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what is the most appropriate savings to income ratio for an average employee?
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A good rule of thumb is 10-20% of income. Contributing to a 401K will have the benefit of tax savings and tax deferred growth. -
There is a formula from one of Elizabeth Warren's books that is a good starting point.
50% of income for needs
30% of income for wants
20% of income for savingsSteve
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Pay yourself first - worry about the ratio second. This tip is more for other people reading this thread who are saving nothing at all...Comment
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Growing up I was taught 10% always goes to retirement 20% when you are young. Currently we save 5% towards my husband 401k equivalent and max out the roth every year. When we are dual income (we are military so we move a lot) my entire salary goes to savings.Comment
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I see... I see I think that 5-3-2 is reasonable as well as that paying yourself first.
Thanks guysComment
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