How Much Should You Save For Retirement

Saving enough money to retire comfortably is a major financial goal for most people. However, determining the right amount to accumulate can be confusing. Factors like your desired lifestyle, life expectancy, potential healthcare costs, and more make retirement savings targets highly personalized. While there are general guidelines, you need to consider your specific situation. This blog provides tips on how to calculate your ideal retirement savings goal an how much should you save for retirement.

6 Tips to Save For Retirement Are

Estimate Your Retirement Spending Needs

The first step is to estimate your annual spending in retirement. Will you continue your current lifestyle? Do you anticipate major new costs or expenses decreasing? Travel, healthcare, and housing are big items to evaluate. Consider both essential living expenses and discretionary spending for desired activities.

Look at your current household budget. Does 70-80% of your pre-retirement income cover your envisioned retirement lifestyle? Will you have additional income like Social Security or pensions? Build up a detailed annual retirement budget to end up with a spending target.

Multiply By Your Retirement Time Horizon

How Much Should You Save For Retirement

Once you have an estimated annual spending number, multiply this by your expected years in retirement. To determine this:

  • Use your current age and a target retirement age of 60, 65 or beyond.
  • Estimate life expectancy based on your health and family history to arrive at an anticipated lifespan.
  • The difference between your retirement age and life expectancy gives an estimated timeframe to cover.

For example, retiring at 65 and planning for a lifespan to 85 means you need to save enough for 20 years of retirement. Multiplying your annual spending by 20 gives the nest egg target to withdraw 4-5% annually.

Factor In Expected Social Security and Pensions

Next, reduce your total savings goal by subtracting any income you expect annually from Social Security payments and defined benefit pensions.

  • Check your Social Security statement online for estimated benefits at various claiming ages.
  • If you have a traditional pension, review benefit calculations to project this income stream.

These sources won’t replace savings fully, but they can cover 25-40% of retirement spending to reduce the amount you must self-fund.

How Much Should You Save For Retirement

Consider Potential Major Expenses

Your simple annual spending multiplied by years may underestimate large one-time costs that arise in retirement:

  • Healthcare expenses tend to increase, especially long-term care needs later in retirement.
  • Major home renovations and repairs or relocations can require large outlays.
  • Gift-giving, weddings, inheritance needs, and philanthropic goals may come into play.

Factor in a contingency reserve for these potential big-ticket costs beyond basic annual living expenses. This provides a cushion that makes retirement finances more robust.

Translate Total into Monthly Savings Need

To reach your total nest egg goal, determine how much you need to save monthly or annually between now and retirement. First, calculate your current accumulated savings. Then estimate investment growth potential at a reasonable rate of return like 6-8% annually. This allows you to determine the gap between current savings and your final target to identify the periodic savings required.

Adjust Along The Way

Retirement planning is not static. Every few years, revisit your total goal and savings rate required. Adjust contributions needed higher or lower based on updated projections, your accumulated savings growth, and changes in potential retirement expenses or income sources. Regular fine-tuning ensures you stay on track to hit your retirement savings target.


Saving for retirement is part art and part science. While target guidelines help, calculating your personalized number involves estimates and assumptions. Start conservatively but be ready to refine your approach as your financial and life situation evolves.

FAQs About Retirement Savings Goals

How much is enough to retire comfortably?

A comfortable retirement is highly personal but most experts suggest needing around 70-90% of your pre-retirement income, adjusted for major expense changes, annually to maintain your standard of living.

How do I know how much to withdraw annually from retirement savings?

The popular 4% rule suggests limiting annual withdrawals to about 4-5% of retirement savings to sustain your nest egg for 30 years. So a $1 million portfolio could support $40,000 withdrawn yearly.

How much should I have saved by age 30, 40, 50?

By 30, aim for 1x your salary. By 40, 3x your salary. By 50, 6x your salary. By 67, 10x your salary. This allows savings to grow in line with spending needs.

Should retirement savings be in pre-tax or post-tax accounts?

Utilize both. Pre-tax accounts provide current deductions while post-tax vehicles like Roth IRAs offer tax-free growth. A diversified blend is optimal for most.

What percentage of income should I save per year for retirement?

Saving at least 10-15% annually including any employer contributions is a common retirement savings benchmark. Bumping this to 20% or more provides an even stronger nest egg.

A Ahmad
A Ahmad

A Ahmad, a certified financial planner, Retirement Step was created to share over two decades of retirement planning experience with readers looking to take control of their financial futures.

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