The amount you should save for retirement each month depends on various factors such as your desired retirement age, expected lifestyle, and current savings. Financial experts recommend saving 10-20% of your income towards retirement, but it's crucial to assess your individual circumstances.
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Life is unpredictable; we all know that. It's hard to guess what the future may hold. But if there's one thing you can control, it's saving for your retirement. Having some savings set aside can go a long way toward living a comfortable retirement — whether it's three years or three decades down the road.
However, saving isn't always cut and dry. How you save and how much often depends on your age. Are you asking questions such as "How much should I save for retirement?" and "What percentage of my income should I save?" You're definitely not alone.
Determining these numbers can be challenging since there's no one-size-fits-all rule for retirement savings. However, the following general guidelines may help.
Key Takeaways
- Saving for retirement is crucial: Regardless of your age or future plans, having savings set aside for retirement is important for a comfortable future. It's a personal journey, and the amount needed varies for everyone.
- General guidelines for retirement savings milestones: By the end of your 20s, financial experts suggest having saved 50% to 100% of your current salary. By age 50, aim for four to six times your annual salary, and by age 60, aim for seven to eight times your annual income.
- Estimate your retirement needs: Creating a retirement budget and considering major costs and recurring expenses such as housing, transportation, utilities, healthcare, and emergencies can help you start saving and budgeting effectively.
- Determine retirement income sources: Identify potential income sources in retirement and consider post-retirement income options such as downsizing or part-time work.
- Saving and budgeting for retirement: Saving 10%-20% of monthly income for retirement is a general rule, but you should adjust it based on your retirement expenses and income needs.
Determining Retirement Needs & Wishes
Saving for retirement is a personal journey. Depending on individual wants and needs, the amount needed varies for everyone. For example, if you hope to spend your retirement at home with your friends and family and don't have many expenses, you can probably aim to save less than someone who dreams of traveling the world.
One of the first things you should think about when it comes to retirement savings is creating an estimated retirement budget. That can help form the foundation of your retirement strategy. If you're younger, this is more difficult; retirement could be decades away. But having a general idea of what you may need in retirement can help you get on the path to saving what you need every month.
Some major costs and recurring expenses you'll want to consider include:
- Housing
- Transportation
- Utilities
- Insurance
- Health care
- Loans
- Groceries
- Big-ticket items
- Planned expenditures and events
- Emergency savings
Getting a general sense of these costs can go a long way toward helping you start a budget. Then, through the years — and especially as you get closer to retirement — revisit your budget and plans to ensure you're still on track.
Our retirement calculator is a good place to start. It can help you estimate how much you may need to save to retire comfortably. Meeting with a financial professional can also help you figure out your goals. They can work with you to make personalized plans for budgeting, saving and spending over the long term.
How to Estimate Retirement Income
With an idea of how much money you may need in retirement, you have a rough estimate of expenses. Next, you'll want to determine the income needed to cover those expenses and any other wants for your quality of life.
In terms of income, there are several primary sources of it in retirement:
- Social Security benefits
- Employer-sponsored 401(k) savings
- Individual retirement account (IRA) savings
- Pension plans
- Other investment and savings accounts
Potential post-retirement income can come from other places, too, such as selling your home and moving to a smaller residence or working a part-time job. Depending on your situation, you may want to consider a wide range of options as you get closer to retirement. Our retirement cost of living calculator can help you plan.
A couple of generalized approaches can help you figure out how much, in total, you may want to have in your retirement accounts when the time comes:
- 80% of your income. Financial experts generally recommend you to look at your current income and estimate that you'll want to have around 80% of it to meet your needs.1 Of course, this number can depend on your expenses. If you live more frugally, you could live on a lower percentage of your current income.
- 4% of your retirement savings. Another way to look at potential retirement income needs is to estimate you'll need to withdraw about 4% of your total retirement savings each year (and then annually adjust that amount for inflation).
Conventional wisdom has often thrown out $1 million in savings as a benchmark of "enough" in retirement. While that may be plenty for many, you'll want to run your numbers to decide if that's a goal that works for you.
What Percentage of My Income Should I Save?
With an idea of how much money you may spend in retirement and the income you may need to cover those expenses, you can start taking concrete steps toward saving.
A general rule is to save 10%–20% of your monthly income for retirement.
You can contribute the money to your 401(k), an IRAor other investment accounts. You can split up a percentage across each or put it all into one account, whatever you prefer. Take your preferred savings rate and apply it to your monthly income; that's how much you should save each month.
Another popular framework is called the 50/30/20 rule. Take your monthly income and break it down into three categories:
- Necessities (food, housing, etc.): 50% of your monthly income
- Discretionary (travel, clothes, activities, etc.): 30% of your monthly income
- Savings (retirement and emergency): 20% of your monthly income
Here's where having an idea about your retirement expenses and income can help. If you don't think you'll need as much money in retirement because you have a low cost of living now, you may need to save less than someone with higher estimated expenses.
Depending on your age, income and other expenses, it may be difficult for you to consistently reach your monthly savings goal. But saving any amount toward retirement when you're young can benefit from having a long time to grow and overcome market fluctuations. Note, though, that investments cannot guarantee growth or even sustainment of principal value; they may lose value over time. Past performance is not an indication of future results.
How Much Should I Save for Retirement in My 20s?
Ask most 20-somethings about retirement, and you'll find it's often considered to be far off in the distance. But the sooner you can start saving toward your retirement, the better. Plus, getting into good savings habits early can pay off decades down the road.
One common suggestion by financial experts is to have saved 50% to 100% of your current salary by the end of your 20s.Let's say you are 22 years old and make $50,000 a year. If you put $6,250 a year, or $520 per month, into a 401(k) or other retirement savings account, you could potentially reach $50,000 in savings by age 30. Follow the same math as you age and increase your income.
If you're starting your first job, see if you are eligible for an employer-sponsored retirement plan, such as a 401(k). You can make tax-advantaged contributions to it from your paycheck, which may help you save. Plus, if your employer offers to match a percentage of your contributions, that's even better. It's free money.
How Much Should I Save for Retirement in My 30s?
As you get into your 30s, you may have yourself in a better career position and earning more income. However, many people in their 30s also start seeing significant expenses, including a wedding, buying a home and starting a family.
That may make it more challenging to reach your monthly retirement savings goals, which many experts set between two and three times your annual salary by the time you turn 40. One way to help catch up is to boost your 401(k) contributionsto maximize employer matching (if offered). For example, if you contribute 5% of your income to it and your employer matches 3% of that, you're already at 8% of your income going to savings. You might also add any cash windfalls to your savings, such as bonuses or inheritances.
If hitting your goal percentage is hard, try increasing your savings by a small percentage, such as 0.5% or 1% each year. With the anticipation you'll have 30 more years before retirement, that may help you catch up.
How Much Should I Save for Retirement in My 40s?
For many people, you'll have your highest salary jump somewhere in your 40s as you enter your prime earning years. That, coupled with other expenses such as saving for kid's college funds or paying off student debt, means keeping a budget and carefully tracking your expenses is increasingly important.
By the time you hit 50, many experts suggest having between four and six times your annual salary in your retirement savings.
This age is often when people meet with a financial professional to review their total pictures, including retirement plans and strategies to improve financial health. They may have some suggestions to help maximize your retirement savings by setting a targeted monthly amount based on your needs and current income. They can also guide you on potential tax benefits and explore other investment and savings vehicles.
How Much Should I Save for Retirement in My 50s?
As you enter your 50s, retirement may seem just around the corner. Planning and reviewing your current savings rate becomes essential. If you've struggled to hit the 10% to 20% monthly savings suggestions, this may be your chance to catch up.
Experts recommend having seven to eight times your annual income in retirement savings by the time you reach 60. You'll also want to start seriously considering when you may retire and begin claiming your Social Security benefits. Generally, waiting until you've reached your full retirement age or beyond can help increase your monthly income in retirement.
Some special tax rules can help you boost your savings. After age 50, the Internal Revenue Service (IRS) allows for catch-up contributionson select retirement savings accounts. So if you have an IRA or 401(k), you may be able to increase your savings in these accounts each year. Just make sure you follow the IRS guidelines, which are updated annually.2
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How Much Should I Save for Retirement in My 60s?
Come your 60s, you're in the home stretch. Depending on your situation, you may be a few years away from retirement or plan to work into your 70s. Regardless of the retirement path you've planned, now is when your decades of hard work saving for retirement can become a reality.
Your final retirement age and lifestyle plans may influence your savings needs. Experts recommend saving between eight and 10 times your annual salary by the time you retire. However, if you plan on a more active lifestyle with a higher cost of living, working longer and saving that much extra may help. It may also help boost your Social Security benefits.
Now is the time to work with a financial professional to go over your plans. They can help you finalize your retirement budget, look at your investments to determine if anything needs adjusting, and offer guidance on the best time to retire based on your financial situation.
It's Never Too Late to Start
Life happens, so you may not have saved 15% of your income every month for the last 20 years. However, that doesn't mean you can't start putting away a percentage of your income every month now and start building your retirement savings.
It may feel overwhelming, but there are resources to help. Chatting with a financial professional is one way to start. They can help you set realistic retirement goals and get you on a path toward saving for your future.
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Sources
- Parrish S. A second look: Four retirement rules of thumb. Forbes. https://www.forbes.com/sites/steveparrish/2021/05/05/a-second-look-four-retirement-rules-of-thumb. Published May 5, 2021. Accessed April 21, 2022.
- Savings by age: How much to save in your 20s, 30s, 40s and beyond. Ally. https://www.ally.com/stories/save/savings-by-age-how-much-to-save-in-your-20s-30s-40s-and-beyond. Published March 23, 2022. Accessed May 17, 2023.
- COLA increases for dollar limitations on benefits and contributions. Internal Revenue Service. https://www.irs.gov/retirement-plans/cola-increases-for-dollar-limitations-on-benefits-and-contributions. Last reviewed November 5, 2021. Accessed April 21, 2022.
FAQs
How Much Should I Save for Retirement Each Month? ›
There is a general rule of thumb: When saving for retirement, most experts recommend an annual retirement savings goal of 10% to 15% of your pre-tax income.
How much do I need to save each month for retirement? ›Although financial planners typically recommend saving between 10% and 15% of your gross annual income for retirement, the average worker with an employer-sponsored retirement plan only contributes about 7% of their income toward their retirement fund according to Vanguard's “How America Saves 2022” survey.
Is $500 a month enough to save for retirement? ›If you start setting aside just $500 a month for retirement at age 35, the money will still accumulate significantly into your golden years. In fact, by the time you reach 65 (when retirement typically begins), you will have saved over $300,000!
Is saving $1,000 a month good? ›Yes, saving $1,000 a month is great! It amounts to $12,000 a year and if this amount is invested properly, it will grow into a very large portfolio over time. Of course, there are a few other elements worth considering when saving $1,000 a month.
What is the $1000 a month rule for retirement? ›The (Overly) Simple Math Behind the “$1000/Month Rule”
The math behind the $1000-a-month rule is simple. If you take 5% of a $240,000 retirement nest egg each year, that works out to $12,000/year, which, divided into 12 months, gives you $1000 each month. Painless, right?
Investing $100 per month will grow to more than $160,000 when you are ready to retire in 47 years. At $500 a month, the same 20-year-old would retire with more than $800,000 if they stuck to their saving. If you bump that number up to $1,000 per month, your total will grow to over $1.6 million for retirement.
Is $2 m enough to retire? ›Yes, for some people, $2 million should be more than enough to retire. For others, $2 million may not even scratch the surface. The answer depends on your personal situation and there are lot of challenges you'll face. As of 2023, it seems the number of obstacles to a successful retirement continues to grow.
Is $1,500 a month enough to retire on? ›That means that many will need to rely on Social Security payments—which, in 2021, averages $1,544 a month. That's not a lot, but don't worry. There are plenty of places in the United States—and abroad—where you can live comfortably on $1,500 a month or less.
Can you live on $3000 a month in retirement? ›If you have a low living cost and can supplement your income with a part-time job or a generous pension, then retiring on $3,000 a month is certainly possible.
Is $100 K enough to retire on? ›Yes, it is possible to retire on $100,000 a year. However, it depends on several factors, such as your retirement goals, current age, and expected retirement age. You must have a solid retirement plan to retire on $100,000 annually.
Should I save $20 a week? ›
Small amounts will add up over time and compounding interest will help your money grow. $20 per week may not seem like much, but it's more than $1,000 per year. Saving this much year after year can make a substantial difference as it can help keep your financial goal on your mind and keep you motivated.
Is saving $50 a month good? ›Although $50 a month may not get you to retirement completely, it's a good start. $250 a month is even better, and can get you to a minimum retirement income level of about $2,000 a month.
Is a million dollars enough to retire? ›Will $1 million still be enough to have a comfortable retirement then? It's definitely possible, but there are several factors to consider—including cost of living, the taxes you'll owe on your withdrawals, and how you want to live in retirement—when thinking about how much money you'll need to retire in the future.
At what age can you retire with $500000? ›With some planning, you can retire at 60 with $500k. Remember, however, that your lifestyle will significantly affect how long your savings will last. If you're content to live modestly and don't plan on significant life changes (like travel or starting a business), you can make your $500k last much longer.
Can I retire at 60 with $500 K? ›Generally speaking, you can retire at 60 with $500,000, but you may not like how much income you have or it may not be enough for your needs. However, some people can retire on less.
Can I retire at 50 with $500 K? ›Yes, you can! The average monthly Social Security Income in 2021 is $1,543 per person. In the tables below, we'll use an annuity with a lifetime income rider coupled with SSI to give you a better idea of the income you could receive from $500,000 in savings.
How much do most people retire with? ›The Federal Reserve's most recent data reveals that the average American has $65,000 in retirement savings. By their retirement age, the average is estimated to be $255,200.
Is $300 K enough to retire in? ›In most cases $300,000 is simply not enough money on which to retire early. If you retire at age 60, you will have to live on your $15,000 drawdown and nothing more. This is close to the $12,760 poverty line for an individual and translates into a monthly income of about $1,250 per month.
Why saving 10% won't get you through retirement? ›Mathematically, 10% Just Isn't Enough
By saving 10%, your money would need to grow at a rate of 6.7% a year for you to retire 40 years from when you start. In order to retire early, after 30 years of contributing, you would need an unrealistically high rate of return of 10.3%.
Living off interest of 2 million dollars is doable, but you'll need a reliable, high-earning investment vehicle. A fixed annuity can give you even more interest than a CD, at 3 percent or more, offering more confidence in how long will 2 million last in retirement.
Can I retire at 55 with $3 m? ›
The good news: As long as you plan carefully, $3 million should be a comfortable amount to retire on at 55. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now.
What is the average 401k balance for a 65 year old? ›| Age | Average Account Balance | Median Account Balance |
|---|---|---|
| 35-44 | $97,020 | $36,117 |
| 45-54 | $179,200 | $61,530 |
| 55-64 | $256,244 | $89,716 |
| 65+ | $279,997 | $87,725 |
One rule of thumb is that you'll need 70% of your pre-retirement yearly salary to live comfortably. That might be enough if you've paid off your mortgage and are in excellent health when you kiss the office good-bye.
How many people have $3,000,000 in savings? ›1,821,745 Households in the United States Have Investment Portfolios Worth $3,000,000 or More.
What is the average Social Security check? ›Average Social Security retirement benefits in 2023
Average payments for all retirees enrolled in the Social Security program increased to approximately $1,827, according to the Social Security Administration (SSA).
If you choose to retire at 62, your Social Security benefit could be about 25-30% lower than if you wait until your full retirement age, which varies depending on your birth year. On the flip side, you'll be receiving benefits for a longer period.
Can $1 million dollars last 30 years in retirement? ›A recent analysis determined that a $1 million retirement nest egg may only last about 20 years depending on what state you live in. Based on this, if you retire at age 65 and live until you turn 84, $1 million will probably be enough retirement savings for you.
What percentage of Americans have $100000 for retirement? ›14% of Americans Have $100,000 Saved for Retirement
Most Americans are not saving enough for retirement. According to the survey, only 14% of Americans have $100,000 or more saved in their retirement accounts. In fact, about 78% of Americans have $50,000 or less saved for retirement.
If your highest 35 years of indexed earnings averaged out to $100,000, your AIME would be roughly $8,333. If you add all three of these numbers together, you would arrive at a PIA of $2,893.11, which equates to about $34,717.32 of Social Security benefits per year at full retirement age.
What is considered wealthy in retirement? ›How much money do you need to be considered rich? According to Schwab's 2022 Modern Wealth Survey, Americans believe it takes an average net worth of $2.2 million to qualify a person as being wealthy. (Net worth is the sum of your assets minus your liabilities.)
What if I save $50 a month for 20 years? ›
Let's start with the obvious: If you're not contributing any money to retirement, even $50 per month will make a substantial difference. That monthly contribution could add up to nearly $24,600 after 20 years, $56,700 after 30 years, and $119,800 after 40 years. That's still not enough to retire on, but it's a start.
What if I save $600 a month for 20 years? ›If you save the $600 a month for 20 years and get an average 5 per-cent return that is compounded without any withdrawals, your savings would amount to approximately $243,000.
Should I keep 20K in savings? ›Having $20,000 in a savings account is a good starting point if you want to create a sizable emergency fund. When the occasional rainy day comes along, you'll be financially prepared for it. Of course, $20,000 may only go so far if you find yourself in an extreme situation.
What if I save $50 dollars a week for 1 year? ›If you were to save $50 each week, that would result in an annual savings of $2,600. Over the span of 30 years, that's $78,000. That's not something you can retire on. But if you invested those savings into a safe growth stock, you could potentially have $1 million by the time you retire.
Is saving $5,000 in 6 months good? ›Saving $5,000 in 6 months might not seem like that much, but it can be a life-changing amount of money. To be sure, $5,000 by itself probably isn't going to change your life. But if you start early enough, stay consistent, and let time and compound interest work for you, your future can look very different.
How to save $5,000 in months? ›Break It Down Into Months
If you want to save $5,000 in one year, you'll need to save approximately $417 a month. That's about $97 a week. Saving almost $100 a week may be a lot depending on your finances.
The historical S&P average annualized returns have been 9.2%. So investing $1,000,000 in the stock market will get you the equivalent of $96,352 in interest in a year. This is enough to live on for most people.
At what age can I retire with $1 million dollars? ›$1 million doesn't go nearly as far in retirement as it once did. In fact, a recent survey found that investors believe they'll need at least $3 million to retire comfortably. But retiring with $1 million is still possible, even as early as age 55, if you're smart about it.
Can you retire on $1 million at age 60? ›So, can you retire at 60 with $1 million, and what would that look like? It's certainly possible to retire comfortably in this scenario. But it's wise to review your spending needs, taxes, health care, and other factors as you prepare for your retirement years.
How to retire at 60 with no money? ›- Assess Your Financial Situation.
- Embrace Frugality.
- Maximize Your Income Sources.
- Part-time Job or Side Hustle.
- Rent Out a Spare Room on Airbnb.
- Sell Items You No Longer Need.
- Apply for Government Benefits.
- Invest in Dividend-Paying Stocks or Rental Properties.
What is average 401k balance by age? ›
| Age | Average 401(k) balance | Median 401(k) balance |
|---|---|---|
| 40-45 | $90,774 | $26,989 |
| 45-50 | $123,686 | $33,605 |
| 50-55 | $161,869 | $43,395 |
| 55-60 | $199,743 | $55,464 |
A retirement account with $2 million should be enough to make most people comfortable. With an average income, you can expect it to last 35 years or more. However, everyone's retirement expectations and needs are different.
What percentage of Americans have $500000 in savings? ›How much do people save for retirement? In 2019, about 50% of households reported any savings in retirement accounts. Twenty-one percent had saved more than $100,000, and 7% had more than $500,000.
How much Social Security will I get if I make $25000 a year? ›If you earn $25,000 this year, $1,880 of your benefits would need to be withheld (i.e. ($25000 - $21240)/2). Therefore, if your monthly benefit amount is $1,886, Social Security would need to withhold roughly one full month of your benefits.
How long will money last using 4% rule? ›The rule of thumb is that using a 4% withdrawal rate, the money should last 25 years. However, it's important to note that this is a rough estimate, and actual results may vary based on your investments' performance, inflation changes, and other factors.
Can a 50 year old retire on $2 million dollars? ›Yes, you can retire at 50 with 2 million dollars. At age 50, an annuity will provide a guaranteed income of $125,000 annually, starting immediately for the rest of the insured's lifetime. The income will stay the same and never decrease.
Can you retire $1.5 million comfortably? ›The 4% rule suggests that a $1.5 million portfolio will provide for at least 30 years approximately $60,000 a year before taxes for you to live on in retirement. If you take more than this from your nest egg, it may run short; if you take less or your investments earn more, it may provide somewhat more income.
Can you retire with $1 million dollars at 50? ›Can I retire at 50 with $1 million? You can retire at 50 if you have saved one million dollars. You will get a guaranteed income of $53,750 each year, starting immediately for the rest of your life.
Is saving $2,000 a month for retirement good? ›Yes, saving $2,000 a month is excellent! It amounts to $24,000 a year and if this amount is invested properly, it will grow into a very large portfolio over time. Of course, there are a few other elements worth considering when saving $2,000 a month.
Is $400 a month enough for retirement? ›In fact, if you sock away $400 a month over a 43-year period, and your invested savings generate an average annual 10.5% return, then you'll end up with $3.3 million. And that should be enough money to enjoy retirement to the fullest.
How much do I need in 401k to get $2000 a month? ›
To get approximately $2,000 per month from your 401k when you retire, you'll need to have saved around $800,000. To reach this goal, you must start saving as early as possible, contribute as much as possible to your 401k each year, and consistently invest in a diversified portfolio of stocks and bonds.
How much do I need to save each month to retire at 50? ›How Much Do I Need To Retire At 50? This is a great question and does not have a simple answer. It depends on your lifestyle and how much money you want to have to come in every month. However, a good rule of thumb is to try and generate at least 75% of your current pre-retirement income.
Is $500 K enough to retire on? ›Is half a million enough to retire on? The quick answer is “yes”! With some planning, you can retire comfortably with $500k. Remember, however, that your lifestyle will significantly affect how long your savings will last.
How long will $1 million last in retirement? ›Assuming you will need $40,000 per year to cover your basic living expenses, your $1 million would last for 25 years if there was no inflation. However, if inflation averaged 3% per year, your $1 million would only last for 20 years.
Can I retire at 62 with 300k in my 401k? ›The short answer to this question is, “Yes, provided you are prepared to accept a modest standard of living.” To get an an idea of what a 60-year-old individual with a $300,000 nest egg faces, our list of factors to check includes estimates of their income, before and after starting to receive Social Security, as well ...
How long will a $500000 401k last? ›Yes, you can retire at 55 with $500k. According to the 4% rule, if you retire with $500,000 in assets, you should be able to take $20,000/ yr for a 30-year or longer. Additionally, putting the money in an annuity will offer a guaranteed annual income of $24,688 to those retiring at 55.
What is the average 401k balance at age 65? ›| Age | Average Account Balance | Median Account Balance |
|---|---|---|
| 35-44 | $97,020 | $36,117 |
| 45-54 | $179,200 | $61,530 |
| 55-64 | $256,244 | $89,716 |
| 65+ | $279,997 | $87,725 |
The good news: As long as you plan carefully, $3 million should be a comfortable amount to retire on at 55. If you're ready to be matched with local advisors that can help you achieve your financial goals, get started now. To plan your retirement on $3 million, you'll need to face your mortality.
Can I retire with $3 million at 50? ›Yes, you can retire at 50 with three million dollars. At age 50, an annuity will provide a guaranteed income of $161,250 annually, starting immediately for the rest of the insured's lifetime.
Is $2 million enough to retire at 50? ›Yes, you can retire at 50 with 2 million dollars. At age 50, an annuity will provide a guaranteed income of $125,000 annually, starting immediately for the rest of the insured's lifetime. The income will stay the same and never decrease.