Retirement Planning
How Much Should I Save for Retirement?
8 min read · Updated
Retirement planning gets treated as a forecasting problem when it is mostly an arithmetic one. You cannot control investment returns. You can control how much you save, for how long, and what you pay in fees.
The starting benchmark
Fifteen percent of gross income, including any employer match, from your twenties onwards is the most widely used rule of thumb. If your employer matches 5%, that means 10% from you.
Starting later raises the requirement steeply. Beginning at 35 typically requires closer to 20%; at 45, closer to 30%. This is compounding working in reverse — every year of delay is a year of growth that cannot be recovered by contributing more later.
Milestones by age
Fidelity’s multiples of salary are a reasonable checkpoint, and they assume steady saving from the mid-twenties with retirement at 67.
| Age | Target saved | On a $80,000 salary |
|---|---|---|
| 30 | 1× | $80,000 |
| 40 | 3× | $240,000 |
| 50 | 6× | $480,000 |
| 60 | 8× | $640,000 |
| 67 | 10× | $800,000 |
The 4% rule and what it really says
The 4% rule comes from research into how much a retiree could withdraw without running out over a 30-year retirement. Take 4% of the portfolio in year one, then increase that dollar amount with inflation each year afterwards.
Reversed, it gives a target: multiply your desired annual income by 25. A $60,000 income implies a $1.5 million portfolio. Two important caveats — the research is based on US market history with a particular asset mix, and it ignores taxes and fees. Treat 4% as a reference point, not a guarantee.
Why projections must be in today’s money
A projected balance of $1.5 million in thirty years has the purchasing power of about $715,000 today at 2.5% inflation. Both figures describe the same portfolio; only the second tells you what it will buy.
The same applies to the income it supports. Withdrawals need to rise every year just to stand still, which is why a sustainable inflation-adjusted income looks so much lower than dividing the balance by the number of years in retirement.
What Social Security adds
For a median earner, Social Security replaces roughly 30%–40% of pre-retirement income. It is not the whole answer, but it is not nothing, and leaving it out of your planning overstates what your own savings must produce.
Claiming age matters considerably: taking benefits at 62 rather than full retirement age permanently reduces them by around 30%, while delaying to 70 increases them by about 8% a year. Your personalized estimate is available from your Social Security statement.
The levers that actually move the outcome
Of everything in a retirement projection, three inputs dominate — and the one people worry about most is the one they control least.
- Retirement age
- The most powerful lever available. Three more years adds three years of contributions and growth while removing three years of withdrawals.
- Contribution rate
- Fully within your control and immediate in effect. Raising contributions by 1% of salary a year is a common and painless approach.
- Investment fees
- A one percent difference can cost 15%–20% of the final balance across a career. This is free money for most people.
- Expected return
- Where most of the anxiety goes, and almost entirely outside your control. Assume something defensible and revisit it rarely.