Is Saving 10% of My Income for Retirement Enough?

You'll need savings of your own to enjoy retirement the way you want to. Even if you get a nice benefit out of Social Security, as a general rule, the money you get there will only replace about 40% of your pre-retirement wages, and that assumes you're an average earner. If you're an above-average earner, you might get even less replacement income from Social Security.

Now, imagine living on 40% of your salary (or less). That doesn't exactly paint a rosy picture. And so if you want to make sure you'll have enough money as a retiree to do the things you've always dreamed of, then you'll need to make an effort to consistently sock money away in your IRA or 401(k) plan.

But how much of your salary should you be parting with for retirement savings purposes? You might assume that 10% is a nice amount to contribute. But is it really enough?

You may want to aim higher

You'd think saving 10% of your income for retirement would yield really great results. But a lot of financial experts will tell you that saving just 10% of your earnings will leave you with a shortfall during your senior years.

Suze Orman, for example, says that saving 10% of your salary for retirement is really just the minimum. She says that 15% is a smarter target.

Of course, the amount of money you decide to save for retirement should hinge on a few different factors. These include:

• What you're reasonably able to save
• What your retirement savings goals are
• How you'll be investing your savings

If you're a lower earner barely scraping by, then saving 15% to 20% of your income for retirement may not be feasible. Heck, saving 10% may not be doable if you can barely cover your rent or mortgage on your current income.

Meanwhile, you may have lofty goals for retirement, like extensive travel. Or you may be content to stay close to home and pursue hobbies nearby. In the latter scenario, you might need less savings than in the former. So that, too, should help determine how much of your income you part with.

Finally, think about how you're going to invest your savings. If you'll be investing somewhat aggressively, such as buying stocks, then you may be able to get away with saving a smaller percentage of your income. But if you plan to stick to safer investments like bonds that commonly generate a lower return, then you may need to compensate by saving more of your salary.

Your savings rate can change over time

If you're fairly new to funding a retirement plan, you may not be able to part with more than 10% of your income. You may not even be able to save 10% of what you earn. And that's okay. Your best bet is to save as much as you can, and then aim to ramp up your savings rate over time.

One tactic for accomplishing this that tends to work well is saving your raise each year on top of what you've already been saving. Another tactic is to stick extra money that comes your way into your IRA or 401(k) as you can, such as when you get a tax refund. These strategies can have a big impact over time -- and, ideally, leave you with enough money to enjoy retirement to the fullest.