American ExpressAmerican ExpressAmerican ExpressAmerican ExpressAmerican Express
United StatesChange Country

How Much Should You Save for Retirement?

February 18, 2020

Well over half of adult Americans—56 percent, to be precise—are unsure how much they should save for retirement.1 That’s a big challenge. Since it takes time to grow a large enough nest egg to retire comfortably, it’s hard to catch up once you’ve fallen behind—and knowing how much you should save is a key starting point!


Experts offer several different ways to think about this question of how much you should put in your 401(k), Individual Retirement Arrangement (IRA), or other retirement savings.


Setting a Goal: How Much Retirement Savings Do I Need?

Most experts say you should aim for retirement income equal to about 75 percent of your annual pre-tax salary just before you retire. That 75 percent should come from both your savings and what you expect to receive from Social Security.


Let’s apply those guidelines to a 66-year-old who earns $50,000 a year and retires at the end of 2019: he or she would be looking for a retirement income of approximately $37,500, which is 75 percent of $50,000. Social Security would provide $16,800 of that, according to the agency’s online Benefits Calculator. If you follow financial advisors’ traditional “4 percent rule,” which states that a retiree can withdraw 4 percent of their retirement savings every year without too much risk of running out of money, that 66-year-old would need $517,500 in retirement savings when he or she retires.2 That’s because 4 percent of that amount is $20,7000, which, when combined with the Social Security payments, totals up to the expected $37,500 in annual retirement income.


But that example is of someone who is just about to retire. What if you’re much younger? If you’re only 25 years old and earning a $50,000 annual salary, the amount you need to save for retirement is considerably more: $1.6 million.3 This takes into account the amount your income is likely to rise before you reach 67, which is full retirement age for those born in 1960 or later. Of course, you’ll have a bit more than 40 years in which to save.


Reaching Your Goal: Follow the "15 Percent Rule"

Setting a goal is a great first step, but how do you know how much to save for retirement, each year, when you’re in your 20s, 30s, or 40s? Don’t panic—financial advisors have a rule for that, too: the “15 percent rule.” Some financial advisors say saving at least 15 percent of your pre-tax income is the smart way to go. This assumes that you begin saving for retirement at age 25 and continue each year until age 67. If you’re starting later or have missed a year or two, you may need to compensate by saving more in some years.


Where does this 15 percent figure come from? It’s the simple result of a lot of complex analysis and math that aims to help you save enough for retirement over the course of your entire working lifetime. In general, the idea is that by saving 15 percent of your income every year, you’ll have saved enough so that, when you retire, you can withdraw that 4 percent every year to supplement Social Security and help you maintain your lifestyle. Saving 15 percent a year between the ages of 25 and 67 should get you to the amount that you need.4


Tracking Your Progress: Benchmark Your Retirement Savings Progress by Age

To help you know if you’re on the right track, some financial advisors suggest calculating how much you should have saved up for retirement at different ages. To come up with a dollar value, financial planners suggest thinking of your retirement savings in terms of your annual salary. By these benchmarks, at age 30 your retirement savings should equal at least 50 percent of your annual salary. As you get older, the multiple rises as follows:5


  • By age 40, you should have saved two times your annual salary for retirement.
  • By 50, you should have four times your annual salary.
  • By 60, six times.
  • By 67, you should have reached your end goal of around eight times your annual salary.

How to ‘Catch-Up’ Your Retirement Savings

As the research shows, many Americans haven’t saved enough money for retirement and likely need to make up for lost time. According to a recent study, more than one in five Americans (22 percent) have less than $5,000 saved for retirement and 15 percent have no retirement savings at all.6


If you fall into one of these categories, these guidelines may no longer apply. Experts advise putting aside as much of your salary as you possibly can to get back on track. But the most important thing, they say, is not to give up. While difficult, you can still regain at least some of the ground you have lost by trimming your expenses and then saving as much as you can. This may also help you to take advantage of additional savings opportunities that are available to you—such as employer matching contributions to your retirement savings plan at work, or “catch-up” contributions to your 401(k) or IRA. Catch-up contributions are amounts over-and-above the normal maximum annual contribution that the IRS allows you to deduct from your income for tax purposes. You’re eligible to make catch-up contributions once you reach age 50.


The Bottom Line


Most people can comfortably retire by annually saving about 15 percent or more of their salary. By the time you retire, the experts say, you should have around eight times your annual salary. Together with Social Security benefits, this should be enough to provide a retirement income of three dollars for every four that you earned before retiring. In other words, 75 percent of your pre-retirement income.

Related Articles





†Accounts offered by American

Express National Bank. Member FDIC. Each depositor is insured to at least $250,000 per depositor, per insured bank, per ownership category.

Learn More at

*The Annual Percentage Yield (APY) as advertised is accurate as of . Interest rate and APY are subject to change at any time without notice before and after a High Yield Savings Account is opened.


For a CD account, rates are subject to change at any time without notice before the account is funded. The rate received will either be (i) the rate reflected during your application process or (ii) the rate being offered when your CD is funded, whichever is higher. All CDs must be funded within 60 calendar days from the time we approve your application or will be subject to closure. The interest rate and Annual Percentage Yield (APY) will be disclosed in your account-opening documents, which you will receive after completing your account-opening deposit. After a CD is opened, additional deposits to the account are not permitted. Early CD withdrawals may be subject to significant penalties which could cause you to lose some of your principal. Please see the Deposit Account Agreement for additional terms and conditions and Truth-in-Savings disclosures.


**The national rate referenced is from the FDIC's published Monthly Rate Cap Information for Savings deposit products. Visit the FDIC website for details.


‡For purposes of transferring funds, business days are Monday through Friday, excluding holidays. Transfers can be initiated 24/7 via the website or phone, but any transfers initiated after 7:00 PM Eastern Time or on non-business days will begin processing on the next business day. Funds deposited into your account may be subject to holds. See the Funds Availability section of your Deposit Account Agreement for more information.


♢Calculations are estimates of expected interest earned. Actual results may vary, based on various factors such as leap years, timing of deposits, rounding, and variation in interest rates. The first recurring deposit is assumed to begin in the second period after any initial deposit.


§IRA Contributions are subject to aggregate annual limits across all IRA plans held at American Express or other institutions. IRA distributions may be taxed and subject to penalties based on IRS guidelines. Required minimum distribution, if applicable, is only relevant to this IRA plan and does not take into consideration other IRA plans held at American Express or other institutions. Please see for more information. We recommend you consult with a financial or tax advisor when making contributions to and distributions from an IRA plan account.