How Much Will I Need to Save For Retirement?

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Retirement is a tantalizing idea.

Wake up when you want, do what you want, travel where you want, relax, read, enjoy time with the family — especially the grandkids. After a lifetime of work, retirement provides that idyllic vision.

Which can happen, provided you plan well and saved enough to afford life without work.

If we haven’t, we’ve put ourselves in a difficult situation.

A TD Ameritrade survey in January of 2020 reports that most of us want to retire by age 67, but  38% of those aged 60-69 have retirement savings of less than $100,000, which means they are not positioned to fully enjoy their post-work days.

The solution?

“Save early, save often,” said Kevin Angney of CCF Advisors, a financial planning and asset-management firm outside of Cleveland. “Make saving a habit that will last through your life.

“Small amounts set aside now make for larger amounts later.”

Angney has a way to measure how much is right that anyone can grasp.

“If people are spending more for their cell phone plan than they are for retirement, it’s time to adjust where they’re putting their money,” he said.

The moral of the story: Plan in advance, and plan as early as possible. Those who start to think about retirement money in their 20s are being smart, not silly.

“Most people spend what they have in their paychecks,” Angney said. “Take withdrawals for retirement out automatically. That way it’s saved before you see your take-home pay. Treat it as a necessity, that it has to be done.”

» Jump to: Retirement calculator

Calculate Your Retirement Savings Goal

How much do we need to set aside for retirement? A lot. Yes, that’s brusque and callous, but the bulk of our retirement money has to come from money saved during the work days. Appreciate Social Security, but don’t assume that monthly benefit will take care of all the expenses after the working days end.

Two prime theories for how much is enough dominate the financial planning world: the 4% Retirement Plan and the 70%-80% Rule.

The 4% Retirement Plan works this way: Divide current income by 4%, which shows the total amount needed for retirement. If you make $50,000, the 4% Retirement Plan says you’ll need $1.25 million ($50,000 ÷ .04 = $1.25 million) for retirement.

If you had $1.25 million in retirement savings (earning a modest 4% return), you could withdraw $50,000 a year for more than 30 years.

Yes, that sounds like a lot. But Social Security benefits can account for $300,000-to-$400,000 depending how long you live. Too, the Labor Department relates that those who start saving $6,000 per year at age 25 would have almost $850,000 by age 60 with even a modest rate of return.

The 70%-to-80% Rule states that to keep our standard of living in retirement, we’ll need 70% to 80% of present income. Split the difference at 75%. If you currently make $80,000, the goal is $60,000 per year, which if we live 20 years after retirement equals $1.2 million.

If you’re the frugal sort, you may need less than that, but it’s always wise to plan conservatively. Overestimating expenses and underestimating savings would lead to a surplus of funds once we stop work, which is the best situation possible.

» Learn More: Retirement Checklist

How Much Money Do I Need to Retire?

In days gone past, the three-legged stool for retirement meant counting on pensions, Social Security and savings. Those who depend on that stool nowadays will fall hard, because the pension leg is either gone or going away. The Federal Reserve reports that only 22% have pensions to rely on in retirement. That’s less than one-fourth of the population.

The maximum Social Security benefit in 2020 at full retirement age is $3,011. But, the average Social Security benefit in January of 2020 was just $1,503. That’s $18,036 per year. It’s not hard to see that won’t go far.

We’ve devised and included a retirement calculator that gives you estimates of what you need, based on your honest assessments of where you are. Use it; give yourself a realistic plan.

Retirement Calculator

Enter your age, your current retirement savings, and a number of other variables into this financial calculator to get a personalized estimate of how much money you will need to save to replace your income in retirement.

Retirement Calculator Assumptions

The first five figures needed on the calculator below – age; income; spouse’s income; present retirement savings and desired retirement age – are self-explanatory. Merely answer honestly.

The others require some thought:

Retirement age. Social Security has determined that the full retirement age is now 67, which means that is the age to receive full Social Security benefits. Even though waiting until 70 yields a higher monthly benefit, it’s wise to plan for 67 as the magic year of stopping work. If you’re in good financial shape and can retire at 62, bully for you on a job well done.

Expected inflation: The U.S. Inflation Calculator puts the rate at 1.3% in 2020 – or 1.47% averaged over 10 years. It’s probably not wise to guess inflation will stay that low forever. Estimating a 3% inflation rate is a safe and relatively conservative guess.

Income replacement: This refers to how much you’ll need to live when retired. Or how much of your working income you’ll need to replace with your retirement savings. The 75% estimate works, but to be conservative, figure 80% of present income.

Return on investment: Optimists could estimate 8% per year, but basing your future on optimism isn’t wise. Best to underestimate gains at 4%; anything extra will be a bonus.

Social security. The government gives all of us a way to check our expected monthly Social Security benefits. Merely create an account and the information is readily available.

At this point, the calculator takes over.

How Does Your Retirement Savings Compare By Age?

The easiest rule in retirement savings: Save as much as you can as young as you can.

The easiest reality to understand: Most of America is far behind.

A Transamerica Center for Retirement Studies shows that the median retirement savings for people in their 50s is $117,000. For people in their 60s, it’s $172,000.

How much should you have saved as you age? Several of the leading financial firms (Merrill Lynch, Fidelity, Schwab) have made projections. Here’s a look at an average of all their estimates:

Retirement Savings By Age





301x annual salary$40,000$40,000
403x annual salary$50,000$150,000
505x annual salary$60,000$300,000
607x annual salary$70,000$490,000
65-678x annual salary$80,000$640,000

These are goals, important ones. Today’s money set aside for personal care and well-being in the future is money used wisely. And yes, some of that money will come from Social Security.

The key is knowing what you need (see the calculator) and doing the work it takes to get there by putting money into retirement accounts. Pay the bills, make sure expenses are met, don’t go into credit card debt, then set aside whatever you can for the future.

» Learn More: How Much Do I Need in My 401(k) to Retire?

How to Save for Retirement

Start young, stay consistent. If your company has a 401-K, take advantage of the tax breaks by signing up as soon as you can and contributing as much as you can afford.

“Start right away,” Angney said. “Then increase contributions every time you get a raise. Make that a habit.

“If you start with your first job, it’s very easy. It becomes a habit as you get older.”

Another suggestion: Increase contributions by 1% every January. It’s surprising how the savings will add up.

Fidelity estimates individuals should save 15% of their pretax income every year starting at age 25. Synchrony Bank suggests between 10 and 15% for those in their 20s, which may be more realistic given salary levels and bills for those just starting out. Synchrony has a good formula for the 401-K based on that 10%-to-15% target: Subtract the 401-K percentage that the company matches and contribute that number to your 401-K.

If the company matches half up to 6% (which is 3%), you should try to save 12%. If the match is half up to 10%, your contribution should be 10%.

If those numbers are immediately unreachable, shoot for as much as possible, as soon as possible.

If you’re in your 40s and haven’t started saving or have saved a small amount, make a plan. Write down what you’ve saved, then figure the number of years until retirement at age 67. Estimate you will need to replace 75% of present income, then use the calculator to project what you’ll need to save.

And start saving immediately.

An IRA (Individual Retirement Account) is another tax-advantage savings plan. If your company does not offer a 401-K, set up an IRA and make regular contributions. Everyone should have at least one retirement saving account. Those who can afford an IRA in addition to a 401-K help themselves greatly.

If it all seems complex, consider the help of a financial advisor who can increase your financial literacy.  There’s no shame in asking for help in this complex financial world – especially when it comes to taking care of your long-term health and well-being.

About The Author

Pat McManamon

Pat McManamon has been a journalist for more than 25 years. His experience has mainly been in sports, but the world of athletics requires knowledge of business and economics. He also can balance a checkbook and keep track of investments with Quicken quite adeptly. McManamon’s experience includes covering the NFL for ESPN, LeBron James for the Akron Beacon Journal and AOL Fanhouse, and the Florida Gators and Miami Hurricanes for the Palm Beach Post.


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