How Much Should I Save for Retirement? How Much Will I Need?

Nicolas Cesare
How Much Should I Save for Retirement?

When you hit 65, are you going to be able to retire?

In 2017 the average cost of retirement was estimated to be around $738,400. That’s much more than the average American worker makes in a year, and it’s an amount that none of us is likely to see in our bank accounts at any one time. Once you begin to account for inflation, that number will go up every year.

You can’t rely solely on social security to take care of you, so the question then becomes: have you saved enough money yourself? If you don’t have enough money already, do you have a plan on how you’ll get it? Do you even know how much money you’ll need in order to retire in your later years?

First, you need to figure out how much money you’ll need in order to retire (and stay retired), and then you have to make a plan on how you’ll get that money into retirement accounts. Here’s what you need to do if you want to retire at a reasonable age, and enjoy your golden years in style.

Table of Contents

Save as Much as You Can, Starting as Soon as You Can

There may not be a consistent number for how much you need to save, but there is one piece of advice that never changes: save what as soon you can. This holds true whether you are just beginning your career or actively researching retirement communities. More than a quarter of all American adults have put nothing towards retirement. If you’re in this group, start saving for retirement immediately! The more you save and the sooner you start, the better off you will be.

If your employer offers retirement benefits, coordinate with them to start a 401(k), but if not, open up your own IRA. If your employer offers matching retirement benefits, start utilizing that right away. Not only does your own money go into your retirement account, your employer matches it to a percent, meaning even more money going towards retirement.

Even if your employer doesn’t offer retirement benefits, start saving now. Open up an IRA and set aside a percentage of your income to go into it. The reason you want to start saving right away is because IRA’s utilize compound interest, meaning whatever interest you earn on the initial money gets added back into the account and can earn even more interest. Basically, your money grows at an increased rate over time.

Work Your Way Toward Saving 15 Percent of Your Income

For a long time, the rule of thumb for saving from retirement was 10 percent of your income. That way, combining retirement funds with social security would be enough for people to survive. This is no longer the case though. With the costs of living and healthcare rising, but many wages staying stagnant, it’s not enough to retire.

The new rule of thumb is to save 15 percent of your annual wage into a retirement fund. This way, you have less of a dependence on social security and can have the funds necessary to live and pay for healthcare when you are older. Of course, 15 percent is still just a rule of thumb. If you are under, that’s ok: 15 percent can be your retirement savings goal. Even if you are already saving 15 percent, consider whether you can afford to save or invest more. Should you experience a gap in employment or unexpectedly lose your job or even your ability to work, any extra you can put away now will help.

Retirement Savings by Age:

Are you on track to retire by 65? Falling behind early on in life can make catching up very difficult, so here are some good goalposts to follow. Remember: it isn’t absolutely necessary to hit each savings goal by the associated age here — these are just healthy averages to help you measure your progress and assess whether your savings habits need some work.

Average Retirement Savings by Age 30

Around the ages of 32 to 37, your retirement savings should be around $31,644. During this age it’s recommended that you grow your retirement fund to the point it is double your annual salary. That means aggressively saving money.

Average Retirement Savings by Age 40

Once people enter their 40’s, they need to have about $67,000 saved up for retirement. This is when many people hit their prime earning years, and a lot of that money needs to head into retirement accounts.

Average retirement Savings by Age 50

When people hit their 50’s, they should have around $124,831 saved up. Once you hit 55, you’re able to make catch up contributions towards your retirement, meaning you can put extra money into the accounts.

Average Retirement Savings by Age 60

As people get closer to retirement, they should hopefully have $163,577. They still need a bit more money if they want to retire, meaning a few more years of work and savings.

Retirement Budgeting: Predicting Your Expenses and Income Needs

It’s important to know that while the above goalposts are useful, they might not match exactly your needs or expenses. These goals are set off of national averages, but maybe you plan on retiring somewhere the price of living is extremely low, or stay in a place like New York City where it’s very expensive.

As you plan out your retirement you need to predict what you want your lifestyle to be and what expenses that will create. Than includes things like: housing, living expenses, debt, medical bills, insurance and travel. Incorporate those costs into your retirement planning and expect inflation to make it even larger.

Medical Bills

The cost of healthcare in retirement is easily one of the biggest money sinks for your savings. Right now you are at an age where your health isn’t too bad. Perhaps you go the doctor once a year or so for a checkup or you might have a prescription that costs about $12 a month, but as long as you don’t suffer a serious injury, your healthcare costs are minimal.

All of this will change after retirement. It’s very important to note that as people age, their healthcare bills rise. In 2015, the average retiree spent $12,000 on healthcare, making it their second largest bill after their mortgage. That cost is only rising every year and needs to be a key part of your expense planning. In 2016 it was estimated that total medical bills in retirement would cost the average person around $260,000. That is a huge share of your total retirement savings!


Most American homeowners have paid off their mortgages before age 65. If this doesn’t sound like you, it may be time to consider whether or not you bought a house within your means. On the other hand, just because you feel confident that you’ll be finished with your mortgage by the time you retire doesn’t mean that it’s time to get comfy.

There are hidden costs to owning a home, some of which you will still have to keep up on in retirement. Additionally, you can’t expect to live in your home over the course of your whole retirement. If your needs change, you may move into a retirement or nursing home later in life. This would change your housing costs dramatically, as a retirement home can go for anywhere between $653 to $4,200 a month depending on your location and living situation.


Here’s the thing that nobody tells you about retirement: it can become incredibly boring! It’s strange to think of retirement as boring, since many of us find ourselves looking forward to it from our very first days in the workforce.

Retirement can seem boring because it involves such an enormous change in lifestyle. Many of us in the workforce fill our days with work and, whether we find it exciting or not, it provides us with something to do for 40 hours out of the week. When you don’t have work anymore, that’s 40 hours that you must fill with some sort of activity.

You may find that your old hobbies no longer cut it. After all, those were hobbies that cultivated with the expectation of spending no more than a few hours a night or a weekend enjoying. They weren’t meant to be a 24/7 activity for your enjoyment and they don’t have to be.

You can still keep up your old hobbies in retirement, but you will need to supplement them with something more to fill your days. The good news is that this doesn’t have to be office work — you can find something relaxing to do with all of your free time. The bad news is that most hobbies have at least some associated cost.

Keep Updating Your Retirement Plan

Take into account that you will be on a fixed income, meaning you might need to pull from other savings accounts or take on extra debt for large expenses.

Looking to retire early? That means you’ll need an accelerated plan with even more money saved up. Just because you have a massive savings now might not mean much in the long run if you hit 65 with no money left.

No matter your age, it’s important to have a plan for retirement and follow it. Sometimes, life will get in the way in the forms of unemployment, emergencies, medical bills and more and delay your retirement plan. If this does happen, get back to it as quick as possible and try to make up on lost time. As you take inflation, your health, your lifestyle, and other inevitable variables into account, keep updating and adjusting your plan. Whenever you get an opportunity, save extra — even if you appear on track for your age or have hit your 15 percent goal. The only predictable feature of life is change, so save when you can to make up for times you can’t.

By creating a plan early on and meeting proper savings goals, you are more likely to retire at a proper age and have enough money to live comfortably. Even if you are older, all is not lost. Make a plan now and get to work saving using any means possible to build up a retirement fund quickly.

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