Is 15% Enough for Retirement?

Is 15% enough to save for retirement? There are many factors which weigh into this calculation. The first of which is your age. If you are 25 then probably it's enough, but if you are 45, I have my doubts. Second, do you have anything saved and if so how much? If you are 45 with ZERO start worrying. If you are 25 and have zero, well save faster. Third will you have a defined benefit plan (pension) where your company will pay you a set amount every month? This could offset not having as much cash saved for retirement. Of course with private companies like United, Enron, Ford, etc all cutting their pensions, I don't know how much I would count on getting the full benefit. Finally it depends on when you want to retire, for sure 15% is not enough if you want to retire earlier than 65 even if your 25. You will need to cover your own medical insurance premiums and any other health issues before 65 when Medicare kicks in.

Now to address specifically if 15% is enough. With two people working, you are allowed to save $4k/annually for a Roth IRA and $15.5k/annually into a 401k. This equals $39k/year into tax deferred retirement accounts. So for our calculations we'll be putting everything into a tax deferred or non-taxable account.

Consider if you are 45 years old with no savings, well every $1 million dollars in savings = $40k/year living. This assumes you withdraw 4% which is the amount estimated by all economists to not outlive your portfolio. If you are making $60k/annually you need a $1.5 million porfolio to replace your income without Social Security. But let's assume you will get 20k/year from SS at 65, and will retire at 65 (full retirement age is actually 67).