full time at age 65 under their current standard of living," says Vernon. And the solution is "either working longer or finding a way to live on less money in retirement or some combination."

Younger workers, he adds, should up their savings if they can: "At this point, the thing they [young workers] should be doing is just be saving. Any kind of target savings amount is a guess — it's a rough guess and it's not going to precisely get you the exact amount because so much can happen between now and then — but still, take your best shot, save as much as you can and be prepared to adjust your plans when you get closer to retirement."

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Don't miss: How much money Americans are saving for retirement—and how much you need if you want to retire by 65

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