How Much Should You Save for Retirement? 6 Ways to Get Your Answer

You don’t really want to work forever, do you? Whether you intend to retire at 45, 55, or 85, you need savings to make that happen. Social Security is not usually anywhere near adequate to cover retirement expenses. So, how much should you save?

The most accurate answer for how much to save will depend on a wide variety of knowable (and unknowable) factors, but there are a variety of methods for determining an acceptable savings rate. Anyone of the following six ways of determining how much savings you need will be a step in the right direction.

If your employer offers a retirement savings plan, then you should – at a bare minimum – save enough into this plan to qualify for the match. The match is free money and usually represents thousands of dollars. It is completely worthwhile to do whatever is necessary to capture the match.

The easiest way of determining how much to save is to simply save 20% of your income.

This rule of thumb is based on an easy budgeting method that uses a “rule of 50/30/20” – spend 50% of your income for needs, 30% for wants, and 20% for savings or paying off debt. So, if you are earning $75,000 a year, you should be saving $15,000 a year or $1,250 a month.

NOTE: This method is best for people earlier in their careers. If you are in mid life or approaching retirement and haven’t been saving adequately, you will probably want to boost savings beyond 20%.

While there are no hard and fast rules for how much you should have saved at different ages, certain benchmarks can provide general guidance. The appropriate savings amount will vary depending on factors such as your income, lifestyle, retirement goals, and individual circumstances. Here are some benchmarks to consider as a starting point:

  • By Age 30: Aim to have saved the equivalent of your annual salary. So, if you earn $75,000 a year, you should have this much in retirement savings (plus an adequate emergency fund). This can help provide a foundation for your financial future and set you on the right path towards long-term savings goals.
  • By Age 40: Strive to have saved three times your annual salary. At this stage, you should be focusing on increasing your savings rate and taking advantage of employer-sponsored retirement plans and investment opportunities.
  • By Age 50: Aim to have saved six times your annual salary. As retirement approaches, it’s crucial to ramp up your savings efforts and take advantage of catch-up contributions available in retirement accounts.
  • By Age 60: Target to have saved eight to ten times your annual salary. With retirement on the horizon, it’s important to have a substantial nest egg built up to support your desired lifestyle and cover future expenses.

If you are behind these benchmarks, consider ways to boost your savings rate and catch up.

The I.R.S. gives tax advantages to people who save for retirement in IRAs and 401ks. Basically, your tax bill is reduced. And, depending on your tax bracket and how much you save, it can mean hundreds, thousands, or even tens of thousands of extra dollars in your pocket.

When you get the tax breaks depends on the type of account you save into.

  • Traditional IRAs and 401ks: These types of accounts reduce your tax bill immediately. Any money you contribute is not counted as taxable income. So, if you pay a 15% tax rate and save $5,000 into a traditional IRA or 401k, your taxable income is reduced by $5,000 resulting in $750 in tax savings.
  • Roth IRAs and 401ks: With Roth accounts, there are no tax advantages when you save. However, the money grows tax free and all future withdrawals are tax free as well. Saving in a Roth account is a good idea when you think that you are paying a higher tax rate now than you will be in the future when you want to withdraw the money.

Anyone over 50 can add catch-up contributions up to $7,500 in 2023 to their 401(k) savings. That is in addition to the $22,500 contribution limit. So the total you can contribute to these accounts in a given year is $30,000

In 2023, you can save $22,500 into a 401k and an extra $7,500 if you are over 50. The contribution limit for an IRAs is $6,500 or $7,500 for those over 50.

Saving as much as possible when you are young, even if your salary is not substantial, can have significant long-term advantages. You actually need to save less money overall if you start early.

Here’s an example to illustrate why starting early can be beneficial:

Let’s consider two individuals, Ben and Chris. Ben starts saving for retirement at age 25 and contributes $1,250 per month into a retirement account (20% of his $75,000 a year income) with an average annual return of 7%. Chris, on the other hand, waits until age 45 to start saving. Let’s assume that his salary is double that of Ben’s, and he is able to contribute 20% of $150,000 or $2,500 per month into the same retirement account.

Assuming both individuals retire at age 65, here’s how their savings would compare:


  • Ben starts saving at age 25 and contributes $1,250 per month for 40 years (480 months).
  • Total contributions over 40 years: $600,000 ($1,250 x 480).
  • Assuming an average annual return of 7%, the total value of the retirement account at age 65 would be approximately $4,365,018.


  • Chris starts saving at age 45 and contributes $2,500 per month for 20 years (240 months).
    • This is double the monthly savings contribution to what Ben saved over half the number of years.
  • Total contributions over 20 years: $600,000 ($2,500 x 240).
    • This is equal to what Ben saved.
  • Assuming an average annual return of 6%, the total value of the retirement account at age 65 would be approximately $1,142,362.
    • While probably perfectly adequate for retirement, this sum is more than $3 million less than what Ben has at age 65.

Both Ben and Chris contributed the same amount to savings, but it’s worth noting that Ben, who started saving earlier, ends up with a significantly higher retirement savings balance despite the higher monthly contributions made by Chris. This emphasizes the importance of starting early and allowing investments more time to grow.

However, the examples above demonstrate that even if someone starts saving later in their 30s or 40s, consistent and substantial contributions can still lead to significant retirement savings by retirement age.

6. Build a Detailed Plan for Exactly How Much Savings YOU Need for a Secure Future

The methods above are easy enough ways of putting your savings into the ballpark of what you’ll actually need for retirement. However, if you want a more personalized and reliable answer, you will need to do some calculations.

This is especially important if you are nearing retirement age or want to be sure that you are saving adequately for the future you really want.

Determining how much savings you need for retirement involves considering various factors such as projected spending needs, income sources, savings drawdowns, and making certain assumptions.

  • Start by projecting what your expenses might be each year for as long as you’ll be retired. And, consider how your spending might evolve over the 20 or more years you will be retired.
  • Next assess your anticipated income. This may include Social Security, pensions, annuities, rental income, and more.
  • Determine the gap between your desired spending and anticipated income and plan for withdrawals from your savings to meet this gap.
  • Apply assumptions for inflation, investment returns, retirement date, life expectancy and more.
  • Evaluate additional risks and unknowns.

Sound complicated? It doesn’t need to be. The NewRetirement Planner will walk you step by step and show you how much savings you need. And, you will gain peace of mind from seeing a detailed plan. People with a written plan do better and fee better with their money.

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