A common guideline is to save 12% to 15% of your gross annual income for retirement, including any contributions from your employer. But the right amount for you depends on your age, current savings, retirement goals, and expected living expenses.
If you start saving early, you have more time for your money to grow. If you’re starting later, you may need to save a larger share of your income or adjust your retirement plans.
The first step is to work out how much money you may need, then turn that goal into a monthly savings target you can afford.
How Much Should You Save for Retirement Each Month?
Your monthly retirement savings target depends on how much you earn and what percentage of your income you want to save.
A common starting point is 15% of your gross income. Gross income is what you earn before taxes and other deductions.
For example, if you earn $60,000 a year, saving 15% means putting $9,000 toward retirement annually, or $750 per month. If your employer contributes to your retirement plan, that contribution may count toward the 15% target.
Calculate your own retirement target
Monthly Retirement Savings by Annual Income
Here is how different savings rates translate into monthly contributions.
| Annual gross income | Save 10% monthly | Save 15% monthly | Save 20% monthly |
|---|---|---|---|
| $40,000 | $333 | $500 | $667 |
| $60,000 | $500 | $750 | $1,000 |
| $80,000 | $667 | $1,000 | $1,333 |
| $100,000 | $833 | $1,250 | $1,667 |
| $150,000 | $1,250 | $1,875 | $2,500 |
These figures are illustrative targets based on gross income, rounded to the nearest dollar. They do not account for employer contributions or individual financial circumstances.
You don’t have to reach your target immediately. If 15% feels out of reach, start with an amount that fits your budget. You can increase it when your income rises or other expenses fall.
The important thing is to build a savings habit you can maintain.
Does Your Employer’s 401(k) Match Count Toward Retirement Savings?
Yes. Employer contributions generally count toward your total retirement savings rate.
For example, suppose you earn $60,000 a year and want to save 15% of your income. Your annual target is $9,000.
If you contribute 5% of your salary, you put in $3,000 a year. If your employer adds another $1,800, your total annual retirement contributions reach $4,800.
You would still need another $4,200 in annual contributions to reach the $9,000 target, assuming no other contributions.
Check your employer’s matching formula and vesting rules. Some employers require you to work for a certain period before you own all their contributions.
If your budget allows, contributing enough to receive the full employer match can be a useful starting point. Just remember that the match is part of your total savings, not an additional amount you need to save yourself.
How Much Should You Have Saved for Retirement by Age?
Your age can help you estimate whether you’re on track for retirement. But age alone doesn’t tell the whole story. Your income, savings history, planned retirement date, and expected expenses all matter.
One common approach is to compare your retirement savings with your annual salary.
Fidelity’s retirement savings guideline suggests aiming for about 1 times your annual salary by age 30, 3 times by 40, 6 times by 50, 8 times by 60, and 10 times by age 67. These are planning benchmarks, not guarantees or requirements. Your personal target may be different.
How Much Should You Have Saved in Your 20s?
Your 20s are a good time to start saving, even if you can only afford a small amount.
You may be dealing with student loans, rent, or an entry-level salary. That’s normal. You don’t need to have a large retirement account right away.
Focus on three things:
- Start contributing regularly to a retirement account.
- Take advantage of an employer’s 401(k) match if one is available.
- Increase your contributions when your income grows.
Starting early gives your savings more time to grow through investment returns. You also have more time to adjust your plan if your financial situation changes.
For example, someone who starts saving at 25 has more years to contribute before retirement than someone who starts at 40. The difference can be significant, although actual investment returns are never guaranteed.
How Much Should You Have Saved in Your 30s and 40s?
Your 30s and 40s are often busy financial years. You may be buying a home, raising children, paying off debt, or helping family members.
These expenses can make retirement savings harder. But this is also a good time to review your progress.
Start by checking how much you have in your retirement accounts. Compare that amount with your expected retirement expenses and the age at which you want to stop working.
If you’re behind, consider increasing your contribution by one or two percentage points when your budget allows. Even a small increase can help over time.
You should also review your investment choices, account fees, and employer contributions. Make sure your retirement plan still reflects your goals and the number of years you have left to invest.
How Much Should You Have Saved in Your 50s and 60s?
If retirement is getting closer, your focus should shift toward understanding whether your savings can support your expected expenses.
Start by estimating how much you plan to spend each year after leaving work. Then consider income from Social Security, a pension, or other sources.
The difference between your expected expenses and other retirement income will help you estimate how much your savings need to provide.
If there’s a gap, you may have several options:
- Increase your retirement contributions if you can afford to.
- Review eligible catch-up contributions to retirement accounts.
- Consider working a few additional years.
- Reduce expected retirement expenses.
- Review when to claim Social Security benefits.
You don’t necessarily need to follow the same savings benchmark as someone with a different income or retirement plan. The goal is to understand your own numbers and make a realistic plan.
How Much Money Do You Need to Retire?
There’s no single retirement savings amount that works for everyone. One person may retire comfortably with less than $1 million, while another may need considerably more.
The amount depends on how much you spend, how long your retirement lasts, and how much income you receive from sources other than your investments.
A practical way to estimate your target is to calculate your expected expenses, subtract other retirement income, and estimate how much your savings need to provide.
Estimate Your Annual Retirement Expenses
Start by listing the expenses you expect to have after retirement.
Include:
- Housing, rent, mortgage payments, and property taxes.
- Groceries, utilities, and household expenses.
- Transportation, including car payments and maintenance.
- Healthcare, insurance, and medical costs.
- Travel, hobbies, and entertainment.
- Taxes and debt repayments.
- Unexpected expenses and home repairs.
Some expenses may decrease after you stop working. For example, you may spend less on commuting. Others, such as healthcare, may increase.
Don’t assume your retirement budget will automatically be lower than your current budget. Estimate it based on the lifestyle you actually want.
Subtract Your Expected Retirement Income
Next, estimate how much money you may receive from sources other than your retirement investments.
For many Americans, these sources include Social Security, employer pensions, and rental income.
You can check your estimated Social Security benefits through the official Social Security Administration website .
For example, suppose you expect to spend $60,000 per year in retirement and receive $25,000 annually from Social Security and a pension.
Your investment savings would need to cover the remaining $35,000 per year.
$60,000−$25,000=$35,000
This is your estimated annual retirement income gap.
Your estimate will be more useful if you account for taxes and distinguish between guaranteed income and income that could change.
Estimate How Much You Need in Retirement Savings
One rough planning method is to divide your annual retirement income gap by an assumed initial withdrawal rate.
For example, using a 4% initial withdrawal rate:
0.04$35,000=$875,000
Under this simplified illustration, you would need a retirement portfolio of about $875,000 to support an initial annual withdrawal of $35,000.
But this is only a starting estimate. A 4% withdrawal rate does not guarantee that your savings will last throughout retirement. Your results will depend on investment performance, inflation, fees, taxes, and how long you need the money to last.
Someone retiring early may need a more cautious plan because their savings could need to support them for several decades.
How Much Do You Need to Retire at 55, 60, 65, or 67?
Your planned retirement age affects both how much time you have to save and how long your money may need to last.
| Retirement age | What to consider |
|---|---|
| 55 | You may need to fund a long retirement and bridge the gap before Medicare eligibility. Access to retirement accounts also needs careful planning. |
| 60 | Review your savings gap, healthcare costs, and the rules governing withdrawals from your accounts. |
| 65 | Medicare eligibility generally begins at 65, but premiums and other healthcare expenses still need to be budgeted. |
| 67 | Review your Social Security estimate, projected expenses, and how much your portfolio needs to provide. |
Your full retirement age for Social Security depends on your birth year. For people born in 1960 or later, it is generally 67. You don’t have to claim benefits at that age, and claiming earlier or later affects your monthly benefit.
Retiring later can give you more time to save and may reduce the number of years your portfolio needs to support you. However, your decision should also account for your health, work situation, and personal priorities.
Calculate Your Personal Retirement Savings Goal
A general savings percentage can help you get started, but a personal estimate is more useful. You need to consider your current savings, your planned retirement date, and the income you’ll need.
You can use a retirement calculator to estimate your goal, or work through the numbers yourself.
What Information Do You Need?
Gather the following information before calculating your retirement target:
- Your current age.
- The age at which you want to retire.
- Your current retirement savings.
- Your annual income.
- Your planned monthly contributions.
- Your expected annual retirement expenses.
- Your estimated Social Security or pension income.
- Your assumptions about investment returns and inflation.
You may not know every figure yet. Use reasonable estimates, identify any assumptions, and update them as you get better information.
How to Interpret Your Retirement Estimate
A retirement calculator usually estimates how much you could accumulate by your planned retirement date. Some calculators also estimate how much income those savings could provide.
Compare the projected amount with your estimated retirement target.
If the projection falls short, you can test different scenarios. For example, see what happens if you increase your monthly contributions, work another two years, or reduce your planned retirement spending.
Don’t treat the calculator’s result as a promise. Investment returns vary, and even a small change in assumptions can produce a different result over several decades.
What Can Change Your Retirement Calculation?
Several factors can affect the amount you need to save.
Investment returns: Higher returns could increase your balance, but markets can fall as well as rise.
Inflation: Your future expenses may be higher than today’s expenses. Make sure your assumptions account for changes in purchasing power.
Salary growth: If your income increases, you may be able to contribute more each year.
Employer contributions: A 401(k) match can increase your total retirement savings.
Retirement age: Working longer may give you more time to save and reduce the period your savings must support.
Fees and taxes: Investment fees and taxes can affect how much money you keep.
A useful calculation should make these assumptions clear rather than show a single number without explaining how it was reached.
Retirement Savings Examples for Different Incomes
Your income affects how much you can save, but it doesn’t determine your retirement outcome on its own. Your spending habits, existing savings, and retirement goals also matter.
Here are some examples using a 15% savings rate.
Saving for Retirement on $40,000 a Year
If you earn $40,000 annually, saving 15% means contributing $6,000 per year, or $500 per month.
If that amount isn’t affordable right now, you could start with 5% or 10% and increase it as your financial situation improves.
Focus on regular contributions and avoid taking on an unrealistic savings target that leaves you unable to cover essential expenses.
Saving for Retirement on $60,000 a Year
On a $60,000 salary, a 15% savings rate equals $9,000 annually, or $750 per month.
If your employer contributes to your 401(k), include that contribution when calculating your total savings rate.
Review your budget to see whether you can increase your own contribution without neglecting emergency savings or high-interest debt.
Saving for Retirement on $80,000 a Year
If you earn $80,000, saving 15% means contributing $12,000 per year, or $1,000 per month.
You might find it easier to reach this target by increasing contributions whenever your salary rises. This can help you avoid relying on large changes to your budget later.
Your target may need to be higher if you want to retire early or expect substantial retirement expenses.
Saving for Retirement on $100,000 a Year
A 15% savings rate on a $100,000 salary equals $15,000 per year, or $1,250 per month.
At this income level, review your retirement account options, employer benefits, and eligibility for tax-advantaged accounts.
A higher salary doesn’t always mean you need a larger retirement portfolio. If you plan to spend less in retirement than someone with similar earnings, your target may also be lower.
Saving for Retirement on $150,000 a Year
If you earn $150,000, saving 15% means contributing $22,500 annually, or $1,875 per month.
You may need to consider how much of your retirement spending will be covered by personal savings, Social Security, or a pension. If your employer’s plan has contribution limits, you may also need to consider other eligible savings options.
The right approach depends on your retirement date, spending plans, taxes, and current assets.
What If You Are Behind on Retirement Savings?
If your retirement balance is lower than you expected, you still have options. The first step is to understand the size of the gap rather than focus only on an age-based benchmark.
Calculate Your Retirement Savings Gap
Estimate how much annual income you will need from your investments. Then compare that amount with the retirement income you expect from other sources.
Next, estimate how much your existing savings and future contributions could provide.
This will help you decide whether you need to save more, adjust your retirement age, reduce expenses, or combine several approaches.
Increase Contributions Gradually
You don’t always need to make a large change at once.
Try increasing your retirement contribution when you receive a pay raise or pay off a loan. You could also review recurring expenses to see whether some of that money can go toward retirement.
Choose an amount you can maintain. A steady plan is more useful than a high contribution that you have to stop after a few months.
Review Employer Matching and Tax-Advantaged Accounts
If your employer offers a retirement match, check the plan rules to understand how much you need to contribute to receive it.
You can also review eligible retirement accounts, such as a 401(k), traditional IRA, or Roth IRA. These accounts have different tax rules and eligibility requirements.
Contribution limits and catch-up rules can change, so check the IRS retirement plans guidance for the applicable tax year.
Consider Working Longer or Adjusting Retirement Spending
Working an extra year or two may give you more time to contribute and less time relying on your savings.
You could also adjust your retirement budget. For example, you might plan to travel less, move to a lower-cost area, or pay off your mortgage before retiring.
These decisions involve personal trade-offs. Choose an approach that fits your financial needs and desired lifestyle.
Avoid Common Retirement Catch-Up Mistakes
Don’t assume you can make up for years of low savings by taking excessive investment risks. Higher potential returns usually come with greater risk.
Also, don’t neglect emergency savings or high-interest debt simply to reach a retirement savings percentage.
And avoid making Social Security decisions based only on the size of your current retirement account. Your claiming age can affect your monthly benefit, so compare your options before deciding.
How Inflation and Healthcare Affect Retirement Savings
Your retirement savings need to cover future costs, not just what things cost today.
Two expenses deserve particular attention: inflation and healthcare.
Why $1 Million May Not Go as Far in the Future
Inflation reduces the purchasing power of money over time. If prices rise, the same amount of money will buy fewer goods and services.
For example, if annual inflation averages 3%, something that costs $50,000 today would cost about $90,000 in 20 years.
This is an illustration, not a prediction of future inflation.
When estimating your retirement needs, make sure you use consistent assumptions. If your projected expenses are expressed in future dollars, your retirement savings estimate should account for inflation as well.
How to Plan for Healthcare Costs
Healthcare costs can be a significant part of retirement spending.
Medicare generally becomes available at age 65, but it doesn’t cover every healthcare expense. You may still need to budget for premiums, deductibles, prescriptions, and services that aren’t covered.
If you plan to retire before 65, consider how you’ll obtain health insurance until Medicare eligibility.
Your costs will depend on your coverage, health needs, income, and location. Review your options as part of your retirement plan instead of assuming healthcare will fit within your regular household budget.
Should You Adjust Your Savings Target for Where You Live?
Your location can affect how much you need to retire.
Housing, property taxes, transportation, utilities, and healthcare costs vary across the United States. A person planning to retire in a high-cost city may need a different budget from someone living in a lower-cost area.
Start with the lifestyle you want and research the costs in your intended retirement location.
Don’t move somewhere cheaper based on general cost-of-living claims alone. Compare housing, taxes, healthcare access, transportation, and the cost of visiting family.
Where Should You Save for Retirement?
Once you have a target, the next step is deciding where to put your money.
The right account depends on your employer benefits, tax situation, eligibility, and when you expect to need the money.
401(k) and 403(b) Plans
A 401(k) is an employer-sponsored retirement plan offered by many private-sector employers. A 403(b) is commonly available to employees of eligible public schools and certain tax-exempt organizations.
Contributions, tax treatment, and withdrawal rules depend on the plan and the type of contribution. Some employers also offer matching contributions.
Review the fees, investment options, and matching rules before deciding how to use your plan.
Traditional IRA vs. Roth IRA
Traditional and Roth IRAs are individual retirement accounts with different tax treatments.
With a traditional IRA, contributions may be tax-deductible depending on your circumstances, and withdrawals are generally taxable.
Roth IRA contributions are made with after-tax money, and qualified withdrawals are generally tax-free. Income limits and other eligibility rules apply.
The better fit depends on your current tax situation, expected future tax situation, and eligibility. Consider professional tax advice if you’re unsure which option suits you.
Health Savings Accounts
A health savings account (HSA) is available to eligible individuals enrolled in a qualifying high-deductible health plan.
HSAs can offer tax advantages when used according to the applicable rules. They can help with eligible healthcare expenses, including costs that arise during retirement.
However, an HSA is not a replacement for a retirement plan. Eligibility, contribution limits, and qualified expense rules apply.
Taxable Brokerage Accounts
A taxable brokerage account can provide flexibility beyond retirement-specific accounts.
Unlike many retirement accounts, it generally doesn’t impose the same retirement-age withdrawal restrictions. But dividends, interest, and investment gains may have tax consequences.
It can be useful as part of a broader financial plan, depending on your goals and circumstances.
How Should You Invest Retirement Savings?
Your investment choices should reflect your time horizon, risk tolerance, and need for future income.
Diversification can help spread investments across different assets, while fees can affect your long-term returns. Some investors use target-date funds that adjust their investment mix as the target retirement year approaches.
There is no single portfolio that suits everyone. Review your investments periodically and make sure they still fit your retirement plan.
A 7-Step Plan to Start Saving for Retirement
If you’re not sure where to begin, use these steps to turn your retirement goal into a practical plan.
1. Estimate your retirement expenses. Include housing, healthcare, taxes, daily living costs, and the activities you want to enjoy.
2. Estimate your future income. Review your Social Security statement and consider any pension or other dependable income.
3. Calculate the gap. Subtract your expected retirement income from your estimated expenses.
4. Review your current savings. Check your 401(k), IRA, and other investments to see where you stand.
5. Set a monthly target. Choose a contribution amount that fits your budget and moves you toward your goal.
6. Automate contributions. Set up regular contributions and check whether your employer offers a match.
7. Review your plan each year. Update your assumptions when your income, expenses, family circumstances, or retirement goals change.
You don’t need to solve every part of retirement planning today. Start with the numbers you know, make a reasonable plan, and adjust it as your situation changes.
Frequently Asked Questions
How much should I save for retirement each month?
A common starting guideline is to save 12% to 15% of gross income for retirement, including employer contributions. If you earn $60,000 a year, 15% equals $9,000 annually, or $750 per month. Your personal target may be higher or lower depending on your age, current savings, and retirement plans.
What percentage of my income should I save for retirement?
Saving 12% to 15% of gross income is a commonly used guideline. This generally includes employer contributions. You may need a different rate depending on when you start saving, when you plan to retire, and how much retirement income you’ll need.
How much should I have saved for retirement by age 40?
One commonly cited benchmark is three times your annual salary by age 40. However, this is a guideline rather than a requirement. Your progress depends on your income, savings history, planned retirement age, and expected expenses.
Can I retire with $500,000 in savings?
Possibly, but it depends on your expenses and other retirement income. Someone with low living costs and dependable pension or Social Security income may have different needs from someone who relies heavily on personal savings. Estimate your annual income gap before deciding whether $500,000 is enough.
Is $1 million enough to retire comfortably?
It can be enough for some people, but not everyone. Your retirement age, spending, healthcare costs, taxes, location, and other income all affect how long $1 million may last. Estimate your expected expenses and compare them with your projected retirement income before setting your target.
How much do I need to retire at 55?
Retiring at 55 generally means planning for a longer retirement than someone who stops working at 67. You’ll need to consider how long your savings must last, healthcare coverage before Medicare eligibility, and when you can access your retirement accounts without additional taxes or penalties.
Is it too late to start saving for retirement at 50?
No. You can still build retirement savings at 50, although you may have fewer years for contributions and investment growth. Review your current savings, increase contributions where affordable, check eligible catch-up options, and consider whether adjusting your retirement age or spending would help.
Should I pay off debt or save for retirement first?
It depends on the interest rate, your financial reserves, and your employer benefits. High-interest debt can be expensive, while an employer retirement match may provide a valuable benefit. Keep up with required debt payments, maintain an appropriate emergency reserve, and compare your options before deciding how to allocate extra money.
Does Social Security count toward retirement savings?
Social Security is retirement income, not a retirement savings account. It can reduce how much income you need to draw from your investments. Check your estimated benefit and include it when calculating the gap between your expected retirement expenses and other income.
How often should I review my retirement savings plan?
Review your plan at least once a year and whenever you experience a major change, such as a new job, a salary increase, a home purchase, or a change in your retirement date. Regular reviews help you adjust your contributions and assumptions as your circumstances change.
Final Thoughts
How much you should save for retirement depends on more than your age or salary. You need to consider your current savings, expected expenses, retirement date, and income from sources such as Social Security or a pension.
A savings rate of 12% to 15% of gross income can be a useful starting point. But don’t treat it as a guarantee that you’ll have enough.
Work out your retirement income gap, set a monthly savings target, and review your progress regularly. If you’re behind, focus on the steps you can take now rather than worrying about where you think you should be.