Katherine Tierney, CFA®
Senior Retirement Strategist, Client Needs Research

Key points

  • Deciding how much to save for retirement can be confusing.
  • Average savings benchmarks can show how you compare with others in your age bracket, but not how prepared you are to meet your individual needs. Determining that will require different tools and benchmarks.
  • Your financial security after retirement will be unique to you: It will depend on things you control, such as spending habits and savings and things you don’t, such as financial market volatility and tax rates.
  • To help you get started on an effective long-term strategy, we’ve calculated broad estimates of how much you should have saved during each decade of your career.

How much should I save for retirement?

The bottom-line goal of retirement planning is deceptively simple: accumulating enough money to live the life you want once your career is no longer occupying most of your time or generating a regular paycheck.

Achieving that goal requires asking questions that have no easy answers: How much money will you need? How can you measure your progress toward a target decades in the future?

A financial advisor can help you with those questions, then tailor a financial strategy to help you meet your individual goals.

Often, people trying to figure out how well they’re doing begin by comparing their own savings with those of others in the same age bracket. If you’re curious how you stack up, data collected by the Federal Reserve in its 2019 Survey of Consumer Finances, shown below, can tell you. What those numbers can’t do, though, is tell you how close you are to your goal.

Using them as a gauge is a little like comparing your SAT score with the average of your graduating class in high school to determine whether it’s high enough to get you into a particular university.

The one piece of data that’s crucial is the average SAT score of the freshmen the university admitted. Without that data point, you have no idea whether your score meets the institution’s standards.

Average retirement savings by age

 Chart showing the average retirement savings by age

Source: Federal Reserve Survey of Consumer Finances, 1989-2019; https://www.federalreserve.gov/econres/scfindex.htm

It’s the same with retirement: The relevant data point isn’t what others your age have saved but how much money you need yourself. The answer depends almost entirely on you, your habits now and your plans for later.

For example, what’s your average monthly spending today and do you expect to maintain it after retirement? Do you expect to relocate? If so, will you live in a region where the cost of living is higher or lower than where you are now? How do you plan to spend your time — traveling the world in style or volunteering in your neighborhood and working in your garden?

To help you begin evaluating your progress, we’ve developed generalized benchmarks, below, that are more useful, and more detailed, than average savings levels for someone retiring at age 65.

Retirement savings goalposts by age

Below you'll find generalized age- and salary-benchmarks for investment levels that might let you retire comfortably, using broad assumptions about factors including taxes and spending preferences. For example, if you are 29, making $100,000, you would want a savings of $15,000 - $90,000 to maintain your current lifestyle. (The higher and lower ends of the range reflect differing assumptions about market volatility during your career.)

Having a ballpark projection of how much money you need to retire comfortably can be helpful. However, relying on broad-based assumptions, they can’t address individual circumstances such as your income, spending needs and risk tolerance.

That’s where a qualified financial advisor comes in. After you evaluate your status with these tools, schedule a face-to-face meeting with a financial advisor to set a more precise goal.

Retirement savings benchmarks notes on methodology and assumptions:

To estimate how much money you need in retirement, we created a lower and upper boundary based on the following methodology and assumptions about lifestyle and savings habits:

  • In retirement, we assume you will maintain your current level of spending (adjusted for inflation). We calculate your current spending as current gross income minus savings and taxes.
  • All savings are for retirement. Savings are pretax, equivalent to 15% of gross income, and adjusted assuming an inflation rate of 3% per year.
  • We assume an effective tax rate of 25%, which is applied to gross income after deducting pretax savings.
  • We assume your retirement portfolio earns an annual return of 6% pre-retirement and 5% post-retirement.
  • Annual spending in retirement is adjusted assuming an inflation rate of 3% per year.
  • We assume retirement at age 65 and life expectancy of 90. Benchmarks are only provided through the assumed retirement age.
  • We assume that in retirement, you have two sources of income to cover your spending needs: Social Security and withdrawals from your retirement portfolio.
  • We assume the amount you receive from Social Security is the minimum between 35% of your gross income and $35,916 (which in 2022 is the maximum Social Security benefit if you retire at 65). We assume you pay taxes on 85% of that amount at the effective tax rate of 25%.
  • Withdrawals from the portfolio are taxed at the effective tax rate of 25%.
  • Values are rounded to the nearest$5,000.

Lower Boundary: Our analysis assumes the portfolio grows at a constant rate of return each year in retirement and is entirely depleted at death.

Upper Boundary: Our analysis incorporates expectations for market volatility and is calculated so that the probability of the portfolio lasting until death is 80-90%.

How Edward Jones can help

When saving for retirement, going it alone can be risky.

If you’re interested in learning more about how Edward Jones can help you create an effective plan to reach your retirement goals, contact an Edward Jones financial advisor for a discussion today.

Katherine Tierney

Katherine Tierney is a Senior Retirement Strategist on the Client Needs Research team at Edward Jones. The Client Needs Research team develops and communicates advice and guidance for client needs, including retirement, education, preparing for the unexpected and leaving a legacy. Katherine has more than 15 years of financial services and retirement experience. She is a contributor to Edward Jones Perspectives and has been quoted in various publications.

Read Full Bio