How Much Should You Really Save for Retirement?

Financial experts often recommend saving between 10% and 20% of your pre-tax income for retirement. However, there is no universal number that works for everyone. The amount you need depends on several personal and financial factors, including:

• Your current age and how early you begin investing

• Whether your employer offers matching retirement contributions

• Your investment strategy and risk tolerance

• The age at which you plan to retire

• Your expected lifespan and future living expenses

Someone who starts investing later in life typically needs to contribute more aggressively to catch up. On the other hand, workers who receive strong employer matches may reach their goals while contributing a smaller percentage of their own income.

Investment allocation also matters. Portfolios with a larger stock allocation historically produce higher long-term returns, though they also carry greater short-term volatility during market downturns.

Another important variable is retirement duration. People who retire early or expect to live well into their 90s generally need substantially larger savings reserves.

Looking for Extra Income to Boost Retirement Savings?

Whether retirement is decades away or approaching quickly, additional income can help strengthen long-term financial security. Many people use side-income platforms to supplement retirement contributions through simple online activities.

Some popular options include:

Retirement Saving Strategies by Age

Saving for Retirement in Your 20s

Investing early creates a major advantage because compound growth has more time to work. A dollar invested at age 25 can grow dramatically more than a dollar invested at age 40.

The challenge is that many people in their 20s face lower salaries, student loan payments, and rising living costs.

Prioritize Employer Matching Contributions

If your employer offers a 401(k), 403(b), or similar retirement plan with matching contributions, contributing enough to receive the full match should usually be the first priority.

An employer match effectively delivers an immediate guaranteed return before any market gains occur. For example, a 50% employer match instantly increases a $100 contribution to $150.

Retirement plans with matching contributions are among the most powerful wealth-building tools available to employees.

Eliminate High-Interest Debt

After securing the employer match, focusing on high-interest debt—especially credit card balances—can improve long-term financial stability.

Debt with double-digit interest rates often grows faster than typical investment returns, making repayment financially efficient before aggressively increasing investments.

Accept More Investment Risk While Young

Long investment horizons allow younger investors to tolerate greater market volatility. Portfolios heavily weighted toward stocks generally outperform conservative allocations over long periods, despite temporary crashes and recessions.

This does not mean speculating on extremely risky assets, but younger investors can typically afford higher equity exposure because they have time to recover from downturns.

Build an Emergency Fund

An emergency reserve protects retirement investments from being withdrawn prematurely during financial hardship.

Financial planners commonly recommend saving three to six months of living expenses in liquid accounts such as:

• High-yield savings accounts

• Money market accounts

• Certificates of deposit (CDs)

Emergency savings should remain accessible and separate from long-term investment portfolios.

Avoid Lifestyle Inflation

As income rises, many people increase spending proportionally. While enjoying career progress is reasonable, automatically increasing expenses with every raise can severely limit wealth accumulation.

A practical strategy is to dedicate part of every future raise directly toward retirement contributions before increasing discretionary spending.

Saving for Retirement in Your 30s

Starting retirement savings in your 30s is still manageable, but delaying further becomes increasingly costly. At this stage, many people face competing priorities such as mortgages, childcare expenses, and family responsibilities.

Open an IRA

Workers already contributing to employer-sponsored retirement plans may benefit from adding an Individual Retirement Account (IRA).

A Roth IRA can be particularly attractive because qualified withdrawals in retirement are tax-free. Traditional IRAs may provide upfront tax deductions depending on income and eligibility.

IRAs also provide broader investment flexibility than many employer-sponsored plans, allowing investors to select individual stocks, bonds, mutual funds, or ETFs.

Keep Retirement Savings Separate

Some retirement accounts allow limited withdrawals or loans for purposes such as home purchases or education expenses. However, using retirement funds for short-term financial goals can significantly reduce future compound growth.

Maintaining dedicated retirement savings accounts improves long-term planning accuracy and reduces the temptation to interrupt investment growth.

Start Education Savings Early

Parents often face the challenge of balancing retirement planning with college savings.

Retirement should generally remain the top priority because loans exist for education but not for retirement. Once retirement contributions are stable, education-focused accounts such as 529 plans can help families prepare for future tuition expenses without sacrificing retirement security.

Continue Investing During Market Crashes

Market downturns are inevitable. Historically, major stock market declines occur periodically, including recessions, financial crises, and unexpected global events.

For investors in their 30s, downturns can feel especially stressful because account balances are finally large enough for losses to appear significant.

However, long-term investors often benefit most by continuing regular contributions during declining markets. Consistent investing through volatility—commonly called dollar-cost averaging—allows investors to purchase more shares at lower prices during downturns.

Emotional reactions such as panic selling frequently damage long-term returns more than market declines themselves.

The Bigger Picture

Successful retirement planning is less about finding a perfect number and more about building consistent financial habits over decades.

Key principles include:

• Starting as early as possible

• Taking advantage of employer matching programs

• Maintaining disciplined investing during volatility

• Managing debt responsibly

• Avoiding unnecessary lifestyle inflation

• Protecting savings with emergency reserves

Retirement security is ultimately created through consistency, long-term thinking, and disciplined financial decisions rather than short-term market timing or speculation.

Saving for Retirement in Your 40s

If you’re in your 40s and started saving early, you may have a healthy nest egg by now. But if you’re behind on your retirement goals, now is the time to ramp things up. You still have plenty of time to save, but you’ve missed out on those early years of compounding.

Continue Taking Enough Risk

You may feel like you can afford less investment risk in your 40s, but you still realistically have another two decades left until retirement. Your money still has — and needs — plenty of time to grow. Stay invested mostly in stocks, even if it’s more unnerving than ever when you see the stock market tank.

Put Your Retirement Above Your Kids’ College Fund

You can only afford to pay for your kids’ college if you’re on track for retirement. Talk to your kids early on about what you can afford, as well their options for avoiding massive student loan debt, including attending a cheaper school, getting financial aid, and working while going to school. Your options for funding your retirement are much more limited.

Keep Your Mortgage

Mortgage rates vary from week to week. Your potential returns are much higher for investing, so you’re better off putting extra money into your retirement accounts. If you haven’t already done so, consider refinancing your mortgage to get the lowest rate.

Invest Even More

Now is the time to invest even more if you can afford to. Keep getting that full employer 401(k) match. Beyond that, try to max out your IRA contributions. If you have extra money to invest on top of that, consider allocating more to your 401(k). Or you could invest in a taxable brokerage account if you want more flexibility on how to invest.

Meet With a Financial Adviser

You’re about halfway through your working years when you’re in your 40s. Now is a good time to meet with a financial adviser. If you can’t afford one, a financial counselor is typically less expensive. They’ll focus on fundamentals like budgeting and paying off debt, rather than giving investment advice.

The 5 Dumbest Things We Keep Spending Too Much Money On

You’ve done what you can to cut back your spending. You brew coffee at home, you don’t walk into Target and you refuse to order avocado toast. (Can you sense my millennial sarcasm there?)

But no matter how cognizant you are of your spending habits, you’re still stuck with those inescapable monthly bills.

You know which ones we’re talking about: rent, utilities, cell phone bill, insurance, groceries…

Ready to stop paying them? Follow these moves…

Tina Russell/The Penny Hoarder

Saving for Retirement in Your 50s

By your 50s, those retirement years that once seemed like they were an eternity away are getting closer. Maybe that’s an exciting prospect — or perhaps it fills you with dread. Whether you want to keep working forever or retirement can’t come soon enough, now is the perfect time to start setting goals for when you want to retire and what you want your retirement to look like.

Review Your Asset Allocation

In your 50s, you may want to start shifting more into safe assets, like bonds or CDs. Your money has less time to recover from a stock market crash. Be careful, though. You still want to be invested in stocks so you can earn returns that will keep your money growing. But remember, if interest rates are low, bonds and CDs probably won’t earn enough to keep pace with inflation if it ever ramps back up.

Take Advantage of Catch-up Contributions

If you’re behind on retirement savings, give your funds a boost using catch-up contributions. In 2024, you can contribute:

• $1,000 extra to a Roth or traditional IRA (or split the money between the two) once you’re 50

• $7,500 extra to your 401(k) and most other workplace accounts once you’re 50

• $1,000 extra to a health savings account (HSA) once you’re 55.

The Secure Act 2.0, which passed in December 2022, will increase catch-up contributions to employer-sponsored accounts workers between ages 60 and 63 beginning in 2025.

Work More if You’re Behind

Your window for catching up on retirement savings is getting smaller now. So if you’re behind, consider your options for earning extra money to put into your nest egg. You could take on a side hustle, take on freelance work or work overtime if that’s a possibility to bring in extra cash. Even if you intend to work for another decade or two, many people are forced to retire earlier than they planned. It’s essential that you earn as much as possible while you can.

Pay off Your Remaining Debt

Since your 50s is often when you start shifting away from high-growth mode and into safer investments, now is a good time to use extra money to pay off lower-interest debt, including your mortgage. Retirement will be much more relaxing if you can enjoy it debt-free.

Saving for Retirement in Your 60s

Hooray, you’ve made it! Hopefully your retirement goals are looking attainable by now after working for decades to get here. But you still have some big decisions to make. Someone in their 60s in 2024 could easily spend another two to three decades in retirement. Your challenge now is to make that hard-earned money last as long as possible.

Make a Retirement Budget

Start planning your retirement budget at least a couple years before you actually retire. Financial planners generally recommend replacing about 70% to 80% of your pre-retirement income. Common income sources for seniors include:

• Social Security benefits. Monthly benefits replace about 40% of pre-retirement income for the average senior.

• Retirement account withdrawals. Money you take out from your retirement accounts, like your 401(k) and IRA.

• Defined-benefit pensions. These are increasingly rare in the private sector, but still somewhat common for those retiring from a career in public service.

• Annuities. Though controversial in the personal finance world, an annuity could make sense if you’re worried about outliving your savings.

• Other investment income. Some seniors supplement their retirement and Social Security income with earnings from real estate investments or dividend stocks, for example.

• Part-time work. A part-time job can help you delay dipping into your retirement savings account, giving your money more time to grow.

• Reverse mortgages: If you’ve paid off your home or have significant equity, a reverse mortgage can provide extra income.

You can plan on some expenses going away. You won’t be paying payroll taxes or making retirement contributions, for example, and maybe your mortgage will be paid off. But you generally don’t want to plan for any budget cuts that are too drastic.

Even though some of your expenses will decrease, health care costs eat up a large chunk of senior income, even once you’re eligible for Medicare coverage — and they usually increase much faster than inflation.

We Dare You to Take Control of Your Debt

Up for a debt challenge?

In 10 days, these 10 practical steps could help you get back on the right financial track.

Develop Your Social Security Strategy

You can take your Social Security benefits as early as 62 or as late as age 70. But the earlier you take benefits, the lower your monthly benefits will be. If your retirement funds are lacking, delaying as long as you can is usually the best solution. Taking your benefit at 70 vs. 62 will result in monthly checks that are about 76% higher. However, if you have significant health problems, taking benefits earlier may pay off.

Figure Out How Much You Can Afford to Withdraw

Once you’ve made your retirement budget and estimated how much Social Security you’ll receive, you can estimate how much you’ll be able to safely withdraw from your retirement accounts. A common retirement planning guideline is the 4% rule: You withdraw no more than 4% of your retirement savings in the first year, then adjust the amount for inflation.

If you have a Roth IRA, you can let that money grow as long as you want and then enjoy it tax-free. But you’ll have to take required minimum distributions, or RMDs, beginning at age 73 (previously age 72) if you have a 401(k) or a traditional IRA. These are mandatory distributions based on your life expectancy.

The penalties for not taking them are stiff: You’ll owe the IRS 50% of the amount you were supposed to withdraw for tax years 2022 and prior, though the penalty dropped to 25% for 2023 and subsequent years.

Keep Investing While You’re Working

Avoid taking money out of your retirement accounts while you’re still working. Once you’re over age 59 ½, you won’t pay an early withdrawal penalty, but you want to avoid touching your retirement funds for as long as possible.

Instead, continue to invest in your retirement plans as long as you’re still earning money. But do so cautiously. Keep money out of the stock market if you’ll need it in the next five years or so, since your money doesn’t have much time to recover from a stock market crash in your 60s.