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How Much to Save for Retirement – Planning Strategies for Every Age



You’ve heard plenty of lame one-liners and empty tokens of advice: Save 15% of your income to retire comfortably; save two grand per month to retire a millionaire; save a million dollars to retire comfortably; plan to withdraw 4% annually in retirement.

Financial advice isn’t helpful if all you get are platitudes and generalizations. Too often, experts toss around figures about how much you need to save and invest, without considering your long-term personal financial goals.

The elements of your investing style – your concerns, considerations, circumstances, habits, and risk tolerance – are uniquely your own. And they always will be. It’s up to you, then, to see beyond the clichés and generalizations and decide the best moves for your financial future.

Personalized Retirement Plan

If you want to retire early, you’re going to have to make a lot of short-term sacrifices. If you’re pursuing a pension, then you need to analyze your accounts and your schedule. And if you’re someone who doesn’t intend to fully retire, then you may not be worrying as much about retirement accounts. While no one can tell you the perfect portfolio asset allocations or how much to save, some benchmarks can help you determine whether or not you’re on the right track on your financial journey.

Personally, my strategy and goals have changed a great deal over the last few years. Yours probably will too, so how can you seek advice about your scenario and keep things flexible too?

Check out this look at three different retirement ages: early (age 50), middle (age 60), and late (age 70); as well as three portfolio benchmarks: one million dollars, two million dollars, and three million dollars. You’ll see how much you’ll need to save each month to reach each age with each savings target. For this example, consider two assumptions:

  • A conservative 7.5% rate of return – based on a middle ground between historical returns of stocks (10% for every 20-year period since 1800) and bonds (roughly 6% for AAA bonds since 1919)
  • Starting your investment portfolio at age 25

Early Retirement (Age 50)

Early retirement sounds like a dream, but you’ll face plenty of real roadblocks, like being ineligible for Social Security and Medicare, and not being able to access your tax-sheltered investment accounts without stiff penalties. If you intend to retire before you’re 59 1/2, you need to invest more heavily in dividend-paying stocks and traditional taxable accounts, so you won’t face the penalties and restrictions of tax-sheltered accounts. And since hopefully you’ll have many healthy, productive years ahead of you, you need to build a nest egg that can last.

  • To retire at age 50 with one million dollars: Save $1,250 a month.
  • To retire at age 50 with two million dollars: Save $2,500 a month.
  • To retire at age 50 with three million dollars: Save $3,750 a month.

Mid-Range Retirement (Age 60)

Though it’s looking more difficult, retiring at age 60 is probably more realistic for you than packing it in at 50. Not only will you be able to withdraw from your tax-sheltered 401k and Roth IRA accounts without penalty, you’ll also be eligible for Social Security and Medicare benefits much sooner than those who retire at age 50. And don’t forget, while you were working for the extra ten years, your compounding interest helped your accounts grow significantly.

  • To retire at age 60 with one million dollars: Save $500 a month.
  • To retire at age 60 with two million dollars: Save $1,000 a month.
  • To retire at age 60 with three million dollars: Save $1,500 a month.

Late Retirement (Age 70)

If you love your job, or if you just don’t like the idea of golfing and bouncing your grandkids on your knee, take comfort in the fact that by delaying your retirement until age 70, you’ll not only be eligible for the fattest Social Security check, but also full Medicare coverage. You will also have given your nest egg a great deal more time to grow and mature, meaning you’ll have to defer much less than your peers who retired early did.

  • To retire at age 70 with one million dollars: Save $250 a month.
  • To retire at age 70 with two million dollars: Save $500 a month.
  • To retire at age 70 with three million dollars: Save $750 a month.

Final Word

Like the writers who have covered this topic and who will write about it in the future, I admit I’ve oversimplified a complicated process to provide some general examples. Of course many factors will play into all of your family’s financial plans and choices. But the factors and target numbers in this post will help you set your goals, and then adjust them when your situation changes.

Now that you have an outline of how much you should try to squirrel away, the next step is to figure out your savings strategy: How much will you put in a tax advantaged account (i.e. maximum 401k and Roth IRA contribution limits) vs. taxable accounts?

What’s your planned retirement age? Are your accounts on the right path? Share your story in comments below.

Pat S
Pat S is an active duty military officer. On his off time he enjoys working out, reading, writing and spending time with his dog. Pat became interested in personal finance after several costly mistakes early in his military career that could have been avoided by a basic understanding of personal finance.

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