Is 10 persent Enough?

A cOmmOn rule of thumb when planning for retirement is to save 10% of your gross income during your working years.Since this rule of thumb has been around for a long time, it's logical to question whether it's still an appropriate guideline. Several trends suggest that it is probably on the low side:
fewer individuals are covered bY definedbenefit plans. The 10% guideline anticipated that a retiree would receive a defined-benefit pension as well as Social Security benefits. But a substantial portion of the work force is no longer covered by a defined-benefit pension.
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the social securitY sYstem will face increasing pressure in the future. By 2037, due to the unprecedented number of baby boomers that will be retiring, benefits will need to be reduced by approximately 25% to equal revenues collected unless changes are made to the system (Source: Social Security Administration, 2009).
life expectancies are continuing to increase. Average retirement ages have been decreasing while life expectancies have been increasing. currently, at age 65, the average life expectancy is 82 years for a man and 85 years for a woman, compared to 78 years for a man and 81 years for a woman in 1950 (Source: Journal of Financial Planning, August 2008).
plans for retirement have changed. Another common retirement planning rule of thumb is that you'll need 70% of preretirement income during retirement (Source: Money, January 2009). however, that guideline assumed a relatively inactive retirement lifestyle. Increasingly, retirees view retirement as a time to travel extensively or engage in expensive new hobbies. All these trends point to the fact that future retirees will be responsible for providing more of their income for a longer period of time. Thus, you should consider higher, not lower, savings rates. While 10% of income may sound like a lot of money, consider how many years you expect to work compared to how many years will be spent in retirement. Assume you start working at age 22, work until age 62, and then die at age 82. Thus, you work 40 years and are retired for 20 years - for every two years you work, you need to support yourself for one year in retirement. contrast the current situation with a typical scenario in 1950.
At that time, the average retiree worked 47 years before retiring for nine years. Thus, that person worked over five years to support one year of retirement.
For many people, then, the answer may be to extend their working years. In the above example, if you wait until age 70 instead of age 62 to retire, you will work for 48 years and be retired for 12 years. Thus,
you will work four years for every year of retirement.
These stark realities don't mean that you can't retire, just that you need to plan carefully. Thus, you should start saving as much as possible, as soon as possible, for your retirement.