Is the 11 per cent solution the right retirement number for you?

There’s long been a debate in retirement circles about how much is the right amount to save.

New research from Schroders in the U.S. suggests that non-retired savers around the world are putting away 11.4 per cent of their earnings for life after work.

The biggest savers, according to the Schroders Global Investor Study, which took a look at over 30 countries around the world, are those living in Asia, who put away an impressive 13 per cent of their earnings. The Americas are not far behind at 12.5 per cent, while Europeans save the least, at 9.9 per cent.

However, the folks at Schroders say those numbers fall short of what people may actually need. 

“It’s well known that people aren’t saving enough for retirement but this study shows that even those who are already established investors are not putting away enough money,” states Lesley-Ann Morgan, Head of Retirement at Schroders, in the article.

“There’s also a strong message from those who have already saved: ‘I wish I had saved more,’” she adds.

The problem, Morgan points out, is that people aren’t connecting what they’re saving with what they want to do in the future.

“The pension savings gap is further compounded by the fact we’re in an age of low rates and low returns. To reach their goals, people will need to save even more than savers did in previous generations,” she explains.

“The study shows investors globally are only putting away 11.4 per cent of their income but say they want to retire at age 60. Our analysis shows that someone who started saving for retirement at age 30 is likely to need savings of 15 per cent and above a year if they wanted to retire on 50 per cent of their salary,” she warns.

The article, through charts and examples, goes on to suggest that 15 per cent may be a better savings target.

“People in some countries tend to invest more cautiously and may therefore see lower returns. In Germany, for instance, pension savers have a preference for bonds, which typically have delivered lower returns,” Morgan explains.

“Such savers will need to contribute even more to ensure they realize their retirement goals,” she says.

“The most powerful tool available to savers is time. Start saving at an early age and it makes an incredible difference to the eventual size of your retirement account. The miracle of compounding, where you earn returns on your returns, adds up over 30 or 40 years of saving.”

The takeaway from this article, then, is more is always good with retirement savings – the more you can put away, and the earlier you start, the better things will be when those savings turn into your retirement income.

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