You Don't Need To Invest 15% Into Retirement, Says Jean Chatzky: 'Just 'Live More Lean' In Your 40s'

American journalist and financial editor of NBC's Today Show, Jean Chatzky, has revealed that she does not believe in the decades-old 15% retirement savings rule. Here's why she feels that way. 

Chatzky shared a video clip on X responding to another video of a young woman complaining about a financial rule. In her video, Chatzky responded by explaining that the advice of saving 15% a year for retirement is flawed. This is known as the 50/15/5 rule that many people have used for years to save for retirement. Basically, the rule guides people to keep 50% of their income on essentials like housing, utilities and food. Then, another 15% of that income is put into savings for retirement, and another 5% should be used for short-term savings. 

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However, Chatzky disagrees with this rule, saying that it "sucks." Chatzky explains that for decades, people were told to save 15% consistently to live as comfortably in retirement as before retirement. But Chatzky admits that, realistically, this is difficult in today’s economy thanks to rising inflation. 

In fact, according to the Federal Reserve's consumer survey, almost half of Americans don't have a retirement savings account and rely solely on using their Social Security benefits to help them through retirement. A Schroders 2024 U.S. Retirement Survey also found that 45% of Generation X participants have not done any retirement planning and that 61% are not confident they will reach a dream retirement.   

"Especially in your 20s and 30s, 15% is a whole lot." Chatzky adds, "The thing is, and people don't talk about this, but you can make up ground in your 40s and your 50s and beyond." 

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If you can't save 15% of your income for your retirement while you're young, you don't have to panic because you've still time to save in your later years all by simply living a little bit more leanly. Chatzky knows this can be done and has done it herself after admitting that when she was 40 years old, she got divorced and was fired, so she had no choice but to live her life leaner. 

Chatzky explains that this means "living a little bit more cleanly than you could afford to live in a smaller house with some spending constraints." By doing this, Chatzky believes you'll be able to put away more for your future when you're making more. Chatzky also adds another thing you can do to increase your retirement money: get "yourself to work just a little bit longer at the very end of your career." Instead of retiring as soon as you reach the official retirement age, Chatzky advises that you should try to work an extra six months to a year because this is the equivalent of adding 1% to your retirement contributions for three decades.

"So, you work a year or two longer, and you make up a whole lot of ground." Said Chatzky. 

Financial expert and bestselling author Suze Orman also encourages people to avoid retiring when they enter their sixties and feels that they should work until they are at least 70 to give their assets a chance to grow. In fact, according to the Social Security Administration, retiring early before the age of 62 can result in a 30% reduction in benefits, whereas retiring at 70 can guarantee that you will receive the largest benefit available. A Schroders 2024 U.S. Retirement Survey revealed that only 11% of participants plan to wait till 70 to receive their maximum benefits.            

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*This information is not financial advice, and personalized guidance from a financial adviser is recommended for making well-informed decisions.