Build a Savings Plan That Fits Your Real Life

Conventional wisdom suggests you should save a steady 10% or so a year for retirement throughout your career. Instead, says Maspeth, N.Y., financial planner Michael Terry, you're better off adjusting that rate to fit your financial situation—pulling back to, maybe, 5%, when your kids are in college and the budget is tight, then ramping up to 10% to 15% after they graduate. Once your mortgage is paid off, Terry says, boost your rate again, say, to 25%.

Odds are good that you'll come out ahead with less pain. Take a typical 50-year-old who earns $70,000 a year, saves at a steady 10% clip, and has $350,000 socked away in his 401(k)—the target for that age. Assuming standard 2% raises and average annual returns of 5%, he'll amass $916,500 by 65. If instead he lowers his savings rate to 5% until his kids are out of college, bumps up to 15% at 55, and to 25% at 60, he'll have $980,000 by the time he retires.

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