How much should I save for retirement?

A common guideline is to save 10x your annual salary by age 67. Milestones: 1x salary at 30, 3x at 40, 6x at 50, 10x at 67. If you earn $60,000/year, aim for $600,000 saved by retirement. Use the 4% rule: your retirement number = annual expenses divided by 0.04. If you need $50,000/year, save $1,250,000.

What is a 401(k) and how does it work?

A 401(k) is an employer-sponsored retirement account. You contribute pre-tax money (reducing your taxable income), and it grows tax-deferred until retirement. Many employers match 3-6% of your contributions (free money). 2026 contribution limits: $23,500/year (under 50) or $31,000/year (50+). Always contribute at least enough to get the full employer match.

Should I choose a Roth IRA or Traditional IRA?

Choose Roth IRA if you are young (under 40) and in a lower tax bracket — pay taxes now, withdraw tax-free in retirement. Choose Traditional IRA if you are in a high tax bracket now and expect a lower one in retirement — deduct contributions now, pay taxes later. Both have $7,000/year contribution limits (2026). Most young people benefit more from Roth IRAs.

What is the 4% rule in retirement?

The 4% rule says you can withdraw 4% of your retirement savings in the first year, then increase by inflation each year, with a 95% chance your money lasts 30+ years. Example: with $1,000,000 saved, withdraw $40,000 in year 1, $41,200 in year 2 (at 3% inflation), etc. To calculate your retirement number: annual expenses divided by 0.04.

When should I start planning for retirement?

Start now, regardless of age. The earlier you start, the less you need to save monthly. Starting at 25 vs 35 with $500/month results in $825,000 more at retirement due to compound interest. Even if you are 40 or 50, starting today is better than waiting. First step: contribute enough to get your employer 401(k) match (instant 50-100% return).

Retirement Planning for Beginners

Retirement might feel decades away, but the earlier you start, the less you need to save each month. Here is everything a beginner needs to know about planning for retirement: accounts, strategies, and milestones.

Why Start Early? The Power of Compound Interest

Compound interest is your secret weapon. The earlier you start, the more time your money has to grow. Here is a real example:

Scenario	Start Age	Monthly Savings	Total Contributed	At Age 67
Early Bird	25	$500	$252,000	$1,390,000
Late Starter	35	$500	$192,000	$565,000
Catch-Up	45	$1,000	$264,000	$462,000

Starting at 25 vs 35 with the same monthly contribution results in $825,000 more at retirement. Even waiting 10 years requires doubling your contributions to catch up.

Use our Compound Interest Calculator to see how much your retirement savings can grow over time.

Retirement Accounts: Where to Save

There are several types of retirement accounts. Each has different rules, contribution limits, and tax advantages.

401(k) or 403(b) (Employer Plans)

Offered by employers. Contributions are pre-tax, reducing your taxable income. Many employers match 3-6% of your salary — this is free money.

2026 Limit: $23,500/year (under 50), $31,000/year (50+)
Tax: Pay taxes when you withdraw in retirement
Pro tip: Always contribute at least enough to get the full employer match

Roth IRA (Individual Retirement Account)

You contribute after-tax money, but all growth and withdrawals in retirement are tax-free. Best for young people in lower tax brackets.

2026 Limit: $7,000/year (under 50), $8,000/year (50+)
Tax: Pay taxes now, zero taxes in retirement
Income limits: Phases out at $150k-$165k single, $236k-$246k married

Traditional IRA

Similar to Roth IRA, but contributions are pre-tax (lower your taxable income now). Good if you expect a lower tax bracket in retirement.

2026 Limit: $7,000/year (under 50), $8,000/year (50+)
Tax: Deduct contributions now, pay taxes on withdrawals in retirement
Note: Deduction phases out if you have a 401(k) and earn $87k+ (single)

HSA (Health Savings Account)

Triple tax advantage: pre-tax contributions, tax-free growth, tax-free withdrawals for medical expenses. Can be used as a retirement account after 65.

2026 Limit: $4,300 (individual), $8,550 (family)
Requires: High-deductible health plan (HDHP)
Pro tip: Invest it like a retirement account, pay medical bills out-of-pocket if possible

How Much to Save by Age

General guidelines for retirement savings as a multiple of your annual salary:

Age	Target Savings	Example ($60k salary)
30	1x salary	$60,000
35	2x salary	$120,000
40	3x salary	$180,000
45	4x salary	$240,000
50	6x salary	$360,000
55	7x salary	$420,000
60	8x salary	$480,000
67	10x salary	$600,000

If you earn $60,000/year and have $180,000 saved at age 40, you are on track. If you are behind, increase your savings rate by 1-2% each year.

Use our Retirement Calculator to see if you are on track based on your age, income, and current savings.

The 4% Rule: How Much Can You Withdraw?

The 4% rule is a guideline for retirement withdrawals. It says you can withdraw 4% of your retirement savings each year without running out of money.

Example:

You retire with $1,000,000
First year withdrawal: $40,000 (4%)
Each year, increase by inflation (e.g., 3%)
Year 2: $41,200, Year 3: $42,436, etc.

Historically, this approach has a 95% success rate of lasting 30+ years.

To figure out how much you need to retire: Annual expenses ÷ 0.04. If you need $50,000/year, you need $1,250,000 saved ($50,000 ÷ 0.04).

Use our FIRE Calculator to calculate your exact retirement number using the 4% rule.

Employer Match: Free Money

Many employers match 401(k) contributions, typically 3-6% of your salary. This is an instant 50-100% return on your investment.

Example: 50% match up to 6%

Salary: $60,000/year. Employer matches 50% of your contributions up to 6% of salary.

You contribute 6% ($3,600/year)
Employer adds 3% ($1,800/year) — free money
Total annual contribution: $5,400

That is a 50% instant return + years of compound growth.

Golden Rule: Always contribute at least enough to get the full employer match. If you do not, you are leaving free money on the table.

Understanding Social Security

Social Security provides monthly income in retirement, but it only replaces about 40% of pre-retirement income for average earners. You need personal savings to cover the rest.

Average Monthly Benefits (2026)

Age 62: $1,298/month ($15,576/year)
Age 67: $1,907/month ($22,884/year)
Age 70: $2,364/month ($28,368/year)

When to Claim

Age 62: Earliest, but 30% reduced benefit
Age 67: Full retirement age, 100% benefit
Age 70: Max benefit, +24% vs age 67

Key takeaway: Do not rely on Social Security alone. It is a safety net, not a retirement plan. Your 401(k) and IRA are your primary retirement income.

Common Retirement Planning Mistakes

Not starting early enough

Every year you wait requires significantly more monthly savings. Start now, even if it is just $50/month.

Not getting the full employer match

Contribute at least enough to get the full match — it is an instant 50-100% return.

Being too conservative

If you are under 40, you can handle 80-100% stocks. Bonds are safer but grow slower.

Withdrawing early

Early 401(k) withdrawals cost 10% penalty + taxes. Only tap retirement accounts in true emergencies.

Ignoring inflation

If you need $50k/year now, you will need $90k/year in 20 years at 3% inflation. Plan accordingly.

Not increasing contributions over time

Raise your 401(k) contribution by 1% each year. You will barely notice, but it adds up fast.

Your Retirement Action Plan

This week: Sign up for your employer's 401(k) and contribute at least enough to get the full match
This month: Open a Roth IRA at Fidelity, Vanguard, or Schwab. Set up automatic monthly contributions.
This quarter: Increase your 401(k) contribution by 1-2% (you will barely notice the paycheck difference)
This year: Review your retirement accounts, rebalance if needed, and increase contributions with every raise

Use our Investment Calculator to see how consistent monthly contributions grow over 20-40 years.

Plan Your Retirement

Use our free calculators to see your retirement numbers.

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