The most difficult question we normally receive when assisting clients is: How much should I save towards my retirement? The honest answer is: It depends.

My response can be confusing, leading people to believe retirement is impossible and discouraging them to save.

"It depends" is no help if you are not an expert in finance and want to know what to do.

Many people are also getting the wrong impression from their employers' retirement plans, which often default them into saving far too little.

An obvious solution is financial education. But saving for retirement also requires self-control since most employees would like to save more but lack the willpower.

Employer retirement saving plan

As employers switch from defined-benefit to defined-contribution plans, employees accept more responsibility for making decisions about how much to save.

In a defined benefit fund the employer guarantees you a predetermined pension based on a formula using your final salary and years of service.

In contrast to that, in a defined contribution environment, your final pension depends on how much you and your employer contribute and the performance of the underlying assets in your pension fund.

It is easy to save if your employer is one of the many that automatically signs you up for a retirement fund.

But, typically, these retirement funding plans start out by setting aside 6% of your income with the employer matching those contributions. This is way too little.

Very few employers have a rate higher than 13%, so it is difficult to know what the upper limit is. A recent retirement survey suggests employees could accept saving rates as high as 12%.

Save 13 to 15% of your salary

If you are looking for a basic rule of thumb, the absolute minimum is 13%. This guideline counts retirement contributions coming from both you, as an employee, and your employer.

An employee saving 8% of her own money reaches the 13% goal if her company contributes 5%.

However, contributing 13% to 15% to a retirement fund may be unrealistic for employees who have other
priorities.

When you are young, these
priorities include paying down student debt and building up an emergency cash fund.

When you are older, a key goal should be paying off your bond, because it makes retirement much less expensive.

How come so few employees contribute more than the contribution level determined by their employer? Once you get used to a particular level of disposable income, you tend to view a reduction in that level of income as a loss, so it is not surprising that few employees are willing to increase their contributions.

Base it on how much you earn

How much you earn determines how much you can invest toward your goals.

Saving for retirement is likely not the only financial goal you have on your budget. You may be thinking about buying a house, starting a family, travelling the world or any number of other things. All of these goals are competing for a slice of your salary, so setting your priorities and adjusting your savings percentages is a highly personal activity.

There is no way to accurately predict your retirement needs since nobody knows what your future holds. However, educated assumptions based on historical data produce fairly clear targets.

Aim to save 16% of your annual salary if you are early in your career. If you make R350000 a year, save R56000 a year or about R4666 a month. A tough task? Maybe. If your employer matches your contributions, that R4666 could be R2333 a month (or R27996 a year).

Base it on your gender

Most financial advisers are men, so the financial planning industry defaults to men's salaries, career paths, preferences and lifespans in making assumptions about the future.

However, there is no one-size-fits-all approach to investing for either men or women. Add to that, women are likely to live longer than men. We cannot use the same retirement planning assumptions for men and women.

An area that has received little attention and which can have a big impact on retirement planning is the gender-investing gap.

A man and a woman, both 30 years old with bachelor's degrees, earning the same and investing 10% of their salaries are likely to have different fund balances at retirement.

How much you earn determines how much you can invest toward your goals - and this differs significantly for women and men over their careers.

Save as much as you can

The reality is that putting money away for retirement is not enough. You have to understand and consider the right assumptions when building your retirement plan so it is specific to your needs.

You can take advantage of your employer's matching contribution. If your employer matches your retirement fund contributions, view that as free money.

The change from spender to saver begins with your mind-set, so you must view saving as a reward rather than punishment. It makes your journey to wealth creation much easier and when it comes to your retirement planning, peace of mind is more important than anything else.