How Much Should I Save Each Month for Retirement?


You’re young, and you’ve got your whole life in front of you. Why should you be worried about retirement? 

This is unfortunate many young people have when it comes to planning for the rest of their lives. But putting money aside early for retirement to come is one of the most vital steps a young person can take. Having money set aside can ensure a brighter future and more stable living. 

You’re probably wondering: how much should I save each month in order to retire well? It’s a question many people face. Read on, and we’ll walk you through what you need to know about proper retirement budgeting. 

How Much Is Enough?

There isn’t one right answer to the question of how much a person should be saving for retirement. More than likely, different financial experts would have different answers to that question.

A good rule of thumb that many agree on, however, is saving somewhere around 15% of your pre-tax income during each calendar year. If you do this from age 25 onward, that should give you enough to build a healthy retirement base and keep your day-to-day living more than comfortable.

Why is that the right number? It’s based on a lot of research on the general working class of America. Most people will need to have about 60% to 80% of their preretirement income in order to maintain the living situation they are accustomed to.

Proper retirement planning means figuring out how to get this kind of total into your savings account each month. It might not always be easy. Luckily, there are steps you can take to ensure that you are working towards that goal without sinking yourself in the present day.

Why Starting Early Matters

Many young people don’t want to think about retirement. Especially today, many are burdened by college debt and can’t even afford to think about saving for something many years away.

But saving early is one of the most key tenants of a proper retirement plan. The earlier you start putting money in a retirement account, the more it has time and space to grow. Your investments will rise over time, overcome the downturns of the market, and become more money.

The earlier you start saving for retirement, the less money you’ll have to put in overall. Yes, it can be a challenge to find space in your budget to put towards your savings at a young age. But it doesn’t have to be impossible.

Start small, put away what you can, and you can always increase the percentage you save later as you begin to make more money.

Know When You Plan To Retire

As you approach retirement, it’s important to consider when you might stop working. Most people stop working around the age of 67, which is when social security benefits kick in. However, you need to consider whether or not this will be the situation for you. 

Many people end up retiring earlier than 67. If this might be the case for you, you might actually need to increase the percentage that you’re putting into your savings each year. There will be less time for your investments to grow, and thus more money you’ll need to put in to reach the recommended level.

That being said, the inverse is also true. If you don’t think you’ll end up retiring until after the age of 67, you have more years that you can be working, saving, and watching your investments grow. 

If you think you could be working through your 70s, then you can actually lower the percentage that you save each year. That being said, it’s better to be cautious! You never know what might happen to you in the decades to come, and it’s best to plan for the worst. You might not get to work that late in life even if you want to.

Let Others Help 

That 15% doesn’t have to come all from yourself, either. If you have a 401(k) from your workplace employer, it can be a lot easier to hit this 15% marker each year. Many of these accounts have an employer match program, meaning your employer will be contributing to your account. In a way, it’s like free money! 

If your employer offers a 5% match-for-match on the 401(k) contributions, you really only need to save 10% of your income to hit that eventual 15%. That can make things a whole lot easier! 

You can also utilize tax-advantaged savings accounts that can save you money. When you put money into a 401(k) or a ROTH IRA, it can be considered un-taxed income. You can write these contributions off your taxes and receive a discount as a result. Only when you take this money out far down the line, during retirement, will the money be taxed.

By this point, it’s probably grown so much with interest and investment that it will be well worth it. That’s why it is always a good idea to try to donate the maximum possible contribution to your accounts each year. That maximum is even increasing in 2020. Doing this can help to ensure that you’ll have a stable future for your golden years.

How Much Should I Save Each Month For Retirement?

‘How much should I save each month for retirement?’ is one of the more common questions among working people in America. The answer may vary from person to person, but the above information should help you determine what the right amount would be for you. 

Have more personal finance questions? Check out our blog for more information. 

Jeff Campbell

Jeff Campbell is a husband, father, martial artist, budget-master, Disney-addict, musician, and recovering foodie having spent over 2 decades as a leader for Whole Foods Market. Click to learn more about me

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