How Much Should You Save Per Month?

save each month

A Real Life Example…

Nearly everyone has heard the old pieces of advice “Focus on savings! Build a nest egg! Save for retirement!” But what, specifically, does that mean for your monthly budget? Is there a one-size-fits-all answer?


But don’t worry, there’s still some great advice out there about figuring out your own situation and knowing what the right monthly number is for you.

Below is an answer when a woman wrote in to CNBC asking if she and her husband, who had been saving $300 per month for 6 years, were on the right track to retirement, or if they needed to change their per month

Getting an early jump on savings and starting small can result in big savings down the road. A 25-year-old who opens a Roth IRA with $1,000 and contributes $100 per month for 40 years will accumulate more than $250,000 tax-free by retirement at age 65, according to calculations by T. Rowe Price.

So far, you’ve done a very impressive job of being disciplined about your saving.

The result: In the last six years, you and your husband have each contributed $21,600 to your Roth IRAs—and that doesn’t include the amount of money that you may have earned on your investments. You have a nice little nest egg already. So with regular contributions of $300 a month, will it be enough to retire?
It may be, but there are many variables.

Here are just a few questions: What’s your current income? What percentage of your income are you saving for retirement right now? How might your income change over the years, and will you be able to save more?

Ultimately, how much money you’ll need in retirement will also depend on these three factors:

1. When you retire
2. Where you retire
3. What you plan to do in retirement

You may still want to do something in your late 60s and early 70s that generates a little income.

If you want a general benchmark—a number to strive for—check out these “guideposts” suggested by Fidelity, the nation’s leading retirement plan provider:

  • Age 35: Try to have saved at least as much as your current salary by the time you are 35.
  • Age 45: Have three times your salary saved by the time you’re 45.
  • Age 55: Save at least five times your salary by your 55th birthday
  • Age 67: When it’s time to retire, your goal should be to have saved at least eight times your ending salary.

– via CNBC

A More General Answer

If you want a quicker number to aim for before figuring out your own unique needs, a common answer is 15% of your pretax income. Why? The explanation below will show why this is a great starting point until you know your exact needs for the future.

Our rule of thumb: Aim to save at least a total of 15% of your pretax income each year from age 25 to age 67. Together with other steps, it should help ensure that you have enough income to maintain your current lifestyle in retirement. While 15% may seem like a lot, if you have a 401(k) or other workplace retirement account with an employer match or profit sharing, that employer match or profit sharing counts toward your annual savings rate.

Of course, 15% is just a guideline. Your annual savings rate may be higher or lower depending on when you want to retire, how you invest, and how you want to live in retirement.

For now, let’s look at a hypothetical example. Consider Joanna, age 25, who earns $54,000 a year. We assume her income grows 1.5% a year (after inflation) to about $100,000 by the time she is 67 and ready to retire. To maintain her lifestyle throughout retirement, we estimate that about $45,000, or 45% of her $100,000 preretirement income, needs to come from her savings. (The remainder would come from Social Security.)

Because she takes advantage of her employer’s 5% dollar-for-dollar match on her 401(k) contributions, she needs to save 10% of her income each year, starting with $5,400 this year, which gets her to 15% of her current income.

Is 15% enough?

That depends, of course, on the choices you make before retirement—most importantly, when you start saving, how you invest, when you retire, and how you want to live in retirement.

Go for growth.

While saving early and consistently is critical, you will also need your money to grow. That’s why we suggest investing a significant portion of your savings over the course of your lifetime in a diversified mix of U.S. and international stocks and stock mutual funds—generally more when you are in your 20s, 30s, and 40s and less as you near and enter retirement. Stocks have historically outperformed bonds and cash over the long term.

So if you are investing for a goal like retirement that is years away, it can make sense to have more of your savings invested in stocks and stock mutual funds.

Of course, stocks come with more ups and downs than bonds or cash, so you need to be comfortable with those risks. But over time, history has shown that disciplined savings and investing for long-term growth has paid off.

Work longer.

Our 15% savings rule of thumb assumes that a person retires at age 67, which is when most people will be eligible for full Social Security benefits. If you don’t plan to work that long, you will likely need to save more than 15% a year. If you plan to work longer, all things being equal, your required saving rate could be lower.

“Delaying retirement has a triple benefit,” says Adheesh Sharma, director of financial solutions for Fidelity Strategic Advisers, Inc. “You have more time to save, a shorter retirement, and higher Social Security benefits.”
– via

Do you save a specific amount per month?

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