how much do i need to save for retirement

To determine how much you need to save for retirement, consider these key guidelines and methods:

General Savings Rate Recommendations

• Experts commonly recommend saving 10% to 15% of your pretax income annually , including any employer match, starting as early as age 25 and continuing until retirement (around age 67)

• This rate aims to help you accumulate enough to maintain your current lifestyle in retirement, assuming Social Security and other income sources will cover part of your expenses

Retirement Savings Benchmarks by Age

• By age 35: Save about 1 to 1.5 times your current salary.
• By age 50: Save about 3.5 to 5.5 times your salary.
• By age 60: Save about 6 to 11 times your salary.
• By retirement (age 67): Aim to have saved about 10 times your preretirement income

Calculating Your Target Retirement Nest Egg

• A common rule is the 4% withdrawal rule : To estimate how much you need saved, multiply your desired annual retirement income by 25 (i.e., divide by 4%). For example, if you want $100,000 per year, you’d need about $2.5 million saved

• Another approach is saving 15 to 25 times your annual income to cover expenses throughout retirement

Factors to Consider

• Your estimated retirement age, life expectancy, expected rate of return on investments, inflation, salary increases, and monthly budget in retirement all affect how much you need to save

• Social Security benefits typically cover 20-35% of expenses, so your savings need to cover the remainder, often about 45% of your preretirement income

Practical Example

• If you start saving early (e.g., age 25), saving around 15% of your income annually can build a sufficient nest egg by retirement.
• If you start later (e.g., age 40), you may need to save a higher percentage (e.g., 8-15%) or adjust your retirement lifestyle expectations

In summary, aim to save at least 10-15% of your income annually starting early, target having 10 times your salary saved by retirement, and use tools like retirement calculators to personalize your plan based on your income, savings, and retirement goals