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How Much Money Should You Save for Retirement?

Fifty-seven percent of U.S. workers have under $25,000 saved for retirement according to the Employee Benefit Research Institute. That's obviously far from enough to keep us solvent in our declining years, but how much money do we really need to retire comfortably?

retirement 

(Photo Credit: 401(k) 2012/Flickr)

A study from the Journal of Financial Planning attempted to quantify this number -- or at least provide some rough guidelines for determining it. Wade Pfau, Ph.D, looked at looked market returns between 1871 and 2009 to determine a "safe savings rate" for workers who would like to retire. Ultimately, what he discovered was that the answer depends on how much time you have to prepare for retirement.

"If you have 30 years to save and want to replace 50 percent of your income, use a 60/40 asset allocation (60 percent stocks and 40 percent bonds) and save 16.62 percent of your salary every year," writes Melanie Pinola at Lifehacker. "More proof that saving early pays off: If you have 40 years until retirement, the savings rate drops to 8.77 percent."

In other words, Pfau's research shows us that we're better off focusing on behaviors rather than numbers. Saving early and consistently puts workers in a better spot in their retirement years, regardless of how the market fluctuates.

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