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How Much to Save for Retirement?

By Stuart Robertson

This is a question many Americans wrestle with and one we work to help folks with all the time. While everyone hopes for Social Security to help, if current Social Security projections don't change, it won’t payout 100% of benefits by 2035. And of course healthcare rates rise each year, there’s often some unexpected expense and so on. It may seem like you can never save enough.

Know this – you can do it. Here’s the thing, you can control a lot to get yourself in position to retire. It doesn’t happen overnight, but if you get some good insights and put them to work, you may just retire very happy.

So How Much Should I Save of My Salary?
While the answer of how much to save varies by person, in general, you need to save 10%-15% of your income over a 40-year career to live at your standard of living. The general goal is to get to 10x of your salary at retirement age of 67.

Don’t stress if you didn’t start saving as a 22 year old. Many people don't because they were earning too little, didn’t know to do so, or other life obstacles got in the way. The important thing is to start planning to save more as soon as you can, and then think about other things you can control that put you in much better shape for financial security at retirement.

You will want to save in a tax advantaged account like your 401(k) or start an IRA. These can help your monies grow without the friction of taxes and potentially lower brokerage costs. These account types also have restrictions and/or disincentives for you to be tempted to withdraw the money early.

Assess Where You Are
Regardless if you are saving or not, how do you know if you are on track or what to shoot for? There are some general guideposts to help you think about if you need to be more or less aggressive. Again, this is just to give you an idea of where you are on the road:

Your Age Amount Saved for Retirement  
30 1x Salary
40 3x Salary
50 6x Salary
60 8x Salary
67 10x Salary

You can also run different scenarios with this savings calculator which also shows you how long your money might last.

Moves You Can Make to Help You Build Wealth
There are many moves you can make to help build a meaningful retirement nest egg and we hope achieve financial independence! Below are things you can do starting with your retirement accounts and diving into budgets and major expense management:

  1. If you have a 401(k), can you get to 10%-15% of salary now towards retirement? Even if you are unable to, what about 1% more? Then each year you receive a raise, give your 401(k) a raise too of 1-2 % until you get there.
  2. If your company provides a 401(k) match, make sure you are getting the full amount and know that this amount counts towards your 10-15% of salary goal as well. So if you contribute 7% of your salary to your 401(k), and your company is adding 4% more with a match, you are saving 11% of your salary.
  3. Are you over 50 years of age? 401(k)s and IRAs have “catch-up” contributions that enable you to put more into your account. For a 401(k), the contribution limit is currenty $19,500 per year and with catch up of $6,500, this increases to $26,000. For IRAs, it’s $6,000 per year and with the added $1,000 in catch up contributions, it’s $7,000.
  4. Never been a good budgeter or want to know best practices, read our blog on the 50-30-20 budget and steps to take control of your financial life. This may free up more money for both now and for retirement.
  5. Are you willing to make some big changes at retirement or even now? Downsizing your house can be a win if you make money on the sale and/or lower your monthly payments. Don’t have a house, what about finding a place with lower rent? What about your car payments -- can these be lowered?

You can get there. Good information, some planning, smart money management moves, and you’ll be on the road to financial freedom.

Industry experts generally agree that, depending on when you begin contributing, a minimum contribution of 10-15%, will be necessary to reach a goal of 8 to 10 times your ending annual salary prior to retirement. You may want to review your current contribution level to determine whether you believe it is sufficient to meet your retirement goals. There is no guarantee that contributions at this level will result in sufficient funds to meet those goals.


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