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How Much Money Should I Save for Retirement? A Look at Savings Goals by Age

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How much money should I save?

Yes, that’s the age old personal finance and money question if there ever was one.  We all want to be given “the number” to shoot for and desire to know how close (or how far) we are to that target.

how much should I saveIf you’re like my wife and I, you wonder whether you are doing it right or not.  You are constantly discussing money matters over dinner or during a long car ride.  Maybe you worry about how you will be able to afford your own home.  If you do own a home, you may worry about having enough money for the mortgage each month.

Then, there’s saving for children.  You need clothes, food, diapers, toys, and who knows what else.  One day, you will want to send them to college.  So, there is saving for that.

Finally, you probably don’t want to work for the rest of your life.  I know I don’t.  So, you need to plan for retirement somehow.  However, that seems so far off and you just put off doing anything about it.

So, depending on your situation, you are likely asking yourself one of two questions.  If you aren’t saving, you will want to know how you can get started.  On the other hand, if you are saving, you will want to know if you’re saving enough.

In order to answer those questions, you have to know your goals and understand the process to achieve them.  Saving money is not a one-size fits all concept.  Sure, there are guidelines and we will discuss some of those.  But, you need to customize these guidelines to fit your lifestyle and your family’s end game.

Let’s explore these ideas and tips now.

How much money should I save for my retirement goals?  How do I know if I’m saving enough money?

First, what are your goals?  Are you a person looking for financial independence and trying to retire early?  Or do you see yourself working until your 50s or 60s?

There is no right answer to these questions.  Sure, I am partial to financial independence and retiring earlier.  But, that doesn’t mean you have to be.  Some people have jobs they enjoy and have no desire to start a side hustle.  Many people don’t want to work for themselves.  It comes down to what you and your family want.

Secondly, it’s helpful to at least have a baseline to begin with.  I know I like to know what the normal range is and be able to benchmark it.  I do my research and see where my goals and expectations align.

Behind the Numbers

I am going to share some information with you below.  You see for each 10-year range from 25 to 45 what the ideal savings rate is based on income.  Review it carefully and consider your own situation.  Then, I want to ask you to step out of your comfort zone and share how you stack up in the comments.

The information below comes from J.P. Morgan Asset Management’s Guide to Retirement.  They release it every year in March.

Now, keep in mind that the numbers at the lower end of the spectrum factor in a greater reliance on Social Security retirement benefits.  So, consider that as you’re assessing your situation.  If Social Security is something don’t want to have to rely on, adjust the numbers accordingly.

Also, these numbers are based on the you beginning your retirement savings today.  So, it really simplifies things.  And if you already have something saved, then hey, good for you!

One last thing before we dive in.  J.P. Morgan’s model assumes a few things, including:

  • A pre-retirement investment return of 6.0%;
  • A post-retirement investment return of 2.5%;
  • An inflation rate of 2.25%;
  • Retirement age of the primary earner is 65 and the spouse’s age is 62; and
  • 30 years in retirement.

OK, now with that out of the way, let’s take a look.

How much money should I save by 25?

In your early 20s, it’s hard to think about anything else but continuing the good times from college.  I know the transition from college to the working life was difficult for me.  You go from waking up at 8 am, 9 am, or, yes, 10 am most days to waking up at 6 am (or earlier).  Then, you fight traffic to sit in a cube punching numbers into spreadsheets for 8 hours or more.

Not exactly what you had planned for your life, right?  “Mommy, I want to sit in cubicle when I grow up!” – said no 7-year-old ever.  But, such is life, right?  Heck, you’re lucky to have a job!

Adjusting to post-college life aside, you are probably like the rest of us.  You haven’t considered retirement.  I know I wasn’t serious about it in my early 20s.

With that said, you need to get serious about it.  You need to make it a priority.  Beginning to save before age 25 is such a huge boon to your finances later in life.

Here’s where you should be.  These numbers signify you starting your retirement savings today:

  • If you’re making around $50,000 and have $0 saved for retirement today, you need to save 7% of your income (or $3,500) every year until retirement.
  • At around $75,000, you should save 10% (or $7,500) per year
  • At around $100,000, you should save 11% (or $11,000) per year

How much money should I save by 35?

By 35, you’re likely married with children by now.  You likely also own your home by now.  So, with a family, a home, and God knows what else, retirement is something you want to shoot for obviously.  But, finding the extra money to set aside for it is another conversation.

Chances are you’re either loving your career and working towards advancement — or you hate it and are trying desperately to get out.  So, there’s another factor of finding another job or starting something on the side that you hope leads to working for yourself full-time.  Yes, there’s a lot to juggle in your 30s as I’m finding out.

Where does that leave your savings goals?  Consider the following:

  • If you make around $75,000 and you have $0 saved for retirement, you should be saving 17% of your income (or $12,750) per year.
  • At around $100,000, you should save 18% (or $18,000) per year.
  • At around $150,000, you should save 22% (or $33,000) per year.

How much money should I save by 45?

At 45, you are well into your career or you have made a career change.  Your attitude needs to change from asking the question, “How much money should I save?” to more of a demand like “I must save …”

If you made a career change and went back to school, hopefully your salary today isn’t too far off from where you might be if you stayed in your first career.  Either way, the numbers are what they are.

By now, you may have paid off your house or you could still have plenty of mortgage payments left in your future.  At 45, it’s more difficult to begin financial pursuits because you have so many commitments by now.  By the way, how’s the college fund for the kiddos coming along?

On average, you’re likely 10 to 20 years from retirement.  It all depends on how you set yourself up.  For those that put off saving for their retirement until now, all hope is not lost.  It just gets tougher and requires more of your disposable income.

Here’s how the numbers go at 45:

  • If you make around $75,000 and you have $0 saved for retirement, you should be saving 31% of your income (or $23,250) per year.
  • At around $100,000, you should save 34% (or $34,000) per year.
  • At around $150,000, you should save 41% (or $61,500) per year.

So, you asked, “How much money should I save?”  Well, you have your answer.

OK, so you have the numbers.  Whether it’s good or bad news, you have an idea of where you should be.  If you’re on par or better, great for you!  Congratulations!

However, if you’ve fallen short, you need to figure something out.  It comes down to discipline and the commitment to follow through.  It comes down to each of us individually and those who are entrusted to our care.

Based on a rough estimate, I’m not far off where I should be.  But, by no means am I perfect when measured against this scale.  However, that doesn’t mean I’m off the hook either.

We all need to do a better job of managing our finances.  We all can improve in a variety of areas.

The point is getting the drive and courage to begin.  Take that first step.  Get educated.  Don’t be afraid to “adult” and live a wonderful, enriching life.  Get at it today.  Good luck!

How close are you to the numbers here?  What is your Big Why for your future financial goals?  Share your thoughts in the comments below. 

About the Author David Domzalski

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Erik @ The Mastermind Within says May 15, 2017

I’m saving about $10k a year and I’m 24 (almost 25). I have about $20k in retirement accounts, do you think I’m on track?

Thanks for sharing David and have a good day 🙂
Erik @ The Mastermind Within recently posted…Proactive Behavior – Take Control of Your LifeMy Profile

MyMoneyDesign says May 15, 2017

Nice breakdown of the numbers and the life events that most people forget to consider.
Personally, my advice is to always try to motivate people to front-load their savings as much as possible when they are younger and don’t really have a mortgage or kids to support yet. The reason: Then they’ve got 20-40 years of compounding returns working on their behalf. You don’t have that luxury when you’re in your 40’s and starting to save more. I’ve crunched the numbers before and a professional in their 20’s can save for just 10 years and wind up with a bigger nest egg than someone who starts saving the same amount starting in their 30’s for the next 30 years. It’s crazy how much of an effect compounding returns can have on your growth.
MyMoneyDesign recently posted…The Power of Saving More and Spending Less – The Double-Ended Approach to Retire EarlyMy Profile

    David Domzalski says May 16, 2017

    MMD, that’s great analysis and I’m with you. The more upfront saving you can do the better. I’ll refer you to Erik’s comment!

FIbythecommonguy says May 15, 2017

Nice breakdown by the numbers. I agree with MMD above, the younger you can start saving the longer your money has to work for you. The compounding pays off huge in later years. It shows in how much more you have to save later in life if you didn’t start saving earlier.
Great reminder to keep up those savings.
FIbythecommonguy recently posted…Net Worth Report #1- BaselineMy Profile

Andrew Breidenbaugh says May 30, 2017

I think the biggest question to answer is: “How much will you spend each year in retirement?” Answer that question and it’s much easier to figure out what a person needs to save each month.

CJ says February 18, 2018

Here goes!

I’m 26 making $60k per year and putting 16% of my pre-tax paycheck into my 401k. The past 2 years I have maxed out my Roth IRA. Currently I have $34.5k in investments and I’m sitting on $25k in cash (my growing share of a future house downpayment + emergency fund).

I feel pretty confident in my numbers, but I’m open to suggestions if there’s more I should be doing!

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