How Much Should I Save for Retirement?

Planning for retirement is one of the most important financial decisions you’ll ever make — but figuring out how much to save can feel overwhelming. The “right” number depends on your lifestyle goals, age, income, and how long you expect your savings to last. Fortunately, financial experts have developed several guidelines to help you estimate your needs and build a sustainable plan.

This article breaks down the key factors that determine how much you should save, the formulas and benchmarks commonly recommended, and practical steps you can take to get on track no matter where you are today.

Why Retirement Savings Matter More Than Ever

As life expectancy increases, many people can expect to spend 20–30 years in retirement. At the same time:

• Pensions are disappearing for most private-sector workers.

• Social Security may not cover all expenses, often replacing only 30%–40% of pre-retirement income.

• Inflation steadily reduces purchasing power over time.

This means personal savings — retirement accounts, investments, and other assets — play a crucial role in ensuring financial security later in life.

Step 1: Estimate How Much Income You Will Need

Most financial planners recommend replacing 70%–90% of your pre-retirement income to maintain a similar lifestyle after you stop working.

Why 70%–90%?

Not every expense continues into retirement. For example:

• You no longer need to save for retirement.

• Work-related costs (commuting, meals, professional clothing) decrease.

• Your mortgage may be paid off.

However, some costs increase, such as healthcare. That’s why the 70–90% range is used as a rule of thumb.

Example

If you earn $80,000 before retirement, you might aim for:

• Low range: $56,000 per year

• Mid range: $64,000 per year

• High range: $72,000 per year

Multiply that annual need by the number of years in retirement, adjusting for inflation and investment growth, to estimate your total nest egg.

Step 2: Use Retirement Multipliers

Financial institutions often provide age-based savings benchmarks. One of the most widely used comes from Fidelity Investments:

These targets assume you save at least 15% of your income every year starting in your 20s, invest in a diversified portfolio, and retire around age 67.

What if you're behind?

Don’t panic! Many people save more aggressively in their 40s and 50s once their income rises. The important thing is to start — and increase your contributions consistently.

Step 3: The 15% Rule

A common guideline is to save 15% of your income each year for retirement. This includes:

• Employer contributions (like a 401(k) match)

• Your own contributions

• IRAs and other savings accounts

Why 15%?

This rate accounts for inflation, rising healthcare costs, and typical investment returns. If you start later in life, you might need to save 20–25% or more to catch up.

Step 4: The 4% Rule (How Much You Can Withdraw)

Knowing how much to save also depends on how much you can safely withdraw each year. The classic 4% Rule states:

You can typically withdraw 4% of your total retirement savings in the first year, then adjust for inflation each year after, and your money should last about 30 years.

Using the 4% calculation

If you want $60,000 per year from your savings:

$60,000 ÷ 0.04 = $1,500,000 needed

This gives you a target to work toward.

Is the 4% Rule still valid?

Experts debate this because:

• Markets change

• People are living longer

• Bond yields fluctuate

Many planners now recommend a range of 3%–4%, especially if you want an extra safety buffer.

Step 5: Factor in Social Security

Social Security will likely cover a portion of your retirement income. The average benefit is around $1,900 per month, though the amount varies based on your earnings and when you claim.

You can get your personalized estimate at SSA.gov.

Example

If Social Security provides $24,000 per year and you need $60,000 total:

$60,000 – $24,000 = $36,000 needed from savings
$36,000 ÷ 0.04 = $900,000 total retirement portfolio target

Step 6: Adjust for Your Lifestyle

Retirement spending varies significantly by individual. Ask yourself:

How do you want to retire?

• Traveling yearly or staying local?

• Downsizing or buying a second home?

• Supporting kids or aging parents?

• Pursuing hobbies that require money?

Where will you live?

Location affects taxes, housing, and healthcare costs. For example:

• Rural and suburban areas tend to be cheaper.

• States with no income tax can reduce expenses.

• Cities with high housing costs require bigger savings.

What about healthcare?

Medicare doesn’t cover everything. Out-of-pocket medical expenses in retirement often range from $200,000–$350,000 for a couple across their lifetime. Planning ahead is important, especially for long-term care.

Step 7: Use a Retirement Calculator

Advanced tools plug in factors like inflation, market returns, debt, and life expectancy. They help you:

• Calculate precise savings goals

• Project investment growth

• Test different retirement ages

• Estimate Social Security benefits

• Compare “best case” and “worst case” scenarios

Reputable free calculators include those from:

• Vanguard

• Fidelity

• Schwab

• AARP

Step 8: How Much You Should Save by Income Level

The amount you need to save depends partly on what you earn.

If you earn $50,000/year

Target nest egg: $500,000–$1,000,000 depending on Social Security and lifestyle
Recommended monthly savings: $400–$650 (starting in your 20s)

If you earn $75,000/year

Target nest egg: $750,000–$1,500,000
Recommended monthly savings: $600–$1,000

If you earn $100,000/year

Target nest egg: $1,000,000–$2,000,000
Recommended monthly savings: $900–$1,500

If you earn $150,000/year

Target nest egg: $1,500,000–$3,000,000
Recommended monthly savings: $1,300–$2,500

These ranges assume moderate investment growth and typical retirement spending patterns.

Step 9: Consider Your Investment Strategy

Your portfolio affects how much you need to save. Typically:

• Younger savers (20s–40s): more stocks for higher growth

• Mid-career savers (40s–50s): balanced mix of stocks and bonds

• Pre-retirees and retirees (60s–70s): more conservative to protect capital

Your risk tolerance matters too. Conservative investors may need to save more since they expect lower returns.

Step 10: Common Savings Mistakes to Avoid

1. Waiting too long to start

Compound interest rewards early savers. Waiting until your 40s requires dramatically higher contributions.

2. Not taking the employer match

Not doing so is like leaving free money on the table.

3. Saving only what’s “left over”

Treat retirement savings as a bill — not an option.

4. Being too conservative

Safe investments like cash and bonds may not outpace inflation.

5. Ignoring inflation

Prices double about every 20 years at 3.5% inflation.

Step 11: How to Catch Up if You’re Behind

Even if you’re in your 40s or 50s and feel behind, you can still make progress.

Increase contributions

Boost your retirement contributions by 1%–2% each year until you hit 15%–25%.

Use catch-up contributions (for people 50+)

In 401(k)s and IRAs, older savers can put in thousands more per year.

Delay retirement by a few years

Working longer:

• Increases savings

• Gives investments more time to grow

• Shortens the length of retirement

• Increases Social Security benefits

Even delaying by 2–3 years makes a major difference.

Reduce spending

Cutting expenses by even 10% can dramatically reduce your required nest egg.

Step 12: Create a Personalized Retirement Plan

Everyone’s retirement strategy is unique. Here’s a simple way to build your plan:

1. Estimate desired annual retirement income

Aim for 70%–90% of your current income.

2. Subtract Social Security or pension income

3. Calculate required retirement savings using the 4% rule

4. Determine how much to save each year

Start with the 15% guideline and adjust.

5. Choose your accounts

• Employer 401(k) or 403(b)

• IRA or Roth IRA

• Taxable brokerage account

6. Review your plan yearly

Life changes — your investment plan should too.

Final Thoughts

“How much should I save for retirement?” doesn’t have a one-size-fits-all answer. But with the right tools, realistic planning, and consistent saving habits, you can build a secure and fulfilling retirement.

To recap the most important principles:

• Aim to save 15% of your income each year.

• Work toward 10× your income by retirement age.

• Use Social Security as a supplement, not the foundation.

• Calculate your nest egg using the 4% rule as a guideline.

• Review and adjust your plan annually — your financial future depends on it.