How much should you save for retirement? Goals for each decade

For most of life, retirement seems off in the distance. Anticipating at any point in your working life how much you'll need to retire doesn't feel easy to nail down. After all, your needs in retirement likely will be different from what they are now considering potential lifestyle changes, inflation, interest rates, investment performance, taxes and other factors.

Despite this fuzziness about the future, there are general guidelines for how much retirement savings to have based on your age. These broad-stroke averages can help give you some guideposts, but certain tools and considerations can help you determine your individual retirement savings timeline. Let's take a look at benchmarks, calculators and factors to consider to help you know how much you should have saved for retirement.

The standard recommended total to save for retirement is about seven to eight times your yearly income. For someone making $50,000 a year, that would mean saving between $350,000 and $400,000 in retirement accounts. A person bringing in $150,000 a year would want to save between $1,050,00 and $1,200,000.

Having a generalized end goal is a solid starting point, but it's not the only benchmark. It's helpful to break big goals into smaller ones that feel more achievable. Saving up seven or eight times your salary when you've just settled into your first big job may feel impossible. But consider that when you're younger, you probably aren't yet at your peak income earnings level, and your savings and investment accounts haven't had much time to grow. By staying consistent with your retirement contributions, you'll gain ground toward your end goal, especially if you stick to a long-term investment strategy.

Here are some practical considerations for each decade of working life to help guide your savings strategy:

• In your 30s. During these earlier working years, you're at an OK pace if you have at least one year's salary saved up for retirement. In most cases, the money you can put away in your 30s and leave untouched will be worth much more later because you'll benefit from compound interest.

• In your 40s. Your 40s are a pivotal point in your planning. You may have many competing financial priorities—owning a home or saving to put a child through college on top of building a nest egg—but you're better off making some progress than none. At this age, it's recommended to work toward your retirement accounts holding three to five times your annual income.

• In your 50s. Aim to have accumulated five to six times your annual salary in your 50s. It's a smart time to gain clarity on exactly how much retirement savings is right for you and consider factors like when you plan to retire. If you're just now beginning to save for retirement, you might feel like you're too late. But you have unique benefits, such as catch-up contribution limits, to help you on your way.
  
• In your 60s. At this age, closing in on the target of at least seven to eight times your salary is ideal. With retirement so close, you'll need to ensure you'll have enough to transition from saving to spending. Be sure to consider your readiness to retire within a few years and details like whether you'll have a pension or can access a life insurance policy with cash value.

If you aren't hitting these retirement benchmarks—don't panic. The Federal Reserve found that while 81% of people ages 45–59 have some retirement savings, far fewer people felt they actually were on track for retirement.

Keep in mind that people have different priorities at different stages of life, and what works for someone else might not work for you. If you want to have a better idea about where you are on your retirement timeline, you can take stock of your situation and dig into the numbers a bit more personally.

Many personal factors affect your own retirement savings goal. Tools like our Retirement Income Calculator can help you generate your personalized savings targets.

Putting in the basics of how much savings you have now, your expected contributions in the future and your yearly salary can help you see what retirement savings look like and how long that money will last. You also can adjust the age of when you want to retire and play with numbers to see how you might reach those goals by adjusting your monthly contributions.

Here are three additional tips for calculator inputs:

Your annual income is the basis for at least two elements of your retirement savings plan:

• You're limited by your income when it comes to how much you can save. If you cannot save money month to month, your priority may be reducing spending or increasing your income.

• Your annual income gives you insight into what you might need to live on in retirement, Your lifestyle most likely will change. But as you saw above, the calculations for the amount to save for retirement are often expressed in terms of saving multiples of your yearly income.

• The amount you're saving per month is also key. After inputting your current savings amount into the calculator, consider experimenting with $50 more or $100 more per month. Even small shifts in long-term savings habits can have a big impact.

Getting yourself set up to have retirement income is important, but how much you intend to spend after you stop working is also a big part of your retirement calculations.

To estimate your expenses as closely as possible, review what you typically spend now for a variety of living costs and debt obligations vs. your income now, and then you can draw up a sample budget that anticipates how your spending and income levels might change when you're retired.

Some factors to incorporate into a sample monthly or annual retirement budget include:

• Housing and maintenance costs, such as rent or mortgage, property taxes and repairs

• Everyday expenses for basics, including groceries, utilities, and clothing

• Health care, which can include insurance premiums, prescription costs and long-term care needs

• Lifestyle adjustments, such as traveling more, downsizing your home or working while retired

• Entertainment and discretionary spending, like dining out, going to events or exploring hobbies

• Charitable giving and any financial support for loved ones, like college savings or a first-home down payment

Each year, your portfolio generates a potential rate of return somewhere between 2% and 10%, depending on how it is invested. During retirement, you'll be withdrawing portions of your savings and will want to evaluate what makes a reasonable withdrawal amount each year. This needs to be with an eye of continued savings growth that lasts as long as you need it. The retirement calculator's graph shows your annual withdrawal as a dollar amount, but you also may see it as a percentage of your total savings in other places.

Read more about retirement withdrawal strategies, including the 4% rule

Are you prepared for taxes in retirement?

Planning for retirement involves more than just saving money—you need to understand how taxes will impact those savings. Our guide will help you understand how to manage your retirement income in a tax-efficient manner, so you can make the most out of your hard-earned savings.

Get the Guide to Taxes in Retirement

What if your savings fall short compared to the decade milestones and your own retirement calculator results? If you're not where you want to be on retirement savings, here are some ways to make yourself more prepared for retirement:

• Increase your savings in your employer's retirement plan and take advantage of any matching funds. These plans include 401(k), 403(b) and 457(b) plans. If you can, save up to the annual contribution limit, which is $23,000 in 2024. If you're 50 or older, you also can take advantage of catch-up contributions to boost your retirement savings efforts.

• Consider investing individual retirement accounts, or IRAs, to boost your workplace retirement savings or other funds with earnings that compound over time and tax advantages you can enjoy now or in the future.

• Take advantage of other retirement investments. Annuities and life insurance can complement a comprehensive retirement plan.

Even if you hit your retirement savings goals, you may face risks to a comfortable retirement, so incorporating a buffer to protect your retirement finances is wise. Here's an overview of common retirement risks:

• Market volatility. Rising and falling markets are an unavoidable part of investing. However, managing your retirement portfolio can help you deal with a volatile market.

• Tax implications. Taxes can significantly affect your retirement savings and the income you will draw from them. Managing your retirement funds tax-efficiently can help you maximize your hard-earned savings.

• Health care costs. According to recent surveys, the average couple will spend around $300,000 on healthcare expenses in retirement. Be sure to consider how you will pay for these costs during retirement.

• Inflation. Surges in the cost of goods and services can devastate how much of your expenses your retirement savings will cover. Learn how you can reduce your retirement inflation risk.

• Outliving your savings. Living a long life is a blessing, but also could put your retirement savings at risk. In your retirement planning, you should account for this longevity risk.

Another consideration is the evolution of your investment risk tolerance over the years. This can impact how much of a return you can expect and can affect what you plan on saving at different stages of your life. A financial advisor can help you identify this aspect of your investment personality and discuss how it affects your overall retirement plan.

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