How Much Should I Save for Retirement? The 4% Rule and 15% Guideline

Start from spending, not income

Your retirement number depends on what you will spend, not what you earn. The standard shortcut: multiply expected annual retirement spending by 25.

Target nest egg = annual spending x 25

Spend $60,000 a year and expect $24,000 from Social Security? You need to cover $36,000 from savings, so 36,000 x 25 = $900,000 — not $1.5 million.

Where 25x comes from: the 4% rule

Twenty-five times spending is just the inverse of a 4% withdrawal rate. The rule, from the 1990s Trinity study, says: withdraw 4% of your balance in year one, adjust that dollar amount for inflation each year after, and a stock-heavy portfolio historically survived 30 years in almost every US historical window.

The assumptions matter:

• 30-year horizon. Retiring at 50 makes 4% aggressive; 3.25-3.5% is the safer figure.
• A 50-75% equity allocation. An all-bond portfolio does not support 4%.
• US historical returns. International data is less forgiving.
• No fees. Subtract your expense ratios from the withdrawal rate.

Critics also note that real retirees do not spend on autopilot — they cut back in bad years, which sharply improves survival odds. Treat 4% as a planning anchor, not a guarantee.

The 15% guideline

Working backward from 25x, most households need to save 15% of gross income — including any employer match — from their mid-20s to reach a comparable lifestyle at 65. Start at 35 instead and the figure rises to roughly 20-23%. Start at 45 and it approaches 30%.

Age-based milestones

These assume you save continuously and retire around 67. Being behind one milestone is recoverable; being behind three means changing the savings rate, the retirement date, or the spending target.

Worked example

Maya is 32, earns $85,000, and has $60,000 saved. She saves 15% ($12,750/year including a 4% match) and assumes a 6% real return.

After 33 years, her existing balance grows to 60,000 x 1.06^33 = $408,000. Her contributions grow to 12,750 x ((1.06^33 - 1) / 0.06) = $1,180,000. Total: about $1.59 million in today's dollars.

At 4%, that supports roughly $63,000/year before Social Security — comfortably above her current take-home. She is on track.

FAQ

Is the 4% rule still valid? As a planning benchmark, yes. For early retirees or bond-heavy portfolios, plan closer to 3.25-3.5% and stay willing to trim spending in down markets.

How much should I have saved by 40? About three times your salary. If you are short, raising your savings rate by 3-5 points in your 40s closes a surprising amount of the gap.

Does the employer match count toward the 15%? Yes. A 15% target that includes a 4-5% match means you personally contribute 10-11%.

Model your own path with the Retirement Calculator and check contribution growth with the 401(k) Calculator. For a quick sanity check on how long money doubles, see the Rule of 72.

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*Put real numbers behind the target: run your plan through the Retirement Calculator.*