How Much Should You Save for Retirement?

Updated March 2026 · 10 min read

The question "How much do I need to retire?" has no single answer—it depends on your lifestyle, location, health, and when you want to stop working. But there are well-tested rules of thumb, age-based milestones, and account strategies that make planning straightforward. This guide walks through all of them with concrete numbers.

The 4% Rule: How Much Is Enough?

The 4% rule, derived from the Trinity Study, says you can withdraw 4% of your portfolio in year one of retirement, then adjust for inflation each year after, and your money has a high probability of lasting 30 years.

Working backwards:

Examples:

• Need $40,000/year in retirement → save $1,000,000
• Need $60,000/year → save $1,500,000
• Need $80,000/year → save $2,000,000
• Need $100,000/year → save $2,500,000

These numbers assume Social Security covers part of your income. If you expect $24,000/year from Social Security and need $60,000 total, you only need to cover the $36,000 gap, meaning you need $900,000 saved. Use the retirement calculator to model your specific scenario.

Savings Milestones by Age

Fidelity Investments recommends these benchmarks based on multiples of your pre-tax salary:

If you are behind these benchmarks, do not panic. Increasing your savings rate by even 2–3% of salary per year, combined with employer matching and compound growth, can close the gap significantly. See how compounding works with the compound interest calculator.

How Much Should You Save Each Year?

Most financial planners recommend saving 15% of your gross income for retirement, including any employer match. Here is how that breaks down:

• Salary of $60,000 → save $9,000/year ($750/month)
• Salary of $75,000 → save $11,250/year ($938/month)
• Salary of $100,000 → save $15,000/year ($1,250/month)

If you start at 25, saving 15% with a 7% average annual return gets you to roughly 12× your final salary by age 65—more than enough for most retirees. Starting at 35 requires saving closer to 20–25% to reach the same goal.

401(k) vs. IRA: Which Account to Use

Both 401(k) plans and IRAs offer tax advantages for retirement savings, but they differ in key ways.

401(k) Plans

• 2026 contribution limit: $23,500 ($31,000 if age 50+)
• Employer match: Many employers match 3–6% of your salary. This is free money—always contribute enough to get the full match.
• Traditional 401(k): Contributions are pre-tax, reducing your taxable income today. You pay tax on withdrawals in retirement.
• Roth 401(k): Contributions are after-tax, but withdrawals in retirement are tax-free.

Model your 401(k) growth with the 401(k) calculator.

IRAs (Individual Retirement Accounts)

• 2026 contribution limit: $7,000 ($8,000 if age 50+)
• Traditional IRA: May be tax-deductible depending on your income and whether you have a workplace plan.
• Roth IRA: Contributions are after-tax; earnings and withdrawals are tax-free after age 59½ if the account has been open 5+ years. Income limits apply ($161,000 single / $240,000 married filing jointly for full contribution in 2026).

See projected IRA growth with the IRA calculator.

The Optimal Order

1. Contribute to your 401(k) up to the employer match (free money).
2. Max out a Roth IRA ($7,000).
3. Go back and max out the 401(k) ($23,500).
4. If you still have capacity, use a taxable brokerage account or HSA.

Catch-Up Contributions After 50

The IRS allows higher contribution limits once you turn 50, designed to help people accelerate savings in their peak earning years:

A person who maxes out both a 401(k) and IRA from age 50 to 65, with a 7% average return, would accumulate approximately $785,000 from catch-up contributions alone.

The Power of Starting Early

Compound interest is the most powerful force in retirement savings. Here is what happens when you invest $500/month starting at different ages, assuming a 7% average annual return:

Starting at 25 instead of 35 nearly doubles your ending balance despite contributing only $60,000 more. Model your own scenario with the investment calculator.

What If You Are Behind?

If you are 40+ and have not saved enough, here are five concrete steps:

1. Increase your savings rate immediately. Even 1–2% more per year adds up.
2. Take full advantage of catch-up contributions once you hit 50.
3. Delay retirement by 2–3 years. Working until 68 instead of 65 gives your portfolio more time to grow and reduces the number of years you need to fund.
4. Delay Social Security to age 70. Each year you delay past full retirement age (67) increases your benefit by 8%.
5. Reduce expected expenses. Downsizing your home, relocating to a lower-cost area, or paying off your mortgage before retirement can significantly reduce how much you need.

Common Retirement Planning Mistakes

• Not accounting for inflation. $1 million in 30 years will buy roughly what $550,000 buys today (at 2% inflation).
• Underestimating healthcare costs. The average 65-year-old couple needs $315,000+ for healthcare in retirement (Fidelity 2025 estimate).
• Being too conservative with investments. Over 30+ year horizons, a diversified stock portfolio has historically outperformed bonds and cash by a wide margin.
• Ignoring tax diversification. Having money in pre-tax (401k), after-tax (Roth), and taxable accounts gives you flexibility to manage your tax bracket in retirement.

Key Takeaways

• Use the 4% rule: multiply your annual retirement expenses by 25 to get your savings target.
• Aim to save 15% of gross income, including employer match.
• By age 67, target 10× your salary in retirement savings.
• Always contribute enough to get your full 401(k) employer match—it is free money.
• Starting early is the biggest advantage: 10 extra years of compounding nearly doubles your result.
• Catch-up contributions after 50 can add $785,000+ to your nest egg.

Related tools: Retirement Calculator · 401(k) Calculator · IRA Calculator · Compound Interest Calculator · Investment Calculator