How Much Should You Save for Retirement?

The Big Question

"How much do I need to retire?" is one of the most common financial questions. While everyone's situation differs, there are frameworks to help you find your number.

Quick Retirement Benchmarks

Savings by Age (Fidelity Guidelines)

These are rough targets based on annual salary:

| Age | Savings Target |

|-----|----------------|

| 30 | 1x annual salary |

| 40 | 3x annual salary |

| 50 | 6x annual salary |

| 60 | 8x annual salary |

| 67 | 10x annual salary |

Example: If you earn $75,000, aim for $225,000 saved by age 40.

The 15% Rule

Save 15% of your gross income for retirement (including employer match). Start early and this often leads to a comfortable retirement.

Calculating Your Retirement Number

Method 1: The 25x Rule

Multiply your desired annual retirement spending by 25.

Example:

• Want $60,000/year in retirement
• $60,000 × 25 = $1,500,000 needed

This is based on the 4% rule (withdrawing 4% annually).

Method 2: The 4% Rule

Your savings should support 4% annual withdrawals without running out over 30 years.

Retirement income = Portfolio × 0.04

$1,000,000 portfolio = $40,000/year withdrawal

Method 3: Detailed Calculation

1. Estimate annual retirement expenses
2. Subtract guaranteed income (Social Security, pensions)
3. Calculate remaining needs
4. Apply 25x rule to the gap

Example:

• Annual expenses: $70,000
• Social Security: $25,000
• Pension: $15,000
• Gap: $30,000
• Savings needed: $30,000 × 25 = $750,000

Factors That Affect Your Number

Retirement Age

Earlier retirement = More years to fund = More savings needed

Life Expectancy

Plan for 30 years minimum. Many people live into their 90s.

Healthcare Costs

Often the biggest wildcard. Budget $300,000+ for a couple's lifetime healthcare in retirement.

Lifestyle

Simple living vs. travel and activities dramatically affects needs.

Inflation

$50,000 today won't have the same purchasing power in 30 years. Plan for 2-3% annual inflation.

Social Security

Will replace some income, but amounts vary. Check your estimate at ssa.gov.

How Much to Save Each Month

Savings Rate by Starting Age

To reach $1,000,000 by age 65 (assuming 7% returns):

| Starting Age | Monthly Savings |

|--------------|-----------------|

| 25 | $400 |

| 30 | $575 |

| 35 | $820 |

| 40 | $1,200 |

| 45 | $1,800 |

| 50 | $2,900 |

The lesson: Starting early is powerful. Waiting is expensive.

Retirement Saving Strategies

1. Start Now, Even If Small

$100/month starting at 25 beats $500/month starting at 45.

2. Increase Contributions Over Time

Bump up 1% each year, or save half of every raise.

3. Prioritize the Employer Match

Always contribute enough to get the full 401(k) match first.

4. Max Out Tax-Advantaged Accounts

• 401(k): $23,500 (2025)
• IRA: $7,000 (2025)
• HSA: $4,150 individual / $8,300 family (2024)

5. Automate Everything

Set up automatic contributions so saving happens without thinking.

6. Catch Up If Behind

After 50, you get extra catch-up contribution room ($7,500 for 401(k), $1,000 for IRA).

Are You on Track?

Signs You're On Track

• Hitting the age-based savings benchmarks
• Saving 15%+ of income consistently
• Comfortable with your projected retirement income

Signs You May Need to Adjust

• Below benchmarks for your age
• Saving less than 10% of income
• Expecting to rely primarily on Social Security

Catching Up If Behind

• Increase savings rate immediately
• Delay retirement by a few years
• Plan for part-time work in early retirement
• Reduce expected retirement expenses

Common Mistakes

1. Not Starting Early

Every year you wait, you need to save more to catch up.

2. Underestimating Healthcare Costs

Healthcare is expensive. Budget conservatively.

3. Ignoring Inflation

Your expenses will increase over 30 years of retirement.

4. Counting on Working Forever

Health and job market may not cooperate. Save as if you can't work.

5. Raiding Retirement Accounts

Early withdrawals destroy compound growth.

Tools and Calculators

Use our Retirement Calculator to project your specific retirement needs and track your progress.

Key Takeaways

1. Target 10-12x your salary by retirement
2. Save at least 15% of income consistently
3. Start early—compound growth is powerful
4. Max out employer match first
5. Plan for healthcare and inflation
6. Use the 4% rule (25x expenses) to estimate your number