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The Importance of Your Savings Rate

How much you save for retirement goes a long way to determining how much you can spend in retirement. The more you save while you’re working, all else equal, the more you can spend in retirement. It sounds straight forward, but it seems to be something that many people forget, or at the very least, seem to take for granted. Everyone’s talking about the details – how much risk you should take in your portfolio, how to maximize your portfolio’s tax efficiency, or how to set up a bond ladder. Now, these are important (we wouldn’t have written articles about them if they weren’t), but they all pale in comparison to your savings rate. Put simply, this is the most important number in financial planning. It’s easy to say that how much you save is important, but, as researchers, we want to put some numbers around this. How big of an impact does your savings rate have on your portfolio compared to your asset allocation? The answer is your savings rate has an enormous effect. To show just how big the effect is, let’s make a couple of assumptions. Let’s say that we assume that stock returns will be 6% […]

Provided by: Retirement Researcher

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