The number of years you are able to save for retirement has a big impact.
While that isn’t a bad rule of thumb, there are two primary factors that can affect that recommendation: Many personal finance experts recommend a flat savings rate of 15%. A higher savings rate means you’ll either be able to retire earlier or have more money during your retirement. In addition to being something you have significant control over, your savings rate is one of the biggest factors impacting whether you will have enough money to last through your retirement years. So, focus on your savings rate instead of what the market is doing, and you’ll be well positioned to achieve your financial goals. You have a significant influence over your savings rate through your ability to control expenses and increase your income. Covey’s calls this our “circle of influence” in his landmark book, “The Seven Habits of Highly Effective People.” In his book, Covey emphasizes the importance of focusing on the things that fall within our circles of influence, and not expending energy on the things that don’t. You have little to no control over market returns or how long you’ll live, but you can control how much you spend and how much you save. Your savings rate is arguably one of the most important components of your financial plan, but why? It’s what you have the most control over.
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