TEMPLE, Texas — What should you be saving for retirement? How much from each paycheck? Just the extra? When do you boost the amount? So, really, what should you be putting away per paycheck?
Well, as we'll see on this week's Money Talks, the answer is, it depends. And according to financial planner Rolandus Johnson, it also matters who you are listening to!
"Well if you listen to the Tik-Tok Gurus," said Johnson, "The Tik Tok financial Gurus they will tell you 20% right? Again, 20% is a lot right? I don't care how much money you are making 20% is a lot."
Ok, so you probably realistically can't save 20% of your income, so what does Johnson say to do?
"What we kind of look at is what is comfortable for you," said Johnson. "We want to make it sting, but we also don't want to burn you as well. And your priorities are going to come into play so if you are somebody who is going to, say a young person just getting out of college, and have got a great job, 20% is going to be really steep because you may have student loans or you may have other debt that you have incurred over the years. And so, we may dial that back down to 5 or 10%."
Notice Johnson says to make it sting a little, and that will keep you from just spending all of your money. However, when you start making more, Johnson says to get more aggressive.
"But then when you get into, I call them the golden years," said Johnson, "You know when you are 40 and above you are making really good money, kids may be getting a little bit older; maybe not as, I hate to use the word 'needy', but you are not spending as much on them, then you may want to go, you know, 20%. You know some debts are getting paid down and you are in your prime earning years so it's going to depend on the stage of life that you are in."
You might think, "Wow, 20%? I'll never get there," but you should always factor in a company match into your retirement and you should always take advantage of that free money for sure!
"So the retirement conversation is great and one of my favorite sayings is take free money when free money is given," said Johnson, "So, if you're in a career and they are going to go match you 5%, well, hey, I want to at least double that, so let's put 5% in, I mean into my retirement account and then see what does my life look like after that. And then we take another 5 or 10% and put it towards a brokerage account or a more tax favorable account; brokerage account, Roth IRA, something along those lines. But free money is always good money, right? And so if they are matching five, you put five, if they are matching three, you put three. That's just kind of the rule of thumb that I’ve always told my clients about!"
A study by the Plan Sponsor Council of America showed that 98% of companies that offer a 401k also provide employer matching for their employees. So, get in and take that free money that your company is offering, after all when they match dollar for dollar, that is a 100% return!
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