How much should I save for retirement?
Quick answer
A common target is saving 15% of gross income for retirement, aiming for a nest egg of about 25 times your expected annual spending. Benchmarks along the way: roughly 1x your salary saved by 30, 3x by 40, 6x by 50, and 8-10x by 67. Starting earlier lets compounding do most of the work.
The end goal drives everything: estimate your annual spending in retirement, then multiply by 25. That multiple comes from the 4% rule, which suggests a diversified portfolio can sustain withdrawals of 4% of its starting value, adjusted for inflation, for a 30-year retirement. If you expect to spend $60,000 a year and receive $20,000 from Social Security or a pension, you need to fund $40,000 yourself — about a $1 million portfolio.
The 15% savings rate guideline (including any employer match) works for someone starting in their mid-20s. Start at 35 and the required rate climbs toward 20-25%; start at 45 and it can exceed 30%. The difference is compounding: $500 a month at 7% grows to about $1.2 million over 40 years, but only about $260,000 over 20 years.
Order your savings for maximum benefit: capture the full employer 401(k) match first (free money), then fund tax-advantaged accounts — a Roth or traditional IRA and the rest of your 401(k) up to the annual limits. Where available outside the US, the equivalents are RRSP/TFSA in Canada, workplace pensions and ISAs in the UK, and EPF/PPF/NPS in India.
Do not panic if you are behind the benchmarks — they assume a straight-line career, and most people’s savings accelerate after 40 as incomes rise and mortgages shrink. Increasing your savings rate by 1% of salary each year, and banking raises before lifestyle expands, closes gaps faster than most people expect. Catch-up contribution limits after age 50 also help.
Because the right number depends on your age, current savings, expected return, and retirement date, run your own scenario through a retirement calculator. Seeing the projected balance and the monthly income it supports makes the abstract target concrete.
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