How Much Should I Save for Retirement?

How much of my income should I save for retirement?

Save at least 10% of your pre-tax income, and aim for 15% if you can, including whatever your employer contributes. Pre-tax income means gross pay before taxes and deductions. A 10% rate is usually enough for someone who starts in their mid-20s and works until about 67; people who start later, plan to retire early or expect high spending in retirement need more.

The percentage is only a rule of thumb because it hides three assumptions: how many years you have left to save, the return your investments earn, and how much of your paycheck you will need to replace. The retirement calculator replaces the rule with a projection built on your own age, income, balance and savings rate, and tells you the extra percentage needed if you fall short.

How much do I need to retire?

A common estimate is 25 times the yearly spending your savings must cover, after subtracting Social Security, pensions and any other guaranteed income. To get there, start with how much income you will want in retirement. Many planners use 70% to 80% of pre-retirement income, because payroll taxes, commuting and retirement saving stop when the paycheck does, while health costs tend to rise.

Then subtract the income you will get without touching savings. Social Security replaces a larger share of pay for lower earners than for higher earners, so your own estimate from ssa.gov matters more than any average. What remains is the gap your nest egg has to fill each year. Our guide on how Social Security is calculated shows how that benefit is worked out from your earnings record.

• Step 1: Retirement spending = current income × 70% to 80% (or your own budget).
• Step 2: Gap = retirement spending − Social Security − pension − other income.
• Step 3: Nest egg target ≈ gap × 25.

What is the 4% rule?

The 4% rule says you can withdraw 4% of your portfolio in the first year of retirement, then raise that dollar amount with inflation each year, and historically the money would have lasted about 30 years in most US market periods. It comes from studies of past stock and bond returns published in the 1990s. Dividing 1 by 4% gives 25, which is where the 25-times target comes from.

The rule is a planning shortcut, not a guarantee. It assumes a mix of stocks and bonds, a 30-year retirement and spending that only changes with inflation. A longer retirement, high investment fees, or a market crash in the first few years of withdrawals all argue for starting lower, around 3% to 3.5%. Retiring later, having a pension, or being willing to cut spending after bad years can justify starting a little higher.

How much will I need? A worked example

Here is what our retirement calculator produces for a 35-year-old earning $70,000 a year with $30,000 already saved and 10% of pay going into retirement accounts. The assumptions are the calculator's defaults: retire at 67, plan to age 85, need 75% of pre-retirement income, raises of 3% a year, a 6% average return and 3% inflation.

Without counting Social Security, the calculator says this person needs $1,871,584 at 67 and is on track for $1,098,539, a shortfall of $773,045. Closing it would take another 8.5% of income, about $498 a month at today's pay. That looks alarming, but it assumes savings must pay for everything.

Add Social Security of $2,000 a month in today's dollars (an assumption for illustration; check your own figure) and the picture flips. The first-year income needed from savings falls from $131,254 to $69,452, the amount needed at 67 drops to $990,335, and the projected $1,098,539 leaves a surplus of $108,204. In today's dollars, the target is $384,584. The figures at 67 are larger because they are in future dollars after 32 years of 3% inflation.

Why is this lower than 25 times spending? In today's dollars, this person needs $52,500 a year (75% of $70,000) minus $24,000 of Social Security, or roughly $28,500 from savings. Twenty-five times that is about $712,500. The calculator's figure is smaller because it assumes an 18-year retirement and a 6% return during retirement, while the 4% rule plans for 30 years and a cautious withdrawal rate. If you could live past 85, the 4% rule's larger number is the safer one to plan around.

How much should I save if I start late?

The later you start, the higher the share of income you must save, because each dollar has fewer years to compound. The table uses the same example (a $70,000 income, $2,000 a month of Social Security in today's dollars, retirement at 67, a 6% return and 3% inflation) but assumes nothing has been saved yet, and shows the savings rate our calculator says is needed to reach the target.

Starting at 25 needs about 7% of pay. Waiting until 45 pushes the requirement to 18.7%, and starting at 55 needs 40.1%, which few budgets can manage. Late starters usually combine several levers: saving more, retiring a few years later, cutting planned spending, and delaying Social Security. In this example, retiring at 70 instead of 67 with the same assumptions lowers the required rate for a 35-year-old from 10.9% to 8.3%. The compound interest formula explains why the early years carry so much weight.

Where should I put my retirement savings?

Put money first into any workplace plan up to the full employer match, then into an IRA or back into the workplace plan, and use a taxable account after that. An employer match is free money: a 50% match on the first 6% of pay adds 3% of salary to your savings for nothing more than contributing. Our 401(k) calculator shows how the match and annual raises compound over a career.

The 2026 limits from the IRS are $24,500 of employee deferrals to a 401(k), 403(b) or most 457 plans, plus an $8,000 catch-up at 50 or older, or $11,250 at ages 60 to 63. IRAs allow $7,500, plus a $1,100 catch-up at 50 or older. Whether to use Roth or traditional accounts depends mostly on whether your tax rate is higher now or in retirement; see Roth IRA vs traditional IRA for the comparison.

What changes how much I need?

Five factors move the target the most: when you retire, how long you live, what you spend, your investment returns and inflation. Retiring later helps three ways at once, because you save for more years, draw down for fewer years, and get a larger Social Security check for each year you delay claiming, up to age 70.

Health care is the cost most people underestimate. Medicare starts at 65, so retiring earlier means paying for private coverage until then, and Medicare itself has premiums, deductibles and gaps. Housing is the other big swing: entering retirement with a paid-off mortgage can cut the spending your savings must cover by a large amount.

Returns and inflation work against each other. Every projection in this guide assumes a steady 6% return and 3% inflation, but real markets vary from year to year, and a bad sequence early in retirement does more damage than the same returns later. Rerun the numbers every year or two with your actual balance, and treat any single projection as a range rather than a promise.