How much is enough to save for retirement? It's the million-dollar (or more) question every pre-retiree is asking, and it can be incredibly confusing and overwhelming to answer.
I've come across many articles, videos and statistics about how much you need to save to retire comfortably. Clients often come to me for guidance on this.
Sometimes the guideline is to be able to generate a certain income level with your investments. The number I frequently hear is associated with that target is 80% to 90% of your pre-retirement income.
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Others say there's a magic savings number. For some, a happy retirement is worth $1 million. For others, it's a multiple of the soon-to-be retiree's employment income.
So, which is it? Should you focus on replacing a certain percentage of your pre-retirement income? Or should you focus on saving a certain amount?
Let's take a look at how three popular choices break down.
1. Percentage of income: 80% to 90% of pre-retirement income
I think the real question associated with aiming for an income level is determining whether you could pay your bills with 10% to 20% less pay. For most people, the answer is probably not.
Most of us are used to anticipating a 3% to 4% annual raise pre-retirement. So, a 10% to 20% drop in income would be challenging to live off.
The reality is — the same monthly bills that existed pre-retirement will exist post-retirement. While some associated costs may go away, such as 401(k) contributions and/or workday expenses like a bus ticket or a purchased lunch, there are often new expenses that enter monthly retirement budgets.
Typically, new expenses come in the form of entertainment. When you are retired, every day is Saturday. Just think about how you spend your money during the workday vs on a day off.
As a result, breaking down the numbers, if you are fortunate to have the ability to max out your 401(k) every year, aiming to generate an annual income that is 80% to 90% of your pre-retirement salary, may be the method that works best for you. If not, it might be a much tighter squeeze.
2. Multiple of working income: 12 times your pre-retirement salary
Some experts also claim you should have 12 times your annual working income in retirement savings. For high earners, this is a substantial number.
As an example of what this value will look like, the median weekly earnings for workers in the first quarter of 2025 were $1,194, according to figures released by the Bureau of Labor Statistics in April 2025. Fifty-two weeks of that amount gets you $62,088 a year. If you multiply that by 12, you get $745,056, and let's assume that is in a retirement account.
In financial planning, a common withdrawal strategy is taking 4% of your retirement savings out each year in retirement. If you did this on the $745,056, that equals $29,802.24 per year, leaving this worker very short of their employment income.
If you factor in Social Security, that may be enough to make retirement work, but it is an uncertain strategy that may not be achievable because of the worker's ability to save, their risk tolerance, time horizon, inflation or a combination of any of these factors.
3. Set savings value: $1 million
Other specialists recommend saving $1 million for retirement. This is a wonderful savings accomplishment to have achieved. It makes retirement math simpler…, but is it necessary? Is it not enough? It all depends on your monthly expenses.
If we apply the 4% withdrawal rule to this nest egg sum, the annual amount comes out to $40,000 per year. If you add this to your estimated annual Social Security pay, you may find the number to be greater than, less than or equal to your working pay.
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Similarly, where the million dollars is allocated matters as it can have drastic tax implications, shrinking or inflating the actual lump sum.
If someone's nest egg is all Roth IRA contributions, it is a bigger sum in practice, because taxes have already been taken out. If the sum is in a traditional investment vehicle, taxation will reduce that amount as it is implemented in retirement.
So where does that leave us? In reality, there likely isn't one set number that will work for everyone in retirement. Knowing your goals and priorities pre- and post-retirement is a more worthwhile pursuit.
My philosophy
My goal with clients is usually to set them up with a similar amount of retirement income as they were earning pre-retirement.
Unfortunately, this method may not lend itself well to a perfect round number and varies immensely from person to person, but it is one of the best ways to create a safety net that is customizable and tailored to each individual.
Fortunately, there are many retirement planning vehicles available in the market that can help each investor pursue their goal.
In order to identify what makes the most sense for you and your financial plan, work with a qualified financial professional to determine your risk profile and carve out ways to make your money work for you.
Content in this article is for general information only and not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. CORP-8058592.1-0625-0727
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