Final answer:
To live comfortably in retirement, it is recommended to save around 70% of your pre-retirement income and invest approximately 15% of your income. Starting to save early and leveraging compound interest can also be advantageous.
Step-by-step explanation:
When saving for retirement, it is generally recommended to save around 70% of your pre-retirement income in order to maintain a comfortable lifestyle. Financial advisers suggest saving approximately 15% of your income for retirement. This percentage allows for 60-80% of your income during retirement.
For example, if you earn $1,000,000 over 30 years, saving 15% of your income would result in a retirement savings of $150,000. This amount can provide a significant percentage of your pre-retirement income during your retirement years.
Starting to save money for retirement early in life and allowing compound interest to work can also be beneficial. By saving $3,000 at age 25 and assuming a 7% annual rate of return, the investment could grow to nearly $44,923 after 40 years.