How Much Money Do You Need to Save for Retirement?


Saving is just one part of being financially prepared to retire. Another big step is to figure out if you’re saving enough to cover what may be decades of expenses. However, fewer than half of workers know how much income they’ll need each month in retirement.* How much you should save and how you invest depend on how many years you have before retiring.

Build a Retirement Savings Plan

Whether you’re just starting out or are well into your career, you should have a plan for your retirement savings. Consider when you want to retire, other sources of income beyond your job and your investment plan among other things.

Figure Out How Much You May Need to Save for Retirement

One general rule of thumb says you should save enough for about 80% of your current income to have a similar standard of living. With healthier lifestyles, many retirees can expect to live up to 30 years in retirement.


No two retirements are the same. As part of determining how much money you’ll need, visualize what you want your retirement to look like. A retirement filled with travel and hobbies may require a bigger nest egg than a post-work life spent closer to home.

How Much Should You Save?

As Much as You Can!

No matter how you add it up, retirement won't be cheap. If you are 10 or more years away, using the 80% rule is probably fine. However, if you're within five to seven years of retirement, you'll want to develop a more specific savings plan. With your estimate in hand, consider these tips:

Make It a Priority

Lots of expenses compete for your income. It will be the same in retirement, but without the steady paycheck. The more you save now, the easier it may be to cover those expenses.

Find ways to make saving a priority. Figure out where your money goes and you'll likely find places to stop spending and put it toward retirement.

Increase Retirement Savings, Not Risk

Avoid putting money in aggressive investments as a way to compensate for too little in savings. That strategy could work if you're in your 20s or 30s while you still have the luxury of time. But as you get older, adding more risk—or the wrong kind of risk—can backfire. It's better to:

  • Save enough, after determining how much you may need.
  • Put investments in the right risk category for your age, time horizon and comfort level with risk.

Too Risky or Too Conservative? Find Your Balance

Target-date funds are designed to balance risk and reward over your saving years and into retirement. You choose one based on the date closest to your intended retirement date or when you will need to withdraw the money. Each portfolio follows a preset schedule that gets more conservative over time.


Once you retire, revisit your portfolio allocation. Having a mix of different types of investments may help lessen the impact of market ups and downs on your savings and also may help stretch your income through retirement.

Also consider how you will draw retirement income from your nest egg. Some popular ways include using a broad mix of investments that matches your risk comfort, separating your money into ‘buckets’ to cover different time periods of retirement and covering essential expenses with an annuity or other conservative income product.

Give Yourself a Nudge

Consider increasing your savings by 1 to 2% each year in an employer's retirement plan. Or, if your plan offers automatic increases, think about opting in. That little nudge may not matter much to your monthly bottom line, but it can have a powerful impact on your account balance and tax bill over time.

This hypothetical situation contains assumptions that are intended for illustrative purposes only and are not representative of the performance of any security. There is no assurance similar results can be achieved, and this information should not be relied upon as a specific recommendation to buy or sell securities.

Calculations assume an annual salary of $50,000 in the 25% tax bracket and contributions of 1% per month and 2% or per month. Amount take home pay is reduced is the result of pretax contributions on taxable income. Amount the additional contribution could have on savings assumes investing the 1% or 2% monthly for 30 years with a 6% rate of return. Source: American Century Investments, 2021, Investment Returns Calculator, dinkytown.net.


Match the Match

If your employer's plan offers to match your retirement plan contributions up to a certain point, take advantage of it. It's almost like getting free money and is one of the easiest ways to help fund your retirement.

Understand how Social Security Fits Into Your Plan

If you qualify, Social Security can provide a source of retirement income for as long as you live. However, you should understand the basics and start planning well before you retire. And there are some things to consider, such as when to claim and if you’re part of a couple.

Though you can claim your benefits as early as age 62, there may be an upside to waiting until age 66 or later. Also, married couples should approach their benefits differently than single retirees. 

The Bottom Line in Saving for Retirement

Creating a plan is one of the best ways to help determine whether you will save enough for retirement. Knowing how much you'll need and then taking steps to reach that amount can mean the difference between hope and confidence.


Need help with your financial plan?

*Source: Employee Benefits Research Institute, EBRI/Greenwald Retirement Confidence Survey, 2020. 44% of workers have estimated how much income they and their spouse would need each month in retirement. 

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.

IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.