Have you ever heard of burst saving? If not, you’ll surely be interested to see its effectiveness in building a sizeable nest egg even if not initiated until your later years. In fact, a study by the research firm Hearts & Wallets found that 64% of burst savers were able to build their savings to at least 10 times their annual income. The overall premise of burst saving is to save at least 15% of your annual income for a period of ten years or more. For many individuals, this 15% savings rate is most effectively accomplished by steadily decreasing discretionary spending by 1% a year until they are at this target. Also, many others achieve this rate by making large adjustments by stocking away large portions of bonus income or by making adjustments as a child’s dependency wanes.
Regardless of how you get to the 15% savings rate, it is extremely important to set targets on at least a yearly basis. Studies have consistently shown that people who calculate how much money they need for retirement end up saving much more than those who do not. As you set these plans, be sure to consult with a retirement income specialist to ensure that your overall retirement plan is both accurate and achievable.