How Much to Save for Retirement at Every Age

"How much do I need to retire?" has no single answer, which is why the question gets deflected so often. But it does have a useful structure, and running the numbers even roughly is far better than not knowing at all.

Working out the target

Start from spending rather than income. Retirement usually removes some costs — commuting, work clothes, the mortgage if it is paid off, and the retirement saving itself — while adding others, particularly healthcare and travel early on. A common planning assumption is that you need 70–80% of pre-retirement income, though people who have paid off a mortgage often need less and people planning significant travel often need more.

Then convert an annual income into a capital sum using the 4% rule: a portfolio can support withdrawals of about 4% in the first year, rising with inflation thereafter, with a high probability of lasting thirty years. This came from William Bengen's 1994 analysis of US market history and the 1998 Trinity Study that followed.

Annual income needed ÷ 0.04 = the capital sum. Or, more simply, multiply by 25.

So $24,000 a year from a portfolio requires roughly $600,000. If a state pension or other guaranteed income covers part of your spending, you only need to fund the remainder — which is why checking your state pension forecast is usually the single most valuable half hour in retirement planning.

Benchmarks by age

Fidelity's widely cited salary multiples give a quick reality check:

These assume saving about 15% of gross income from age 25, investing mostly in equities while young, and retiring at 67. Change any of those and the multiples change. If you are behind, that is information about what to do next, not a verdict — most people are behind these benchmarks, and the response that works is raising the contribution rate rather than despairing at the number.

What delay actually costs

Here is the same $600,000 target, assuming a 5% annual return after inflation, starting at different ages and retiring at 67:

Waiting from 25 to 45 nearly quadruples the monthly requirement and almost doubles the total you must contribute, for the identical outcome. That difference is compounding doing the work that your contributions otherwise have to do.

What to focus on at each stage

Twenties

Capture any employer match in full — it is the highest-return move available to you, ahead of everything else. Clear high-rate consumer debt. Get a starter emergency fund in place. Then start investing at whatever percentage you can sustain, and raise it with every pay rise. Amounts are small; time is enormous.

Thirties

Typically the decade where income rises and so do commitments. The defining risk here is lifestyle inflation absorbing every increase. A simple rule works well: half of every pay rise goes to savings and investments, half to life. Also the point at which insurance matters — dependants and a mortgage change what happens if income stops.

Forties

Peak earning years for many, and the last decade in which compounding still does substantial work. Check the benchmark, and if you are behind, treat contribution increases as the lever. Consolidate old workplace pensions if the charges are high — but check for guaranteed benefits before transferring, as covered in how fees eat returns.

Fifties

Get a concrete forecast rather than a benchmark: state pension projection, each pension's projected value, and target spending. Many countries allow higher contribution limits after 50, which is worth checking. Begin thinking about the mix between growth and stability, without abandoning growth entirely — a retirement starting at 65 may still need to fund thirty years.

Sixties and beyond

The focus shifts from accumulating to sequencing: which pots to draw from and in what order, how to handle tax, and how to avoid selling investments during a market fall in the early years — the risk that does the most damage to retirement portfolios. Holding one to two years of spending in cash addresses much of it. This is the stage where paid advice most often justifies its cost.

If you are behind

1. Raise the contribution rate now, not next year. Even three percentage points changes the projection materially over a decade.
2. Work out whether a later retirement is acceptable. Each extra working year adds contributions, adds growth, and removes a year of withdrawals — it is the single most powerful adjustment available.
3. Cut fees. A percentage point of charges is worth roughly a percentage point of extra contributions, and it costs you nothing in lifestyle.
4. Consider what you will genuinely spend. Many people target 80% of current income out of habit; the honest figure, especially with a mortgage repaid, is often lower.
5. Do not reach for higher risk to catch up. Increasing risk widens the range of outcomes in both directions, and there is less time to recover from the bad end of it.

Common questions