How much should you save for retirement?
Aim for 10% to 15% of pay including the match, or work out your gap: income goal minus Social Security, times 25.
New to this?
Saving for retirement means putting money aside now, usually in a 401(k) or IRA, so you have income when you stop working. Social Security covers part of it. Your savings cover the rest. The earlier you start, the less you need to save each month, because the money has more years to grow.
Myth
You need a million dollars to retire, so why even try.
Truth
Your number depends on your spending and Social Security. Jordan, earning $60,000, needs about $575,000 in today's dollars. Saving $449 a month from age 30 could get there at an assumed 5% return.
Worth memorizing
- 1
Plan on 70% to 80% of your pay.
The Department of Labor says many people need 70% to 80% of their pre-retirement income to keep their standard of living.
- 2
Your savings fill the Social Security gap.
Subtract your Social Security estimate from the income you want. Savings cover what is left. For Jordan, that is $23,000 a year.
- 3
Multiply the yearly gap by 25.
That is the 4% rule turned around. A $23,000 gap needs about $575,000 saved, in today's dollars.
I'd aim for 15% of pay, counting the match, and not lose sleep over the exact number at 25. If 15% isn't possible yet, I'd start with whatever gets the full match, then raise it 1% every time I get a raise.
Do this today
Create or log in to your my Social Security account and write down your estimated benefit at 67. Then subtract it from 75% of your yearly pay and multiply by 25. That is your first retirement number.
Practice
1 of 3
You want $40,000 a year in retirement and Social Security will pay $18,000. What savings target does the gap × 25 method give?
The gap is $40,000 − $18,000 = $22,000. Then $22,000 × 25 = $550,000.
2 of 3
You contribute 5% of pay and your employer matches 4%. What is your total savings rate?
Your savings rate counts both your money and the match: 5% + 4% = 9%.
3 of 3
What share of pre-retirement income does the Department of Labor say many people need?
The DOL estimates 70% to 80% of pre-retirement income to keep your standard of living. Some costs fall in retirement and others rise.
Tips
Get the full match first
Contribute at least enough to your 401(k) to get every dollar of the employer match. It counts toward your savings rate and is the best return you'll find.
Raise it 1% each year
Many plans can raise your contribution automatically once a year. Small steps that line up with raises are easy to live with and add up fast.
Check your Social Security estimate
Create a my Social Security account at ssa.gov to see your estimated benefit at 62, 67 and 70. It turns a guess into a real number for your plan.
Count the match in your rate
If you put in 6% and your employer adds 3%, you're saving 9%. Aim for that total to reach 10% to 15% over time.
A worked example: Jordan's retirement number
Jordan is 30, earns $60,000 and plans to retire at 67. She wants 75% of her pay, $45,000 a year. Her Social Security estimate is $22,000 a year.
- Her income goal is $60,000 × 75% = $45,000. Social Security covers $22,000, so savings must cover $45,000 − $22,000 = $23,000 a year.
- Her target is $23,000 × 25 = $575,000 in today's dollars.
- Over 37 years at an assumed 5% after inflation, she needs about $449 a month. That is $5,388 a year, or about 9% of her pay, counting any match.
- Income goal (75%)$45,000
- Social Security estimate−$22,000
- Yearly gap=$23,000
- Gap × 25$575,000
- Savings target=$575,000
- Monthly, starting at 30$449
- Monthly, starting at 40$842
Try your numbers
Reference
Saving $450 a month until 67 at an assumed 5% a year after inflation, by starting age
| Start at age | You put in | Balance at 67 |
|---|---|---|
| 25 | $226,800 | $770,107 |
| 30 | $199,800 | $576,226 |
| 35 | $172,800 | $425,152 |
| 40 | $145,800 | $307,435 |
| 45 | $118,800 | $215,709 |
Common mistakes
Waiting for a perfect number
You don't need an exact target to start. Saving 10% now and adjusting later beats a perfect plan that starts in five years.
Ignoring the match in your rate
Your employer's match is part of your savings. Count it, and never contribute so little that you leave part of it unclaimed.
Planning with high return guesses
Assuming 10% a year makes any plan look easy. Use a modest assumption, such as 5% after inflation, so a bad decade doesn't wreck your plan.
Going deeper
A common target is 15% of your pay, counting any employer match, from your 20s or early 30s onward. To find your own number, take the yearly income you'll want, subtract your Social Security estimate, and multiply the gap by 25.
Two ways to get a number
The quick way is a savings rate: about 10% to 15% of your gross pay, including the match, starting in your 20s or early 30s. The precise way is to work out your own gap and the monthly amount that fills it.
Social Security covers part
The Department of Labor says Social Security replaces about 40% of pre-retirement income on average. Your share depends on your earnings and the age you claim, so check your own estimate.
Starting age matters most
At an assumed 5% a year after inflation, Jordan needs $449 a month from age 30 to reach $575,000 by 67. Starting at 40, she would need about $842 a month.
Limits leave room to catch up
For 2026, you can put up to $24,500 in a 401(k) and $7,500 in an IRA, with extra catch-up amounts from age 50.
Step 1, pick an income goal
Start with how much you'll want to spend each year in retirement, in today's dollars. A simple starting point is 70% to 80% of your current gross pay. Some costs drop when you stop working, like commuting and saving for retirement itself. Others, like health care, often go up.
If you already know you'll own your home outright, or plan to move somewhere cheaper, you might aim lower. If you plan to travel a lot, aim higher. A rough number is fine. You can refine it every few years.
Step 2, subtract Social Security
Your Social Security benefit depends on your highest 35 years of earnings and the age you start claiming. The fastest way to find it is your my Social Security account at ssa.gov, which shows estimates at different claiming ages.
Use the estimate in today's dollars. If you're young and worried about the program's future, you can plan with a smaller number. The latest trustees report projects that, without changes from Congress, the combined trust funds could pay about 83% of scheduled benefits once their reserves run out in the mid-2030s.
Step 3, turn the gap into a savings target
The gap is what your savings need to pay each year. Multiply it by 25 to get a target balance. This comes from the 4% rule, a rule of thumb that a balanced portfolio can support withdrawals of about 4% in the first year, raised for inflation after that. It is a planning guide, not a promise.
If you plan to retire earlier than usual, or want more safety, multiply by 28 to 30 instead. A bigger multiple means a smaller first-year withdrawal.
Step 4, find your monthly amount
Now work out how much to save each month to reach the target by your retirement age. The calculator on this page does it for you. Use a modest return, such as 5% a year after inflation, as an assumption. Real returns vary and some years are negative.
Then compare the answer with your current savings rate, including the match. If it is higher than you can manage today, start with what you can and raise it with each raise. Starting is worth more than getting the number perfect.
When you're starting late
Starting at 40 or 45 means saving more each month, but it is far from hopeless. You likely earn more than you did at 25, and from 50 you can add catch-up contributions on top of the normal limits.
Other levers help too. Working a few extra years adds savings and shortens retirement at the same time. Waiting to claim Social Security, up to age 70, raises your monthly check for life.
Questions people ask
How much should I have saved for retirement by 30?
There is no official number for any age. What matters is whether your savings rate, including the match, fills your own gap by the age you want to retire. If you're saving 10% to 15% and raising it over time, you're on a solid path.
Is 10% enough to save for retirement?
It can be if you start in your 20s and count the match. Starting later, or retiring early, usually needs more. Run your numbers through the calculator to check.
Should I save for retirement or pay off debt first?
Get the full employer match first, since it is an instant return. Then pay off high-interest debt like credit cards. After that, raise your retirement savings toward 15%.
Do I need to account for inflation?
Yes. Working in today's dollars with a return after inflation, as in the example, handles it. If you use a return before inflation, your target must be raised for future prices.
Printable worksheet with answer key, free for classrooms. Lesson plan for this unit.
Sources
- DOL: Top 10 ways to prepare for retirement
- SSA: my Social Security account
- SSA: Summary of the 2026 trustees reports
- SSA: How benefits are computed from your highest 35 years
- IRS: Yearly 401(k) and IRA limit announcement
Updated October 4, 2026. General education, not personalized financial, tax or legal advice. Figures are examples. Check current rates and limits before you act.
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