People should save more if they're in cyclical industries with periods of booms and busts, said Scott Cederburg, a finance professor at the University of Arizona. He cites real estate, oil, technology, and finance as examples.
Con: Economic change is unpredictable. It's not easy to forecast which jobs and industries are about to be disrupted and which job skills will still be valuable in 20 or 30 years. Is a robot going to take your job?
Base it on your gender.
Pro: Women tend to live longer than men, so their retirements tend to be more expensive. "Women are also likely to take more time off from the workplace, so they have a greater need to save earlier and save more," said Jamie Kalamarides, Prudential Retirement's head of full-service solutions.
Con: For planning purposes, the averages are only so useful. For example, many men live into their 90s.
Just save as much as possible.
Pro: With so much uncertainty affecting your career, the economy, and the markets, why not just set aside as much as you possibly can?
"Most people should strive to save the maximum deductible amount," said Diane Garnick, chief income strategist at TIAA. In 2017, for a 401(k), that's $18,000 a year, with a $6,000 "catch-up" contribution for workers 50 and older. You can put $5,500 in an individual retirement account, or IRA, too.
Con: Locking up too much money in retirement accounts gives you less financial flexibility. If you need the money before you're 59 and a half, you'll pay a penalty.
And unless your goal is merely being as wealthy as possible, there's a downside to saving too much: Life is short. If you're too frugal, you'll never learn how to enjoy your money—a surprisingly common phenomenon among retirees.
Just start saving.
Dive in and save at least enough to take advantage of your employer's matching contribution. This may be the only no-brainer in retirement planning. If your employer matches your 401(k) contribution, that's "free money," said Barry Kozak of October Three Consulting LLC. Even if it isn't ultimately enough to live on, it gets you started. "Just getting into the habit of saving via payroll is critical," said John Scott of the Pew Charitable Trusts.
It's encouraging, and disturbing, to note that by doing so you're already a step ahead of most American workers, who are skating toward retirement on very thin financial resources. Two-thirds don't contribute to a 401(k), because they don't have access to a plan—or simply aren't signing up for one.
This article was provided by Bloomberg News.