"How much should I save for retirement?" is one of the most consequential questions in personal finance, and the honest answer is that it depends on your income, your expected spending, your life expectancy, and how much you can save tax-efficiently along the way. Still, there are well-established rules of thumb and IRS limits that can anchor your planning. This guide walks through the benchmarks, the math behind them, and how US tax-advantaged accounts fit into the picture.
Start With Income Multiples, Not a Single Number
Fidelity Investments' widely cited guideline suggests saving roughly 1x your salary by age 30, 3x by 40, 6x by 50, 8x by 60, and 10x by 67. Vanguard's 2024 How America Saves report found the median 401(k) balance for participants aged 55 to 64 was about $244,000 — well below what most households will need, which is why starting early matters more than any single target.
These multiples assume you begin saving in your mid-20s, retire around 67, and maintain a similar lifestyle. If you start later, the multiples rise sharply. A 45-year-old with no savings needs to save a much larger share of income than a 25-year-old to reach the same endpoint.
The 4% Rule and the 25x Target
The most common retirement-income heuristic is the "4% rule," derived from the Trinity study and updated by subsequent research. It suggests withdrawing about 4% of your portfolio in the first year of retirement, adjusted for inflation thereafter, gives a high probability of not running out of money over 30 years.
Inverted, that rule implies you need roughly 25 times your annual retirement spending saved. If you expect to spend $60,000 per year in retirement and Social Security covers $25,000 of that, your portfolio needs to fund $35,000 annually — about $875,000 at a 4% withdrawal rate.
- $40,000 annual gap: roughly $1,000,000 saved
- $50,000 annual gap: roughly $1,250,000 saved
- $60,000 annual gap: roughly $1,500,000 saved
Remember that Social Security replaces only about 40% of pre-retirement income for a median earner, according to the Social Security Administration, so the portfolio gap is usually larger than people expect.
Use Tax-Advantaged Accounts in the Right Order
How you save matters as much as how much. For 2025, the IRS allows employees to contribute up to $23,500 to a 401(k), 403(b), or most 457 plans, plus a $7,500 catch-up contribution for those 50 and older (and an enhanced $11,250 catch-up for ages 60–63 under SECURE 2.0). IRA contributions are capped at $7,000, with a $1,000 catch-up for those 50 and older.
A sensible priority order for most workers:
- Contribute at least enough to your 401(k) to capture the full employer match — it's an immediate return.
- Build a small emergency fund (3–6 months of expenses) so you don't raid retirement accounts.
- Max out a Roth or traditional IRA if eligible, or return to the 401(k) to increase contributions.
- Consider a Health Savings Account if you have a high-deductible health plan — HSAs offer a triple tax advantage.
- Use a taxable brokerage account for additional savings beyond tax-advantaged limits.
Roth versus traditional is a tax-planning decision: Roth contributions are made with after-tax dollars and grow tax-free, while traditional contributions reduce taxable income now but are taxed on withdrawal. If you expect higher tax rates in retirement, Roth tends to win.
Turn the Percentage Into a Dollar Figure
Most guidance suggests saving 15% of gross income, including employer contributions, starting in your 20s. But a percentage is abstract. Convert it to dollars: a household earning $90,000 should target about $13,500 per year, or roughly $1,125 per month. If your employer matches 4%, that's $3,600 of the total — you need to contribute about $9,900 yourself.
Then project forward. Using a 6–7% average annual return assumption (a reasonable real-world figure after fees and inflation adjustments), $500 per month invested for 30 years grows to roughly $500,000–$600,000. Running your own numbers with a retirement calculator is more useful than any rule of thumb.
Adjust for Your Real Life
Rules of thumb assume a standard career and lifespan, which few people have. Consider:
- Healthcare costs: Fidelity estimates a 65-year-old couple retiring in 2024 may need about $315,000 for healthcare alone, excluding long-term care.
- Early retirement: Retiring before 59½ complicates access to 401(k)s and IRAs without penalty (though Rule of 72(t) and Roth conversion ladders exist).
- Longevity: A healthy 65-year-old has a meaningful chance of living into their 90s; planning to age 95 is prudent.
- Required Minimum Distributions: Starting at age 73 under SECURE 2.0, traditional IRA and 401(k) balances must be withdrawn, which affects tax planning.
What to Remember
There is no universal number, but there is a reliable process. Aim for 10x your salary by your late 60s, translate that into 25 times your expected annual portfolio withdrawal, and save at least 15% of gross income including employer matches. Use 401(k)s, IRAs, and HSAs to minimize taxes, revisit your plan annually, and adjust as your income and lifestyle change. The most important variable is time in the market — the earlier you start, the less you need to save each month.