How Much Should You Save for Retirement?

While any savings is better than none, carefully consider your future needs.
While any savings is better than none, carefully consider your future needs. (Image: Piggy Bank image by Daniel Wiedemann from

For many, thinking about contributions to a retirement account is not a source of great pleasure. However, calculating the amount you'll need to live comfortably into your retirement is vital, and it's important to start making those contributions as early as possible. Your hard work will pay off when you have the means to keep up your lifestyle into your retirement years.


Start backward, by calculating the amount of retirement income you will need each year to support your lifestyle. While many financial experts suggest a range between 70 to 90 percent of your salary, CNN Money writer Water Updegrave suggests shooting for the range of 90 to 100 percent. To figure out how much you would need to save to withdraw this amount at 4 percent of the total value of your retirement over the course of 30 years, multiply the annual income by 25. So, if you need $40,000 each year over 30 years, you will need to save $1 million.


It's important to take other factors into consideration when calculating your portion of savings for retirement as well. Some income will come from Social Security, while more may come from a pension. You may adjust your calculation by figuring out the total amount of income support you will receive from these sources and subtracting them from your projected annual income target. For example, taking the $40,000 amount from the section above, if you receive $15,000 per year from Social Security and $5,000 from a pension, then your own contributions will total $20,000. That means that you, personally, need to save $500,000 by the time you retire.


A lot of people have heard the idiom that you should aim to save 10 percent of your income for retirement. However, with so many factors to consider, such as the length of time you have to save, contributions from employers, Social Security, pay increases and the possibility of future job loss, it's vital to sit down and do the calculations as soon as possible, to begin contributing the appropriate amount to your retirement account.


For those who want additional help figuring out how much to save, and also for those who have complicated financial situations, it may be helpful to consult with a financial adviser. Trained professionals may suggest situations you hadn't thought of or present you with options that you wouldn't come across on your own. Make sure the starting point for your discussion with your adviser is focused on your goals, and that the advice you receive grows from there.

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