how much should you save for retirement?

This question has been on my mind lately, as I try to decide how much to fund my IRA for 2007. I’ve got a decent check coming from a TA gig I just completed, and I planned to put much of it in my emergency/savings fund. But I’m wondering how much to pull out for my retirement account… and how much to put towards debt savings. In that respect, it’s not such a sizable check… !

I think I have a considerable amount in my retirement accounts currently. My mom, financial genius that she is, funded my IRA accounts in my early 20s and into my late 20s. I’m 30 now, and I need to be doing that myself (completely). I’ve got a decent amount in my 401K from my old job (I did have enough sense to max out contributions back then). I’m not currently contributing to my 403b, but my company is. I am hoping by the middle of this year to add to that.

So the question is, at the age of 30, how much money do I need to be socking away to retire comfortably? I should point out that I don’t plan to stop working at age 65 (will be running my own nonprofit then). But it would be nice to have that option.

So I’ve played around with some retirement calculators and interestingly, I’ve gotten some wildly different results. Some tell me I’m fine with what I have in my retirement accounts currently, assuming my company continues to contribute to my 403b. Some say I need to contribute up to 30% of my pretax salary in addition to what I’ve already got. I’m not sure why I’m getting this variability.

So instead, I’m going to use a little common sense. I’m going to assume 10% of my salary needs to go into retirement savings, at a minimum for 2007. This is a little on the lower side, but I’m taking into account the fact that I have a good amount already in retirement (thanks Mom!), and I’m investing that amount on the “active” side. I’m also going to include my company’s 5% in that, so I need to cough up 5% of my salary for my 2007 IRA, and then start contributing to my 403b for 2008. For 2008, let’s see if I can’t bump that number up to 15%.

My basic assumption is that I’ll need about $2.5 million by age 65 (that is adjusted for inflation - in today’s dollars, it’s just under a million). Assuming 8% growth annually, I’ll need to contribute about 20% of my current salary every year. Since I expect that there will be years when my salary will be lower than now (ie, if I do a fellowship or go overseas) and definitely years (hopefully the majority) when my salary will be more, I’m going to take that 20% number and use it as a general guideline for the rest of my working life. The nice thing is, those years when I’ll have a higher salary, I’ll definitely be over that number.

How much do you need to save for retirement?

(ETA:  Read a followup to this post!)