FAQ – Miscellaneous

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What percentage of my income should I save for retirement each year?

Some experts recommend a minimum of 10% of your income. However, the real answer depends on how much you need to save to maintain your pre-retirement standard of living (or attain a new standard of living in retirement), how much you already have saved and when you plan to retire.

Let's take a hypothetical example using 10%: Say you earn $60,000 a year and save 10% ($6,000) of your salary each year for 25 years. If your account earned an average of 6% a year, you could accumulate a total of more than $330,000 (of course, this does not take into account any raises that could affect the amount of your contribution). Consider, though, how much money you will need to supplement your CalSTRS or CalPERS pension. If you've determined you'll need an extra $40,000 a year in retirement over and above your pension, your $330,000 would last only a little over eight years (not taking into account any potential continued earnings). If you wanted to accumulate more, you would need to save a higher percentage.

The bottom line: 10% may a good starting point. Save more if you can, and less if you must. Even 5% or 3% is better than nothing and can help you supplement your defined benefit pension. 

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