Carrie Schwab Pomerantz
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Dear Carrie: How much should a dual income couple with no kids save for retirement outside of maxing out their 401(k)s? -- A Reader

Dear Reader: How much to save is on a lot of people's minds these days, especially as many folks have seen what they thought were adequate savings dwindle over the past couple of years.

So your question is a good one -- and essential. A specific answer, however, depends on more personal information than I have about you and your spouse. So, while I can't tell you exactly how much you should be saving, I can give you some help in determining that for yourself.


You say you're maxing out your 401(k)s. That's great. If you're getting a company match, that's even better. But "maxing out" adds up to different dollar amounts depending on your age and your employer's plan. The current maximum contribution allowed is $16,500 (plus a catch-up of $5,500 if you're 50 or older). Which means it's possible that you and your spouse together could save $33,000 a year in your 401(k)s, or up to $44,000 if you're both 50 and older. That's a pretty good sum -- but it may or may not be enough.

If you're able to save more, that's even better. Consider opening a Roth IRA. The current income limit for joint filers is $166,000 to make a full contribution. The benefit of a Roth if you qualify is that, while contributions are made with after-tax dollars, withdrawals are tax-free. And another great choice is to simply save more in a brokerage account. In this case, your contributions are not tax-deductible, but you will have the advantage of paying taxes at the reduced long-term capital gains rate when you sell investments you've held longer than one year.

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Your age and when you started saving are two other important factors. For those who start saving in their 20s, putting aside 10 percent to 15 percent of their yearly salary may well be sufficient -- provided they consistently save that same percentage every year. But someone who waits until their 30s to get started needs to up that percentage to between 15 percent and 25 percent. Put off starting to save until your 40s and you're looking at needing to save 25 percent to 35 percent a year. That can be quite a challenge!


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Carrie Schwab Pomerantz

Carrie Schwab Pomerantz is a Motley Fool contributor.

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