Retirement dreams have taken a beating in the last decade. The collapse of two stock market bubbles, the first driven by pure speculative mania and the second by a housing bubble, has left retirement portfolios decimated. Having taken the advice to "buy and hold" stocks, current workers have gotten severely burnt. In an environment with low bank deposit rates and a rising annual inflation rate, saving for retirement has gotten much harder.

Getting burned twice has resulted in workers heading for safe-haven investments like gold. But fact cannot be ruled out that gold is equally volatile in nature like equities as it is not backed by anything.

The question posed to younger workers is the amount of money they must save for their own retirements. As the investment world looks increasingly grim, putting away a portion of monthly income seems to be the best route. The precise percentage amount varies from expert to expert.

A young worker can choose a lower income percentage to save each month if he wishes. In an uncertain economic climate, workers young and old may wish to save a greater percentage to cope with increased risks. While a younger worker can save as little as 10% of his monthly income, older workers would be better off saving at least 20%. Younger workers can save 20% as well if they feel insecure about their jobs. Leaving accumulated savings in cash is not a good idea in this environment. A record low savings bank rate in India of 4% combined with an annual inflation rate of 9% results in a negative real interest rate of -5%.

Workers who have their money in cash are receiving a negative return and actually losing money in real terms due to inflation.

Dividend-paying stocks and medium-term corporate bonds can offer some income to offset the effects of inflation. You can buy direct stocks if you have ability to understand the financials of the company. If not, then investing via mutual funds is the best option. You can opt for systematic investment plan (SIP), easiest way to spare some part of your salary every month.

The end result may simply have to be increasing personal savings rates along with inflation.

Every person who is working knows that he or she must save if he or she is to have the end of life he or she wants, but the doing of saving is much harder than the thinking of saving. Any little trick that makes the doing easier is one to be embraced and the 10% savings is easy to wrap one’s mind around. The primary thing is not an absolute amount of saving but the actual act of putting the money away and leaving it. It must be a lifetime’s habit to be as effective as it can be.

This article has been contributed by Muzammil Bashir. He is Senior Editor of pensioncalculator.org

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