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What Percentage of My Pre-Retirement Income Do I Need to Save to Retire?

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Retirement is the largest financial goal for most. Everyone needs a different amount to afford their desired lifestyle, but the future is hard to predict.

That can make it challenging to save. You want enough to enjoy your golden years without saving so much that you can’t enjoy life now.

This article will give you a few rules of thumb to get you started, then cover several factors to help you hone in on your retirement savings needs.

Rules of Thumb

There are some rules of thumb to help you estimate your regular retirement savings amount. You can use each of these alongside a retirement calculator to estimate how much to save:

The 70-80% Rule

One recommendation is to save enough to replace 70-80% of your annual income in retirement.

For example, if your current annual income is $80,000, you should aim to save enough to live on $56,000-$64,000 per year.

The 15% Rule

It’s common advice to set aside 15% of your income for retirement. For example, if you earn $5,000 monthly, you’d save $750 each month.

This method may cause you to end up with more retirement assets, depending on the performance of your investments.

Savings By Age

You can track your progress toward retirement by aiming to save a specific multiple of your annual salary at certain ages.

Here is a good rule of thumb for each age:

  • 30: 1x your annual salary
  • 35: 2x your annual salary
  • 40: 3x your annual salary
  • 45: 4x your annual salary
  • 50: 6x your annual salary
  • 55: 7x your annual salary
  • 60: 8x your annual salary
  • 67: 10x your annual salary

What to Consider When Estimating Retirement Savings

There’s a lot that goes into retirement planning. Here are some things to consider when estimating what your financial situation will look like:

Social Security

You can start taking Social Security as early as 62 and as late as 70. The longer you wait, the larger your benefit becomes. You can postpone Social Security longer if you have sufficient assets or work for longer.


Pension plans operate like retirement accounts, but you don’t contribute to them. Only the employer does so.

These may reduce your need to save in other accounts and allow you to delay Social Security payments longer.

Part-Time Work

Some retirees continue working part-time or running a business, such as a sole proprietorship. Part-time work can reduce your reliance on your savings and let you delay Social Security benefits longer.

Desired Lifestyle

Many retirees have fewer expenses in retirement. They might pay off their mortgage, sell a car, commute less, or live in a tax-friendly location. This is why it’s recommended that you plan to retire on less income than you make now.


However, everyone is different. If you want to travel more or live a more expensive lifestyle, you must save more or find additional income sources.

When You Retire

The earlier you retire, the more you have to save for the same lifestyle. You will also have less time to save that money, so your retirement contributions may have to be larger.

Healthcare Needs

Healthcare costs can increase with age.

You’re generally eligible to apply for Medicare at age 65. This often costs less than private insurance but may not cover all your medical needs.

Therefore, you might need to supplement Medicare with other funds. You can either save on your own, get a regular health plan, or get a high-deductible health plan (HDHP).

HDHPs offer Health Savings Accounts (HSAs), which offer three tax benefits:

  • Pretax contributions
  • Tax-deferred growth
  • Tax-free withdrawals when used for qualified medical expenses

The Bottom Line

Determining the exact amount you need to save for retirement isn’t easy.

Using a few rules of thumb can get you started, but everyone’s situation differs. Thus, you must iron out several factors, from your desired lifestyle to healthcare needs and more.

Finally, review your retirement plan and savings amount regularly in case your goals and circumstances change.

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