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How To Calculate If You're Saving Enough For Retirement

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Think you have enough money saved for a comfortable retirement? If so, you are definitely in the minority.

Most of America is woefully unprepared for retirement.


  • 1 in 5 have no retirement savings

  • 1 in 3 Baby Boomers have less than $25,000 saved for retirement

  • 38 percent of working Americans expect to retire at age 70 mainly because they’ll need the money

While many people say they’ve started saving more for retirement, it’s still difficult to figure out exactly how much in average retirement savings you’ll need each decade to retire comfortably when the time comes to hang it up.

Use the information below as a rough guide to get an idea of what your average retirement savings should look like every five years.


Average Retirement Income By Age

It’s no secret that starting early is the main factor in meeting retirement savings goals. Compound interest is the best weapon in your savings arsenal.

Also, there’s a rough rule of thumb that you’ll need about 70 to 80 percent of your peak earnings to maintain the same standard of living in retirement – but that doesn’t include major life changes. Factors such as large medical expenses or paying for managed care as you or a loved one enters the twilight of your lives will quickly deplete your retirement nest egg.

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Social Security clearly won’t be enough to carry the day, either. If retirees take into account that the Social Security Administration predicts its reserve funds will be depleted by 2032, leaving beneficiaries with just three-quarters of scheduled payments, the importance of saving for a comfortable retirement comes into much sharper focus.

An easy way to determine what your retirement portfolio should look like by age is to determine what percentage of your current salary you should save annually. Starting in your 20s, if you can put one-quarter of your gross annual salary into a 401(k) and combine that with an employer match, you should be able to reach your current annual salary by age 30. As you continue to save through major age milestones, and your 401(k) investments grow thanks to the power of compound interest, your annual average savings rate would grow to look like this:


  • How much to save for retirement by age 35: 2x your annual salary

  • How much to save for retirement by age 40: 3x your annual salary

  • How much to save for retirement by age 45: 4x your annual salary

  • How much to save for retirement by age 50: 5x your annual salary

  • How much to save for retirement by age 55: 6x your annual salary

  • How much to save for retirement by age 60: 7x your annual salary

  • How much to save for retirement by age 65: 8x your annual salary

Putting away a full 25 percent of your annual salary can be a tough ask, especially for younger generations who haven’t quite reached their full earning potential. Regardless of current or future earnings, saving for retirement requires dedication, careful planning and strict management of personal finances, especially for people just starting their work careers.


Key Takeaways

These guidelines can help ensure you’ve put away enough money for your retirement.

  • You’ve saved enough that you have an 80 percent chance your retirement nest egg will last at least 30 years from the date you actually retire

  • Your retirement portfolio averages annual growth between 6 and 7 percent

  • You save a minimum of 10 percent of your annual income each year until you reach retirement age.

While there’s no concrete formula for retirement financial success – sharp declines in the stock market can quickly erase tens of thousands of your retirement dollars in a matter of a few bear trading sessions – adhering to these principles gives you a better chance at weathering economic ups-and-downs and coming out golden in your retirement years.


Learn more in The Rocket Dollar Guide to Self-Directed Retirement Plans


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