How Much Should You Save For Retirement? (2024)

It’s no secret that most Americans aren’t saving enough for retirement. According to the National Institute on Retirement Security (NIRS), more than 75% of Americans have retirement savings that fall short of conservative savings targets, and 21% aren’t saving at all.

But how exactly do you decide how much the average American should be saving for retirement? More importantly, how much should you be saving for retirement?

Let’s take a closer look at the main retirement savings guidelines, and help you understand how much you should have saved for retirement at the different stages of life.

How Much to Save for Retirement?

According to Fidelity, you should be saving at least 15% of your pre-tax salary for retirement. Fidelity isn’t alone in this belief: Most financial advisors also recommend a similar pace for retirement savings, and this figure is backed by studies from the Center for Retirement Research at Boston College.

For many people, however, saving for retirement isn’t as simple as setting aside 15% of their salary.

The 15% rule of thumb takes a couple factors for granted—namely, that you begin saving pretty early in life. To retire comfortably by following the 15% rule, you’d need to get started at age 25 if you wanted to retire by 62, or at age 35 if you wanted to retire by 65.

It alsoassumes that you need an annual income in retirement equivalent to 55% to 80% of your pre-retirement income to live comfortably. Depending on your spending habits and medical expenses, more or less may be necessary. But 55% to 80% is a good estimate for many people.

Finally, the 15% rule won’t provide you with a nest egg that supplies all of your retirement income. You’ll most likely derive part of your retirement income from Social Security, for example. All in all, the 15% estimate should provide you with steady retirement income that lasts into your early 90s, at a rate of around 45%of your pre-retirement income.

The Impact of Time on Retirement Savings

Time is your most powerful ally for retirement savings. Small amounts invested early in your career can grow substantially larger than even big amounts invested later in life.

Let’s face it, most Americans can’t afford to set aside a full 15% of their income for retirement. But don’t let that discourage you. Investing anyamount for retirement positions you to benefit from compoundingas soon as possible.

Consider two hypothetical investors. Investor A starts investing $100 a month at 25. By age 65, they would have a retirement balance greater than $640,000, assuming annual returns of 10%, which is the average return of the S&P 500 over the long term.

Meanwhile, Investor B waited until 35 to start saving, but invested $200 a month. Investor B would have almost $200,000 less in their retirement balance by age 65, despite contributing almost $25,000 more.

The difference between Investor A and Investor B illustrates the power of time and compounding when understanding investment returns. A difference of just 10 years can dramatically impact potential returns earned by your investments.

More importantly, it also shows that you can still achieve very significant returns even if you can’t start investing quite as early in your life. In the second scenario, Investor B only contributed $72,000 of their own money, starting at age 35. From that, they earned almost $380,000 in investment returns.

How Much Should You Have Saved for Retirement Now?

Not everyone is able to start saving at age 25, or consistently save 15% of their salary for retirement. If you start later in life, or save a bit less, you may have to work longer, cut more expenses, or contribute more of your money to retirement to make up for less time and compounding.

Regardless of when you start saving or how much you’re able to put away, Fidelity offers some simple retirement savings guidelines by age to help you benchmark your retirement saving progress:

These numbers may look intimidating, especially if you’re behind on your retirement planning. But don’t worry. There are ways to get your retirement savings on track. Keep reading, and we’ll offer tips on strengthening your retirement game in each decade of your life.

For more on which accounts you should use to save for retirement, check out our guide to retirement accounts.

Saving for Retirement in Your 20s

In your 20s, you’ve only recently entered the workforce and started receiving regular paychecks. As you learn to grapple with all of life’s expenses, don’t put off saving for both retirement and for a rainy day.

• Emergency fund:Start your emergency fundand aim to save three to six months of living expenses in cash savings.

• Retirement savings:Make sure you’re enrolled in your employer-sponsored retirement planand contributing at least enough to get your full company match. If a company plan is unavailable or not great, choose either a Rothor traditional IRA. Even if you’re focused on paying down debt, you should make sure you invest small amounts for retirement. By the time you turn 30, aim to have at least your current annual salary in retirement savings.

Catch-up tip:If you’re behind, consider investing a portion of your emergency fund at year’s end in a Roth IRA. Because Roth IRAs are funded with after-tax dollars, you’ve got options for making penalty-free withdrawals. Handled carefully, a Roth IRA can help you get more growth from your emergency fund. The majority of your emergency fund should remain in a more liquid account, though.

How to Save for Retirement in Your 30s

Once you enter your 30s, you’re moving out of entry-level jobs and earning more. You may still be paying down student loans or other debts. But keep saving for retirement even as you remain laser-focused on paying down your debt. The longer you carry debt, the more you pay in interest and the less you’ll have available to save.

• Emergency fund:Aim to maintain at least six months of living expenses in emergency savings, in a high-yield online savings account.

• Additional savings: Once you’re comfortable with the balance in your emergency fund, consider investing additional money in a brokerage account, which can earn higher potential returns than a savings account. This makes brokerage accountsuseful for medium-term goals, like a home down payment, or other longer-term pre-retirement goals.

• Educational savings:If you’re starting a family, consider opening an educational savings account like a 529 planto pay for educational expenses so you can avoid tapping your retirement to pay for college.

• Retirement savings:Review your contribution percentage to make sure you’re getting your full employer match. Consider increasing your contribution percentage above the matching percentage, if possible. A good rule of thumb is to increase your contribution rate by 1% each year until you reach at least 15%. If you’re maxing out your 401(k) account, open an IRA for more tax-advantaged retirement savings. By the time you turn 40, aim to have three times your current annual salary in retirement savings.

Catch-up tip:If debt’s weighingyou down, consider an aggressive debt payoff strategy like the debt snowball or avalanche method.

Saving for Retirement in Your 40s

A lot can happen in your 40s. You may be itching for a career change, or might find yourself settling into a more senior role with a higher salary. Either way, your 40s are a time to keep your debt to a minimum and your savings at a maximum. If a career shift or new business venture is in your plans, cash savings outside of your retirement accounts can fund your dreams—keep your retirement money hard at work.

• Emergency fund:Do a check-in and make sure that you still have at least six months of living expenses saved, especially if you’ve bought a house or started a family.

• Additional savings: Keep using a taxable brokerage account to invest additional savings.

• Educational savings:Keep contributing to your educational savings plans for your kids.

• Retirement savings:Review your contribution percentage annually, especially if your compensation has significantly increased.By the time you turn 50, aim to have six times your current annual salary in retirement savings.

Catch-up tips:If you’re feeling behind in your savings, review your expenses and see where you can cut back. Each month, save any extra money in your IRA or emergency fund to further protect your retirement savings. You could also consider a side hustle to bring in some extra cash to boost your savings.

How to Save for Retirement in Your 50s

By the time you reach your 50s, you’re heading for the home stretch. That doesn’t mean, however, that you’re done working or saving. This is the right time to pay off your mortgage and ensure your overall debt is at a minimum. Stay the course with your savings and speak to a financial advisorabout gradually adjusting your investment strategy as you near retirement.

• Emergency fund:Keep your emergency fund topped up, especially if unexpected expenses have come along.

• Additional savings: Invest additional savingsonce you max out your contributions to individual and employer-sponsored retirement plans.

• Educational savings:Once the kids head off to college, tap these funds to pay for college. Funnel the amount you were saving for college expenses into your retirement and taxable brokerage accounts.

• Retirement savings:Review your contribution percentage annually. Once you turn 50, you’re eligible for an increased annual contribution limits in tax-advantaged retirement accounts. If you’re behind on your goals, take advantage of these increased thresholds. By the time you turn 55, aim to have seven times your current annual salary in retirement savingsacross all of your savings and retirement accounts. By the time you turn 60, you should have eight times your annual salary in retirement savings.

Catch-up tip: If you need some extra cash to sock away, you explore seasonal employment around the holidays to up your annual retirement savings rate.

Saving for Retirement in Your 60s

Retirement is around the corner in your 60s, and the time’s almost come to enjoy the money you’ve worked so hard to save. Consider shifting to capital preservation and income-generating investment strategies. These fixed income investments tend to be stable bondsor fixed annuitiesaimed to keep the money you’ve saved over the years safe.

As you’ll most likely be entering the last of your full-time working years, you’ll want to keep saving as aggressively as you can.

• Emergency fund:Consider upping your cash savings to one year’s worth of living expenses, so you have more cash on hand for things like medical expenses.

• Additional savings: Review your risk tolerance and investment strategy with an eye toward capital preservation. Financial advisors may be particularly helpful now in helping you figure out how to handle the asset allocation of your retirement funds.

• Educational savings:If you have children still in college or grandchildren whose college you’d like to help out with, you can continue contributions to 529 accounts.

• Retirement savings: Make sure you’re contributing as much as you can before you retire. By the time you turn 67, you should have 10 times your annual salary in retirement savings.

Catch-up tips: Even after retirement, there are always part-time jobs that can supplement your income (and potentially provide health insurance, if you’re pre-medicare) as you adjust to living on your savings and Social Security income.

The Bottom Line

Even if you feel like you’re behind with your savings, there are always ways to catch up and save a bit more. Don’t be afraid to ask for help. A financial advisor can help you review your current savings (even if you haven’t started yet) and help chart a course for long-term retirement savings success.