The average American saves less than 5%, so how are you doing?

The average American saves less than 5% of his or her disposable income. Many financial advisors say that isn’t enough to ensure a comfortable retirement.

The personal saving rate, calculated by the federal Bureau of Economic Analysis, has hovered around 5% for the last few years. By the end of June, the rate had fallen to 3.8%, the bureau reported.

Carrie Houchins-Witt, a certified financial planner in Coralville, Iowa, encourages her clients to save 10% to 15% of their disposable income, putting the money in different accounts set aside for emergencies, retirement and other needs.

“I have seen too many people in their golden years being forced to work because Social Security income does not cover their basic expenses,” Houchins-Witt says. “And while I think it’s a great idea for seniors to be active and possibly working to keep busy, I don’t want them to have to rely on that income.”

Decades ago, Americans’ personal saving rate was closer to what Houchins-Witt suggests. From 1950 to 2000, it averaged about 9.8%. It peaked in May 1975, hitting 17% before beginning to slide. At its lowest, in July 2005, it was 1.9%.

How to calculate your personal saving rate

To figure out your own personal saving rate, add up the following:

• Your take-home income for the month, including money you diverted to retirement accounts;
• Your employer’s contribution to your retirement accounts;
• Any interest or dividends;
• Rental income;
• Government benefits such as Social Security or unemployment insurance;
• Any other income.

Then add up the money you didn’t spend. Include:

• Money you put into savings accounts;
• Income you put into retirement accounts, such as an IRA or your employer’s 401(k) plan;
• Cash on hand, such as money in your checking account;
• Any other unspent income.

Divide your total unspent funds by your total income, then multiply by 100 to get your personal saving rate.

Example: After adding all of your income for the month, you come up with $5,000. You’ve spent everything but $500. Divide $500 by $5,000, multiply by 100, and you have a personal saving rate of 10%.

Why your personal saving rate matters

If your personal saving rate is lower than what financial advisors recommend, that’s a sign you may not be doing as much as you should to prepare for retirement or unexpected expenses.

For many families, accumulating some wealth is crucial for goals such as making a down payment on a home, paying for the kids’ college tuition and maintaining a decent lifestyle in retirement.

Tracking your personal saving rate and taking some basic steps to boost how much you’re setting aside can be important building blocks for a more comfortable future.

What’s next?

Build an emergency fund. This should be your top priority. Experts recommend saving enough to cover three to six months of expenses, but even a small amount will help you weather unexpected costs. Consider getting a side job or selling some possessions to raise extra cash.

Nail down a budget. Aim to dedicate 50% of your income to your needs, 30% to your wants and 20% to savings and debt payments. Set up an automatic savings plan that directs your bank to transfer a set amount to your savings account each month.

Invest in a retirement savings account. If your employer offers a tax-deferred retirement fund, such as a 401(k), contribute at least as much as your employer will match. Many companies match 1% to 5% of your salary. Look into opening an individual retirement account as well.