It is easy to estimate how much money should save for retirement if you are 50 years old. But if you are only in your 20s or 30s, it is really hard to predict as retirement is still decades away. However, a few simple calculations can help you ensure that your savings plan is right on track.

The general recommendation

The general recommendation is to contribute at least 10% of your income to your retirement plan when you are not more than 40 years old. It is also recommended that a 10% increase should be made once you turn 50. That savings amount of 20% should ensure that, by the time you retire, you will have enough financial resources to live on.

But with today’s unfavorable financial and economic condition, many people cannot afford to put away 10% of their paycheck, much less increase that amount to 20%.

Many financial experts recommend that you begin with a 5% contribution and increase the amount by 1% every year. With this, the shock will not as dramatic as when you started with a 10% contribution. There will be dramatic decrease in your net paycheck, and you will be in a good position to budget accordingly.

Affording to save

You will find it very difficult to save money for their retirement when you are far from your peak income and are struggling to pay regular bills. But there is a good news: You have got plenty of help. Most employers and the Internal Revenue Service (IRS) kick in some money; you can save a significant amount of money without shocking your paycheck.

For instance, if the company matches 50 cents on the dollar for up to 6% of your paycheck and you make $40,000, you would get the maximum match if you have a contribution of $2,400 in a 401k retirement plan. In that case, you would receive about $1,200 from your employer, which brings your total contribution to around $3,600.

Tricking yourself into saving

Given all the benefits, you may not afford to save 15% of your paycheck initially. And you should not set aside that much until you cover other bases first. It is also important that you pay off credit card debt first to avoid wasting money on interest charges every month.

Once you have met these obligations, maximize your money by getting it into savings to avoid spending it. With a 401k retirement plan, the money is deducted from your salary even before you see or touch it.

Starting young

Starting young means your savings will have more time to grow. This also means that you will need to set aside much less to obtain the same goal compared to if you start saving a few years late.

For instance, if you are 25, you only have to invest around $3,600 annually to get $1 million when you reach 65 given an investment return of 8% annually. But if you start when you are 30, you will have to save around $5,400 every year to yield $1 million by the time you are 65.