How Much Should I Save for Retirement?

Last updated: August 19, 2026 · 9 min read

The retirement question has a surprisingly simple starting answer: save 15% of your gross income every year, starting as early as possible. That single habit, run for 30+ years through the stock market, puts most people in a comfortable position. Here is the full logic behind that number, how to personalize it, what to do if you started late, and a real case study that makes it concrete.

The 15% rule

Financial planners at Fidelity and Vanguard commonly recommend saving 15% of pre-tax income annually for retirement. This assumes you start around age 25, retire around 65, and earn roughly a market return.

Why 15%? Because retirement replaces income you no longer earn. Social Security covers some of it; the rest must come from your savings. 15% sustained over four decades is the arithmetic sweet spot for most earners — enough to build a substantial nest egg without making life miserable in your 20s and 30s.

Milestones by age (quick check)

Age	Multiple of salary saved	Logic
30	1×	10 years of 15% + growth
40	3×	Compounding starts to dominate
50	6×	Halfway to the finish
60	8×	Last catch-up decade
67	10×	Replacement income target

These are rough guides, not laws. If you’re at 0.5× salary at 30, you’re not doomed — but the longer you wait, the higher the contribution rate you need to hit the same endpoint.

The 4% withdrawal rule

Once retired, the classic rule is to withdraw 4% of your portfolio in year one, then adjust for inflation. A $500,000 nest egg supports about $20,000/year; $1,000,000 supports $40,000/year. The 4% rule was designed through historical back-testing to make a portfolio last 30 years through normal market cycles.

Annual retirement income ≈ Nest egg × 4%

It’s a starting point, not a guarantee. If you want a more conservative buffer, use 3.5%. Our retirement calculator lets you adjust the withdrawal rate and see both annual and monthly income.

Case study: Two brothers, one decision

Jake and Leo are brothers, both earning $60,000/year, both planning to retire at 65. The difference: Jake starts saving at 25, Leo at 35.

Jake saves 15% ($9,000/year) for 40 years at 7% → nest egg ≈ $1.8 million
Leo saves 15% ($9,000/year) for 30 years at 7% → nest egg ≈ $850,000

Same income, same savings rate — but Jake ends up with more than double. The ten extra years of compounding, happening at the end of the curve where the balance is largest, are the entire difference. This is why the single most important factor in retirement saving is time, not investment skill.

Started late? It’s not too late, but do the math

If you’re 40 and starting today, the 15% rule no longer applies to you. You need to catch up:

Age 35 start: aim for 20% of income.
Age 40 start: aim for 22–25%.
Age 45+ start: you may need 30%+ or plan to retire later / spend less in retirement.

Three levers are available: (1) raise your contribution rate, (2) delay retirement by 2–5 years (each extra working year adds a full year of contributions plus a full year less of withdrawals), and (3) plan for a lower retirement spending level. Most late starters use a combination of all three.

The worst move is despair: “I’m 40, what’s the point?” and saving nothing. Even $300/month from 40 to 65 at 7% grows to roughly $280,000 — that’s ~$11,000/year at 4%. Something is vastly better than nothing.

Counting your employer match

If your employer matches 401(k) contributions, that money counts toward your 15%. For example, if you contribute 8% and your employer matches 4%, that’s effectively 12% of your income going in. Never leave free money on the table — contribute at least enough to capture the full match before anything else.

Common retirement-saving mistakes

1. Cashing out a 401(k) when changing jobs. You lose years of compounding and pay taxes + penalty. Roll it over instead.
2. Ignoring fees. A 1% annual fee eats ~28% of your final balance over 40 years. Prefer low-cost index funds.
3. Being too conservative in your 20s. Cash and bonds don’t grow. With 40 years ahead, volatility is your friend.
4. Saving “someday.” There is no someday. Every year you delay, the contribution rate you need goes up.

Your action checklist

Run your numbers in our retirement savings calculator (current savings, monthly contribution, years left, expected return).
Test the 4% rule on your projected nest egg: does the annual income cover your planned spending?
If short, raise your contribution by 1% now (before you miss the money) and re-test.
Check your plan fees — if over 0.5%, look at index-fund alternatives.
Review once a year after raises: increase contributions whenever income rises.

Frequently asked questions

Historically, the S&P 500 has returned roughly 7–10% before inflation. 7% is a reasonable central estimate; 5% is conservative. Run the calculator at both rates to see the range.

Not too late, but you need to save more — 20–25% of income instead of 15%. Every year of compounding you missed must be compensated with a higher contribution rate. The calculator shows the exact number.

Yes, you can count the employer match toward the 15% target — but never pass up free money. Contribute at least enough to get the full match.

This calculator uses nominal dollars. To think in today’s dollars, reduce your return rate by expected inflation (e.g. use 7% − 3% = 4% real). That gives a more conservative picture.

Bottom line

15% of income, starting early, invested for decades, withdrawn at 4% — that’s the whole game. If you started late, don’t despair: raise your rate, delay retirement, or trim spending — and start today. Project your own retirement now.