This is the most important number you need to know when it comes to your finances.

Yep, they are. This is a famous piece of evidence from the book Nudge.

And let’s think about this for a second. A racket is important—everything from the right grip to the right size can determine how hard you can hit a ball over the net. Once that racket is chosen, the first few strokes might feel a little awkward as the body adapts to the racket. But then over a bit of time, the racket becomes an extension of the body.

Picking a savings rate is equally important. Most people choose a savings rate quickly, assuming that this very important decision will certainly be revisited soon. When filling out their new hire paperwork or opening up their own retirement account, they hastily choose 5%, maybe to max out the employer matching contribution. it doesn’t seem like a forever decision in the moment.

Only, as it turns out, it kind of is a forever decision. For better or for worse, the number that folks put in  the box has a 90% chance of being the one they keep, at least until they change jobs and again need to face the savings decision.

Alternatively, a savings rate can be given the same thought as a tennis racket.

First get your “grip.” Give yourself permission to retire.

A lot of people tell themselves a story that somehow they love what they do so much or their parents always worked. Therefore, maybe they will never retire. Well, the average retirement age right now is hovering around 62. And I promise that is not by choice when you look at how little retirees have saved. So, no, you cannot live a life planning to work until the end.

Ask yourself, “When do I want to allow my physical body and mind to have the right to stop working?” Is it 65? Or, do you want to leave your mind and body the grace to have the right to stop working at 60? Got your number?

Choose a savings rate that’s the right size.

Next, it’s time to make sure the racket size is just right to hit the ball, and that is the % savings rate. When we pick a savings rate, remember that it is on your gross pay. Also,  if you are married to someone with an income, you have to both be saving. Otherwise, one person has to save a percentage calculated on the combined income of both spouses to prevent from undersaving.

Start with a retirement calculator with your retirement age goal in mind or check out my savings rate blog over at the Aptus Financial site. You can allow the calculator to default you to its assumptions on rate of return or the percentage you plan to spend in retirement. Just make sure to complete the social security estimator.

The way the retirement calculator works is you see your estimated need in retirement based on your current lifestyle and how much you are on track to achieve based on your current savings rate. If those two bars are even, congrats, keep up the great work!

If the estimated need bar is higher, then start inching up your percentage savings rate until it is at parity. There is your savings rate number.

Let’s say that savings rate number is 10% because you are still young. Congrats! You have your number. Go put that in the box on your paperwork. Not convinced? Here is what I want you to do. Pretend you are 10 years older in the calculator, making the same amount. How much would you need to save? Maybe 15%? 20%? Ouch.

Herein lies the problem. It will never get easier to save. Even if you make more money. Honestly, especially if you make more money. This is the conundrum I deal with every day in my job. People missed the savings boat early on and then must make up for it, a realization that usually occurs when they are in their 40s. Their kids are expensive, they are ready to upgrade the house, and they want a new car. This is a really bad year to have to reduce their pay by A LOT to just be able to retire on time at 65.

Retirement Savings: Play the Long Game

I realize it is hard to save all the time, but as the famous White Coat Investor says in his book, “It is better to be young and broke than old and broke.” Wow, sage words. As we get older, we have so many more financial desires, dreams, needs, and wants. When you shoulder your fair share of the savings burden starting at a younger age, you are not permanently delaying enjoyment of money until you retire. Don’t be fooled by that logic. Instead, you are preventing your 30-year-old self from having to make a painful lifestyle revision. By saving today, you are telling your 45-year-old self that, yes, it is time to buy that forever family home. It is telling your 50-year-old self to go ahead and use that pay raise to travel to Europe and start picking off bucket list items rather than having to plow the ENTIRE pay raise into her retirement savings rate in desperate hopes she can stop working in 15 years.

See what I mean? Saving early, saving now, means intermediate term enjoyment of money. I have seen these rare young people who had started saving 10% in their 20s and what they get to do in their 30s and 40s that others don’t get to do..

And you know what else they have? They have an account balance. Some people disinterested in saving start to get really interested in it as they see what 5 years to a decade of saving regularly into a retirement plan does. There is a serious sense of accomplishment. There is a feeling that you are a saver. You are responsible. You set a goal and, unlike every other failed New Year’s resolution, actually kept it.

And amazingly, adapting to the new savings rate is just like adapting to the tennis racket. You pick it out. You spend 1-2 awkward paychecks making adjustments to adapt your lifestyle to that paycheck, and then that savings rate is simply an extension of your paycheck, your brain, your life. It ceases to be a consideration. Instead, it just works. And money piles up for your benefit. In your own account. Like a boss.

Photo by Micheile Henderson via Unsplash