This is the single most common question I get, and the honest answer is that the popular rules of thumb are aimed at someone who may not resemble you at all. "Save 15%" assumes you started at 25. "You need $1 million" assumes a spending level nobody bothered to ask you about.
Here's how I actually work through it with clients in Atlanta, and how you can do a version of it yourself in about twenty minutes.
Start with what you spend, not what you earn
Retirement isn't funded by a percentage of your paycheck. It's funded by whatever it costs to be you for thirty years. So the first number to find is annual spending — not your gross income, and not a budget you aspire to. Pull twelve months of checking and credit card totals and subtract what stops at retirement: payroll taxes, retirement contributions themselves, and the mortgage if it'll be paid off.
Then add back what goes up. Health insurance before Medicare is the big one, and it surprises nearly everyone who retires before 65. Travel usually rises in the first decade too.
Subtract the income you'll already have
Your portfolio doesn't have to cover everything. Social Security, a pension, rental income, and part-time work all reduce the load. Pull your actual estimate from ssa.gov rather than guessing — for a lot of married couples, Social Security ends up covering a third to a half of retirement spending.
What's left is the gap your savings has to fill. That's the number that matters.
Size the target
Multiply the annual gap by 25. That's shorthand for a 4% initial withdrawal rate, and it's a screen, not a plan — but it gets you in the right neighborhood fast.
- Gap of $40,000 a year, target roughly $1 million
- Gap of $60,000 a year, target roughly $1.5 million
- Gap of $90,000 a year, target roughly $2.25 million
Retiring before 60 argues for a more conservative multiple, closer to 30 times, because the money has to last longer and Medicare is years away. Retiring at 70 with a solid Social Security benefit argues for less.
How much to save each year
Now work backwards from where you already are. Rough guidance by starting age, assuming you keep it up until 65 and earn a reasonable long-term return:
Starting in your 20s
10% to 15% of gross income, including the employer match. Time does most of the work here, which is why the standard advice sounds so easy.
Starting in your 30s
15% to 20%. Still very manageable if you raise the contribution rate every time you get a raise, before the money hits your checking account.
Starting in your 40s
20% to 25%, and this is where most people I meet actually are. It sounds brutal, but catch-up contributions, a paid-off mortgage, and a spouse's plan often close more of it than expected.
Starting in your 50s
25% or more, combined with honest conversation about the retirement date. Working two extra years is mathematically more powerful than almost anything else available at this stage: two more years of saving, two fewer years of withdrawals, and a bigger Social Security benefit.
Where the money goes matters almost as much
Two people can save the same amount and end up with very different after-tax income. The order I generally use: capture the full employer match first, then build some Roth space, then fill up pre-tax to manage your current bracket, then taxable brokerage for flexibility before 59½.
Having money in all three tax buckets is what gives you room later to control your taxable income — which drives Medicare premiums, how much of your Social Security gets taxed, and whether Roth conversions make sense in your early retirement years.
If you're behind
Most people are behind by the textbook numbers, and very few of them are actually in trouble. The levers that move the needle are boring and effective: raise the savings rate a percent or two at a time, delay retirement slightly, delay Social Security to 70 if you're healthy, and take a hard look at whether the house still fits.
The worst outcome is deciding the number is impossible and doing nothing for another five years.
Run it against your real numbers
A rule of thumb tells you whether you're in the ballpark. A plan tells you what to do this year. If you'd like to see your own number — with your Social Security estimate, your tax picture, and your actual spending in it — book a 15-minute call and we'll walk through it.
Frequently asked questions
- Is saving 15% of income enough for retirement?
- For someone who starts in their twenties and keeps it up, 15% including the employer match usually works. If you started at 40, 15% is rarely enough — the math typically calls for 20% to 25%, or working a few years longer.
- How much do I need saved to retire?
- A rough screen is 25 times the annual spending your portfolio has to cover after Social Security and any pension. If you spend $100,000 and Social Security covers $40,000, the portfolio covers $60,000, so you're aiming at roughly $1.5 million.
- Does the 4% rule still work?
- It's a reasonable planning starting point, not a guarantee. Withdrawal research suggests being more flexible: trim spending modestly after bad market years and you can often start higher than 4%.
- Should I save in a 401(k) or a Roth?
- It depends on your bracket now versus in retirement. High earners in peak years usually favor pre-tax; people in a lower bracket, or early in a career, get more from Roth. Most households end up wanting some of each.
