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Saving For Retirement in 2022: Ultimate How-To Guide

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Saving For Retirement

How much money are you saving for retirement?

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.

What is the best way to save for retirement?

If 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.

Related ideas to saving for retirement:

Do I need a plan to begin saving for retirement?

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. You also have to make sure you are budgeting properly by using an app like Personal Capital and know your numbers.

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.  This post includes the latest numbers from J.P. Morgan's 2021 Guide To Retirement.

How can I begin saving for retirement?

Consider this:

56% of Americans have less than $10,000 saved for retirement, according to a 2016 survey conducted by GOBankingRates.

Needless to say, that won't get you very far in 21st century America.

If you're reading this post, I'm going to assume you fall into one of two camps:

One, you have no clue about saving for retirement whatsoever.

Two, you know you need to save for retirement, but are having trouble getting started.

Either way, you're likely among the 56% of Americans with less than $10,000 saved.

We want to get you far above that number and able to retire when you want to retire. Not when you get phased out due to old age.

We can get more in-depth about specific retirement savings accounts in a moment. But, let's keep things simple first to get your feet wet.

What is stopping you from saving a portion of your income in a 401(k) or 403(b) with your current company or organization? By doing so, you're saving money for retirement and earning money with your employer matching. By failing to invest in your company's retirement account, you're literally throwing away free money.

Another option is to simply force yourself to set aside money each month. You can automate this just like your company would taking out a 401(k) or 403(b) contribution out of your paycheck.

Go into your online bank site and set aside $100 for example and have it automatically transferred to a savings account each month. It might not be a lot, but it's a start and you can do it without thinking about it. That way, the money doesn't get spent!

What about a reverse mortgage?

If you haven't saved enough money for retirement you may also consider a reverse mortgage, this tool allows for you to access some of your home's equity to generate an additional cash flow via line of credit or tenure payments.

What is the best age to start saving for retirement?

Short answer:

22 years old.

That's according to a recent Bankrate study.

The Motley Fool chimed in on 22 being the ideal age to start saving for retirement, saying:

Why the rush to begin building a nest egg at 22? It's simple: It'll give you the longest possible savings window to work with, thus allowing you to use compounding to your advantage. Compounding is the concept of earning interest on interest. When you fund a retirement plan, you get to invest your savings so your money grows. As your savings earn money, you can reinvest those gains year after year to fuel that growth even further.

For me, I started saving for retirement with my first job out of college at age 21 in 2006. I've kept the percentage at the employer match level at least for as long as I can remember.

The sooner the better is what I say.

You may be well passed 22, but you can always start saving for retirement today. Right now. This second.

Related: Don't Make These Money Mistakes

Since we're on the subject of saving for retirement, you should know that failing to save for your future is one of the biggest money mistakes to avoid.

We discuss how to people continue to make these poor financial decisions and how you can prevent yourself from being one of them!

What are the best types of retirement savings accounts to consider?

There are other retirement savings accounts aside from the 401(k) and 403(b) offered by employers. You will want to look into these depending on your current situation.

For instance, if you're a self-employed individual or own a small business, you have other options including:

  • Solo 401(k)
  • SEP IRA (Simplified Employee Pension Individual Retirement Account)
  • SIMPLE IRA (Savings Incentive Match PLan for Employees)

Solo 401(k)

Here's what Wikipedia has to say about the Solo 401(k):

Solo 401(k), (also known as a Self Employed 401(k) or Individual 401(k)), is a 401(k) qualified retirement plan for Americans that was designed specifically for employers with no full-time employees other than the business owner(s) and their spouse(s). The general 401(k) plan gives employees an incentive to save for retirement by allowing them to designate funds as 401(k) funds and thus not have to pay taxes on them until the employee reaches retirement age.


According to US News, this is what you need to know about the SEP IRA:

SEP stands for simplified employee pension, and this kind of account is used primarily by the self-employed or small business owners. As the employer, you can contribute up to 25 percent of your income or $53,000, whichever is less, in 2015. These accounts are easier to set up than a solo 401(k). If the business has employees, the employer must contribute for all who meet certain requirements.


Here's how the IRS defines the SIMPLE IRA:

A SIMPLE IRA plan (Savings Incentive Match PLan for Employees) allows employees and employers to contribute to traditional IRAs set up for employees. It is ideally suited as a start-up retirement savings plan for small employers not currently sponsoring a retirement plan.

If you're not a business owner or self-employed individual, you're not out of luck though. There are few other ways you can start saving for your retirement, including:

  • IRA (Individual Retirement Account)
  • Roth IRA
  • Spousal IRA
  • Rollover IRA
  • TSP (Thrift Savings Plan)
  • Health Savings Account

IRA vs Roth IRA

For our purposes, we're going to briefly touch on the differences between the IRA and Roth IRA. Here's what you need to know from NerdWallet on the IRA vs Roth IRA debate:

... with a traditional IRA, you pay taxes when you take distributions in retirement (or if you make withdrawals prior to retirement). A Roth IRA operates in reverse: You pay taxes upfront, because your contributions are not deductible. Earnings on your investments grow tax-free in a Roth and tax-deferred in a traditional IRA.

Thrift Savings Plan

I thought I'd quickly touch on the TSP. Here are some quick TSP facts from Dave Ramsey:

What is the TSP?

The TSP was created to give federal workers the opportunity to invest in a tax-advantaged account for retirement, similar to a 401(k) plan.

Who can take advantage of the TSP?

In order to be eligible to contribute to the TSP, you must be employed by the federal government or be a member of the military.

Where can I learn more about the TSP if I'm a federal employee or military member?

Head over to the Thrift Savings Plan website for everything you need to know and how to get started.

What percentage of your income should you save for retirement?

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.  It's a perfect resource to help us answer the "How much money should I save for retirement?" question.

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 you 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:

  • Average gross savings rate of 5% for those making under $100,000.
  • Average gross savings rate of 10% for those making $100,000 or more.
  • A pre-retirement investment return of 5.75%.
  • A post-retirement investment return of 5.0%.
  • An inflation rate of 2.0%.
  • Retirement age of the primary earner is 65 and the spouse's age is 62.
  • 30 years in retirement.

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

Related: Pad Your Retirement Savings

Do you wish you could be saving more money for your retirement?

You're probably thinking to yourself: "No kidding, Dave."

Well, check out our guide to how to make money. It will help you pad your savings stats and secure a better financial tomorrow.

(Poetic, huh?)

How much should you be saving for retirement 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 where your retirement savings should be assuming a yearly 5% for salaries under $100,000 and 10% savings rate for the $100,000 salary mark:

  • If you're making around $50,000, you should have $30,000 saved for retirement.
  • At around $70,000, you should have $63,000 saved for retirement.
  • At around $100,000, you should have $20,000 saved for retirement.
RETIREMENT SAVINGS TIP: Download the Retirement Savings Cheat Sheet and take what you learn with you. Plus, you'll get weekly money-savings tips sent to you.

How much should you be saving for retirement 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 retirement savings goals?  Consider the following:

  • If you make around $70,000, you should have $126,000 saved for retirement.
  • At around $100,000, you should have $150,000 saved for retirement.
  • At around $150,000, you should have $315,000 saved for retirement..

How much should you be saving for retirement 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 $70,000 you should have $224,000 saved for retirement.
  • At around $100,000, you should have $330,000 saved for retirement.
  • At around $150,000, you should have $615,000 saved for retirement.

So, you asked, "How much money should I be saving for retirement?"  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!

If you are struggling to save or are still unsure of how to save for your retirement you might be panicking and overthinking it a bit too much. There are sources out there who can help you manage your money and save those much needed dollars for a rainy day. You can consult the help of a financial advisor who will give you input on how to manage and save.

So, tell us how you answered the "How much money should I be saving for retirement?" question yourself

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.

  • 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

  • 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

  • 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

  • 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:

    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!

  • It’s easier to plan for retirement by taking into consideration your future retirement expenses than to just keep on saving money without a benchmark. It is also important to focus more on the last ten years of your career since this is the most critical stage in shaping your life after retirement. It pays to consider other overlooked retirement strategies like testing your retirement savings, taking advantage of catch-up contributions, having a backup career plan, deciding where you want to live during retirement and planning for long term care.

  • Robert D says:

    I have retired 5 years ago and now I can feel that what missed those days, thanks for this post.

  • Optinsure says:

    Which is a suitable annuity insurance if I am planning to retire early?

  • Optinsure says:

    How can my savings calculations prove relevant after 20 or 30 years?

  • Panda says:

    For those of you that have a 401K there is something called the 55 rule that most are unaware of. You can withdraw from your last company 401k without penalty, if you retire. Google it, IRS 55 rule. I worked in technology for 35 years and retired last year at 56 years young. I plan on taking social Security at 62.

  • I’m amazed, I must say. Rarely do I encounter a blog that’s both
    educative and amusing, and let me tell you, you’ve hit the nail on the head.
    The problem is something which too few men and women are speaking intelligently about.
    I’m very happy I came across this during my search for something relating to this.
    Glebe Farm Hedging recently posted…Glebe Farm HedgingMy Profile

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