How Much to Save Per Month for Retirement

Are you looking for some retirement savings planning tips? Let’s back up a little. The most important thing you need to know about retirement planning is that when it comes to retirement income, your number will look different from everyone else’s. What you need to save depends on your lifestyle, goals, and overall financial situation, especially if you are in a higher-income or high-net-worth bracket.

You can’t simply copy what your neighbor or coworker is saving each month and expect it to work for you. Your future expenses, taxes, healthcare costs, the city you live in, the age you decide to retire, and family responsibilities will not be the same as theirs.

Retirement planning has to be personal. So, when you start wondering how much to save per month for retirement, there are a few things you need to consider first. Read this article to know more.

How much should I save for retirement each month?

When you ask how much to save per month for retirement, the answer isn't a straight line. You need to take a few turns, look at a few signposts and milestones, and then decide which road makes the most sense for you and your family. Financial experts have developed various estimates, benchmarks, and rules to help you determine your savings target. They all point in roughly the same direction, but they get there in different ways.

Let’s walk through the most common ones:

1. The “save 10 times your income” rule

This popular guideline says you should aim to have about 10 times your annual income saved by the time you retire. The retirement age is often assumed to be around 67 because that is when you can receive full Social Security benefits.

So, if you earn $400,000, the target is about $4 million. If you earn $550,000 a year, the rule suggests you would want to save around $5.5 million by the time you stop working. If you earn $750,000, the target becomes $7.5 million. And so on and so forth.

The idea behind this rule is simple. If you have been living on hundreds of thousands of dollars per year, you will likely need a similarly large pool of money to keep paying for housing, healthcare, food, and more over a retirement that could last 20 to 30 years.

Now let’s translate that into monthly savings:

• If your goal is 10× of $550,000, you are aiming for $5.5 million.
• If you have 30 years to save, that works out to $183,333 per year or about $15,278 per month before investment growth.

Of course, in real life, you would expect your money to grow through investing. So, you would actually have to put in less than $15,278 per month and hopefully earn positive returns on your investments. So, even if you do not follow the rule to the T, it can give you a rough idea of what you need to do.

2. Saving 10 to 12 times your final salary

This is similar to the first rule but focuses on one very important thing – your final salary. It suggests that by the time you retire, you should have 10 to 12 times your final working-year salary saved.

If you earn $500,000 at the end of your career:

• 10× would be $5 million
• 12× would be $6 million

3. The “80% of your income” rule

This is another rule that many experts agree on. According to this rule, you will need about 80% of your pre-retirement income to maintain your lifestyle in your golden years.

Let’s say you earn $250,000 before retirement. Under this rule, you would aim for about $200,000 per year in retirement income. If you believe you will need $200,000 per year and you plan for a 25-year retirement, you are looking at roughly $5 million of lifetime income.

4. Saving 15% of your income

Many financial experts suggest saving at least 15% of your annual income for retirement, including any employer match you can get from accounts like the 401(k). So, if you earn $500,000 per year, 15% is $75,000 per year, or about $6,250 per month. If your employer matches 5%, you might put in 10% yourself ($50,000 per year), and your employer adds the other 5% ($25,000 per year) to reach a total of $75,000.

If you use this rule, you do not need to calculate your future expenses. You just have to save a percentage of what you are earning right now and let time and compounding do the work. Over 30 years, saving 15% consistently can add up to a significant amount, especially if your investments grow steadily each year.

5. The “$240,000 for every $1,000” rule

Another way to look at retirement savings is this:

For every $1,000 per month you want in retirement, you need about $240,000 saved.

So,

• If you want $2,000 per month, you would need about $480,000
• If you wish to have $4,000 per month, you would need about $960,000
• If you want $5,000 per month, you would need about $1.2 million

This rule helps you work backwards to your goal. For example, if you know you will need $1.2 million per year in retirement, that is $100,000 per month. Now, all you do is multiply $100,000 by 240, and you get $24 million as a target.

6. Retirement savings goals by age

You can also use age-based benchmarks. These help you check whether you are on track along the way. If you decide to follow this, you need to set retirement savings goals by age. Here’s what this implies:

• By the time you turn 30, you should have 1× your annual income saved.
• By the time you turn 40, you should have 3× your yearly income saved.
• By the time you turn 50, you should have 6× your annual income saved.
• By the time you turn 60, you should have 8× your yearly income saved.

So, if you earn $1,000,000 per year:

• At 30, you should aim for $1,000,000 saved
• At 40, you should aim for $3,000,000 saved
• At 50, you should aim for $6,000,000 saved
• At 60, you should aim for $8,000,000 saved

You can use these benchmarks as targets and aim to reach them. You may or may not actually reach them, but these figures can guide you in the right direction.

Putting it all together, all of these retirement savings planning tips and rules are trying to answer the same question – How much to save per month for retirement?

Some focus on your income, some focus on your savings. Others focus on your saving habits, while a few focus on your lifestyle. You can pick any one of these rules. You also do not have to choose just one. You can use a few of them together to get a clearer picture.

For example, say you are using the 15% rule. At the same time, you also use the age-based benchmark that says you are not on track. In this case, you can try to catch up and save more.

Things to keep in mind when employing these retirement savings planning tips and rules

1. Consider all sources of income

No matter which rule you finally try, just make sure not to focus only on how much you are saving each month. In reality, your retirement income will come from several different places.

Let’s say you save 15% of your income every month for 30 years. But it will not be the only money you live on in retirement. High-net-worth individuals have multiple investment accounts, real estate holdings, and business equity. You will likely also receive Social Security benefits. Some people may have pensions from past employers or other alternative assets and investments outside of their retirement accounts. In some cases, there may even be an inheritance or other financial support later in life.

All of these sources will work together in retirement. That is why it is important not to panic even if your personal savings are smaller than the rule of thumb you are referring to.

2. Do not ignore inflation

Inflation is one of the most important factors to consider when planning for retirement. High-net-worth individuals are affected by inflation just as everyone else is. A high income does not make you immune to inflation.

The problem is that many retirement rules and formulas do not always explain how inflation is built in. Some of them assume a certain rate of inflation, while others do not account for future price increases. This is why you may have to look at inflation on your own. You can work with a financial advisor to get some help. They can help you see what your savings will be like in the future.

Some of your retirement savings can naturally protect you from inflation. For example, money invested in stocks through a 401(k) or an Individual Retirement Account (IRA) may grow faster than inflation over long periods. However, income from sources such as Social Security does not always keep pace with rising costs. That is why you need a retirement plan that looks at all income streams and takes inflation seriously from the very start.

3. Customize your retirement planning strategy

Retirement planning is not the same for everyone. You need to take into account your personal goals, lifestyle, and family structure. It is important to be clear about what you want your retirement to look like.

Will it be as comfortable as your current life? Do you have a spouse who will also rely on your savings? Will your children or grandchildren depend on you for financial support? Are you paying, or are you expecting to pay, alimony or child support? All of these obligations affect how much you can save today and how much you will need later.

All these factors should be considered while planning your retirement. Working with a financial advisor can help you understand what steps you need to take. A monthly retirement savings calculator can also be useful in estimating how much you should be saving to reach your retirement goals.

How can you start saving for the retirement you want?

The most important thing you can do is start. You do not need to have everything figured out on day one. What really matters is being consistent. Saving every month and increasing it over time can work in your favor. It also helps to pick one or two simple rules and use them as checkpoints. For example, you might follow the 15% savings rule or the age-based benchmarks discussed earlier in this article. Or simply aim for a target of 10x or 12x. No matter what you choose, you do not have to follow them perfectly, but they give you a way to check whether you are roughly on track.

Using tools like a monthly retirement savings calculator can make this much easier. You can also consider working with a financial advisor. An advisor can help you choose the right rule and strategy based on your life, income, and goals. If you are not sure where to start, you may explore our financial advisor directory to connect with a professional who fits your needs.

Frequently Asked Questions (FAQs) about how much to save per month for retirement

1. Do I need a financial advisor if I follow these rules?

Yes, you may still want one. Retirement savings rules are helpful, but they are general guidelines. They do not take into account your unique lifestyle, family situation, or investment options. A financial advisor can create a customized plan for you, ensuring you save the right amount.

2. How do I choose the right rule or target for myself?

Start by evaluating your personal needs and retirement goals. Once you understand your goals, you can select the savings rule or target that aligns with your plans.

3. Do I need to worry about retirement savings as a high-net-worth individual?

Absolutely. Even if you currently earn a high income, the future is unpredictable. Markets can fluctuate, you may suffer a loss, your family situation may change, inflation can rise, and a lot more can happen between now and when you retire. So, do not underestimate the importance of planning for your retirement.

4. How much should I save for retirement each month?

The right amount depends on your present income and expenses, your retirement goals, and other similar factors. Working with a financial advisor can help you understand the right figure for your needs.