This is probably the most common question retirement planning advisor get. Unfortunately, it depends on so many things: desired lifestyle in retirement, fixed income sources in retirement, current assets, and so on. I would recommend either finding an independent financial planner to help you determine where you stand compared to your goal or, if you are just starting out in the workforce, use one of the many free online tools as a starting point (Fidelity has some very good tools for individuals).
We recommend a savings rate of 12 to 15%. If you are a participant in a retirement plan that includes your employer's match (if available). To start, consider deferring up to your employer's match in your retirement plan and then increasing your deferral rate by 1% a year until you reach your goal. We don't know of anyone who has retired and complained that they saved too much!
The "retirement for dummies" answer is to save 10% of everything you ever made, invest it wisely and you will be able to enjoy the same lifestyle throughout your life. Read "The Richest Man in Babylon". OKAY, so much for what we ought to have done!
Many of us didn't follow that advice so the conversation gets way more complicated. How far along are you? How long can you work? Do you have a pension? What are the ways to extend your 'earned' income after partial retirement? Will the market return to 'normal' in our lifetime? How little could you spend and still be happy?
That's why we start with a plan that looks at 1) Your goals, 2) Your current situation, 3) What can you realistically achieve without starving today, 4) What can we conservatively project, 5) Where can we provide assurance, and 6) How can we adjust with the 'curve balls' life sends our way.
So start with a plan.
Providing a specific answer to this question is difficult without knowing the details of your financial situation. Deciding how much to save for retirement depends on how old you are, how much you’ve already saved, how much your spouse has saved (if you are married), and other factors. What percentage of your income are you currently saving? You ultimate retirement saving goal should be to set aside between 10% and 15% of your total income. If you’re not at that level, you can get there by gradually stepping up your savings rate. The important thing to realize is that saving just 2% or 3% of your income won’t be enough. Likewise, just contributing enough to get your employer match and not doing anything else is probably not enough to get you to your goal.
When putting together a retirement saving strategy, you also should think about your other financial goals (perhaps you want to fund a college education for your children, for example) and the kind of lifestyle you want in retirement. You also need to take inflation into account. There are a lot of variables to consider.
You can use a variety of online tools to help you estimate how much money you should be saving right now like Mint.com. Better yet, you can talk to an independent, fee-only financial planner, who will work with you to develop a personalized financial plan that will help you set aside enough money to fund the retirement you want.
It does require analyzing the complex interaction of many variables. But don't let that stop you from beginning to save now. In addition to contributing your dollars, make use of other favorable features - 1) matching employer contributions from 401k, 2) tax deferred vehicles, 3) time, 4) power of compounding, 5) diversification. Have a budget, set your priorities, and pay yourself first via savings.
Probably not if you are the average USA worker. It does not matter whether you are blue collar, white collar or professional. If you want to maintain a certain lifestyle there are two options save more than you are currently saving or work longer than age 65. If you are asking the question you already know that you either started to late or are not putting enough away to retire at the medicare eligible age. Put pencil to paper and make a plan to save a lot. Behavioral investing will aid in developing a plan, sticking to it and be dedicated and committed to the plan. Review your income sources at retirement and you will discover that inflation and health care cost will be your biggest challenge while retired.