I cannot post the full article because Business Insider charges to read their articles, but here are some quotes:
(Business Insider actually used this photo for their article!)
However, according to Colin Overweg, a financial planner with a California-based all-virtual practice, there is one rule of thumb that he recommends to most retirement savers: save 20% of your income every year toward retirement, and spend the other 80% of your income however you like.
More than anything else, Overweg said that establishing a consistent 20% savings rate is about successfully building a habit of saving.
"The real wealth builder for most people is consistent saving," Overweg said. "It's not the one-time event where you got lucky and bought a stock, and it's not getting superior investment performance."
He said that the reason why he believes that 20% is an ideal number for saving is because it's a sustainable number to save over the course of about 25 to 30 years and will still get the prospective retiree where they need to be with their finances in order to stop working.
"In broad, very general cases, you need to have around 25x your expenses saved in order to be financially independent," Overweg said, adding that he says 20% is an ideal savings number by examining this rule and working backwards from it.
"20% holds pretty darn true to that over roughly a 25-to-35-year working career," Overweg said. "If you start saving 20% at age 30, you'll be financially independent around age 55 or 60."
One thing that Overweg also suggested is that it's important to "enjoy the other 80%" of your income if you're saving 20% every year.
"Some people can be so focused about budgeting and staying within their budget, but still not be on track to retire," Overweg said. "What are you so worried about penny pinching for? Put 20% into long-term wealth-building accounts, and then just go enjoy the rest — now your budget is made for you."
Overweg described his approach to retirement planning with his clients as "holistic" and said that he stresses that retirement is a number, not an age, and that hitting your retirement number can be achieved in many ways.
"It's very easy for advisors to just say — 'nope, you're not on track, you've got to be able to retire by 62'," Overweg said. "And I'll have someone push back and say that they love their work and want to work part-time for the rest of their life. If that's truly the case, I think it would be pretty sad for an advisor to be saying 'no, we're not going to run those numbers, you still have to save more'."
Overweg referenced Ramit Sethi's best-selling personal finance book "I Will Teach You to Be Rich" and said that it's more important to him as a financial planner that his client live their "richest life" in their 20s, 30s, 40s, and 50s than following a complex and restrictive savings plan that doesn't actually match their needs.
"That's not listening to the client, or running a plan that would allow them to live their best life both now and in the future," Overweg said.