The “half your age” rule refers to the percentage of your pre-tax salary you should contribute when starting to save for retirement. In other words, you have 0 in your pension plan and want to have an indicator for how in percentage terms you need to contribute on a regular basis for a moderate retirement.

If you are 20 years old when you start contributing into your pension, you will contribute 10% of your salary.

Age (when starting)Contribution Rate (%)
2010 %
3015 %
4020 %
5025 %

The contribution can be made up through a combination of contribution of your personal contribution and the amount paid by employer.

If the contribution target rate is 10 % and your employer contributes 7% then you would only need to contribute 3% yourself. It might be worth checking if your employer does matching if your increase contributions as this could improve your chances of a more comfortable lifestyle later in retirement.

The rule has surfaced by multiple financial advisors as a way to make it simple for people to calculate how to save for retirement. And like any other finger rules, it is not perfect. Everyone has a different opinion or view on what their lifestyle in retirement should look like but this rule is highly praised by many experts.

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