How much do you need to save for retirement? That's an easy question to ask, but it's very difficult to answer. The answer involves all kinds of calculations and assumptions, including your desired income, how long you'll live, the viability of Social Security, projected inflation, and the future returns of investments.

Whew! Perhaps that's why, according to the Employee Benefits Research Institute, the majority of Americans haven't ever tried to estimate how much they should be saving.

But don't despair -- Roger Ibbotson is here! He's the founder of Ibbotson Associates (now owned by Morningstar), the folks who document the historical returns of bonds and stocks -- you know, that "stocks have returned 10% a year since 1926" stuff you often hear about. Last year, Ibbotson and several colleagues published the "National Savings Rate Guidelines for Individuals" in the Journal of Financial Planning. The article contains several charts showing what percentage of your income you should save for retirement given your age, current salary, desired retirement income (as a percentage of pre-retirement income), and amount already saved. The numbers assume a retirement age of 65 and incorporate Social Security benefits.

To give you an idea of the results, here's what someone making $60,000 a year now would have to save, assuming the person wants a retirement income that is 80% of pre-retirement net income, which Ibbotson calculates as pre-tax income less retirement savings:



Deduction for Each $10,000
Already Saved

























So if you're 40 years old and haven't saved a dime, you'll have to start socking away 17.6% of your salary to be able to retire at 65. However, if you already have $100,000 in your piggy bank, then you'll need to save just 11.9% (multiply 0.57% by 10, which is 5.7%, and subtract from 17.6%).

As it turns out, people who earn less than $60,000 would need to save less (14.8% in the case of a 40-year-old making $40,000 today and starting from scratch); people who earn more need to save more (19.8% for a 40-year-old bringing home $80,000 who has saved zilch). That's because the more you make, the less Social Security replaces your income.

You may be interested to know that Ibbotson Associates -- remember, these are the folks famous for that "10% returns" number -- estimate that long-term future returns will actually be lower. As Ibbotson told the Fool's own Robert Brokamp in an issue of Rule Your Retirement from last year, the return on stocks will probably be closer to 9% over the next 20 years. That's the assumption built into their recommended savings rates, as well as 2.5% inflation, 2.5% income growth, and the long-term viability of Social Security. Change any of those variables, and the required savings rate also changes.

Still, these guidelines are a huge help to anyone who wonders how much he or she should be saving yet doesn't have time to fiddle with all of those retirement calculators on the Web (and then decide which one is correct, since each will give a different answer). No one can predict the future, of course. But letting the collective big brains at Ibbotson Associates do some number-crunching is a great start. Rather than focusing on the numbers down to each percentage point, learn the biggest lesson of this study: Starting sooner -- as in right now -- is very important.

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This article was originally published on July 28, 2007. It has been updated.

Fool contributor Elizabeth Brokamp is a licensed professional counselor. The Fool has a disclosure policy.