What Percentage of Income Should You Save for Retirement?

Saving for retirement is a major focus during your working years. You want to make sure you have enough money during your golden years, but also enjoy the present. Determining what percentage of your income to save for retirement can help you set some guardrails to accomplishing both. The general recommendation is to save about 15% of your pre-tax income, but this can vary based on your age, income level and retirement goals.

If you need help saving for retirement, a financial advisor can work with you to grow your nest egg.

The answer to this question will vary by person. But, when it comes to saving for retirement, a common guideline is to set aside 10-15% of your pre-tax income each year. This percentage is based on the assumption that most individuals will need to replace about 70-80% of their pre-retirement income to maintain their standard of living in retirement. 

While these figures provide a useful starting point, the actual amount you should save can vary depending on your personal circumstances, like your retirement goals, current financial situation and how long you expect to work.

Your specific retirement goals are a major factor in determining how much you should save. For instance, if you aim to retire early or travel a lot during retirement, you may need to save more than the typical 10-15%. Factors such as anticipated healthcare costs, other income sources like pensions or part-time work, and whether you plan to downsize your home can also influence the percentage of income you should be saving.

There’s no one-size-fits-all answer to how much you should save for retirement. Regularly reassess your savings rate to help keep yourself on track, and consider working with a financial advisor.They can provide personalized guidance and help you develop a retirement budget and savings strategy tailored to your unique situation.

If you want to figure out how much to save for retirement, you will need to see your big financial picture. This will include the following accounting for these six general factors:

• Age and time horizon: The earlier you start saving, the more time your money has to grow through compound interest. If you don’t start saving until later in life, you may need to allocate a higher percentage of your income to catch up. Also, the longer you work, the less you may have to save each year.
• Retirement goals: Your desired lifestyle in retirement impacts how much you should save. For example, if you plan to travel a lot or maintain a high standard of living, you’ll need to save more than someone with modest plans.
• Income level: Higher earners may need to save a smaller percentage of their income to meet their retirement goals, as their contributions could compound to a larger sum over time. On the other hand, those with lower incomes might need to save a higher percentage.
• Life expectancy: If you anticipate a longer retirement due to a family history of longevity or personal health, you’ll need to save more to make sure your funds last throughout your retirement years.
• Other income sources: Consider whether you will have other sources of retirement income, such as Social Security, pensions, or rental income. These can reduce the amount you need to save on your own.
• Inflation and economic conditions: Inflation can erode the purchasing power of your savings, so  factor in how economic conditions might affect your retirement funds.

Figuring out how much you need to save for retirement is one thing. Hitting your savings goal is another. If you’re struggling to meet your retirement savings goals, here are five common strategies that could help:  

• Maximize employer contributions. If your employer offers a matching contribution to your 401(k) or another retirement plan, aim to contribute at least enough to receive the full match. This is essentially free money that can boost your retirement savings over time. 
• Use tax-advantaged accounts. Taking advantage of tax-advantaged accounts like traditional IRAs and HSAs can help you grow your savings by reducing your taxable income. They also allow your investments to grow tax-deferred or tax-free, depending on the type of account.

• Automate your savings. By setting up automatic contributions to your retirement accounts, you ensure consistent savings without the temptation to spend the money elsewhere. 
• Increase your contributions gradually. Increasing your contributions over time, such as by 1% annually or whenever you receive a raise, can help build your retirement fund without a significant impact on your current lifestyle. This approach allows you to save more without feeling a noticeable reduction in your disposable income.
• Review and adjust your budget. Regularly assess your expenses to see where you can free up additional cash for retirement savings. Identify areas where you can cut back on discretionary spending, and redirect those savings into your retirement accounts. Small lifestyle changes, such as dining out less frequently or reducing entertainment expenses, can accumulate substantial savings over time. 

There’s no one-size-fits-all answer when it comes to what percentage of income you should save for retirement. Determining the right percentage of income to save is a personal decision that will depend on your age, retirement goals and financial situation. Furthermore, the earlier you start, the less you may need to save annually because of compound interest. But those starting later might need to save a higher percentage to catch up. You should also consider potential changes in income, lifestyle and unexpected expenses, accounting for flexibility in your savings plan when possible. 

• A financial advisor can help you create and manage your retirement portfolio. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now. 
• If you want to know how much your retirement savings could grow over time, SmartAsset’s free retirement calculator could help you get an estimate. 

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