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Is It Enough to Save 15% of Your Income for Retirement?

income for your retirementWhen it comes to saving for retirement, how much is enough? As a starting point, many experts recommend that you save at least 15% of your income for retirement. One of the loudest personal finance voices out there, Dave Ramsey, recommends saving 15% of your income for retirement as part of Step 4 in his seven baby steps to financial peace.

But what if you got a late start in your financial journey? The later you start to save, the less time your money has to compound and work for you to build wealth. And if retirement is close, it’s probably wise to move your money into less risky, lower performing investments. You’ll earn a lower return, but you’ll preserve more of your capital so your money is there when you need it.

Is saving 15% of your income for retirement always enough to live a comfortable lifestyle in your older years? At what point is it wise to save more? We ran the numbers to find out.


Before we dig into those numbers though, I’ll briefly list my assumptions. We’ll be comparing a starting salary of $50,000, with a 3% inflation rate, a 3% raise per year, and an average investment growth rate of 8%. Even though we all hope to make a higher salary when we are older, this will help make it easy to compare numbers.

With a 15% savings rate and a $50,000 salary, this means our saver will invest $7,500 every year, or $625 per month. This of course means that our test subjects spend $42,500 each year. All numbers are in today’s dollars.

Income for Retirement: How Much in the Bank When I Retire?

This first table looks at four ages when people start investing: 30, 40, 50, and 60. How much will you have in the bank if you retire at age 55, 60, 65, 70, and 75? Will you be a millionaire in today’s dollars?

income for retirement table 1

In this scenario, only our 30 year old was able to become a millionaire, and only at the age of 72.

Income for Retirement: How Much Will I Have to Live On?

But it’s not just whether or not you’re a millionaire by the time you’re retiring. What matters the most is how much of your nest egg you can safely spend each year.

Investment research has shown that for the average American with at least 50% of their portfolio in stocks, it’s safe to withdraw 4% of your balance every year. Even in the worst case scenario, portfolios lasted for at least 30 years.

Using that number, how much can you spend each year? And what % of your current living expenses ($42,500) does this income replace?

income for retirement table 2

As you can see, only those that start by age 40 or less come close to replacing their living expenses…at the age of 75! Many of us hope to retire before then.

But What About Social Security?

We know there are many Americans out there that do not have enough in savings. A recent study by the the Schwartz Center for Economic Policy Analysis found that 54% of Americans near retirement age have less than $100,000 in retirement savings. These folks depend on Social Security to take care of them in their old age.  At this present time, you’re allowed to file for social security at age 62 and 1 month. So how does Social Security impact the amount of money you’ll have to live? Is it enough?

Check out the results below. These values combine your Social Security income and the 4% withdrawal that we used above.

income for retirement table 3

If you start with a net worth of $0 at age 50, you’ll be able to replace 84% of your living expenses by retiring and taking Social Security at the age of 70. If you start with a net worth of $0 at age 40, you’ll be able to replace 78% of your living expenses by age 65.

Bottom line: If you’re close to 40 or older, saving 15% of your income for retirement is not enough – even with Social Security (which might not even exist by then!)

How Much Should You Save?

If you’re age 40 and over, you really should consider saving more than 15% of your salary in order to be able to retire by the age of 65.

So much should you save? Of course, we ran the numbers:

  • If you’re 30, you’ll need to 15% of your income to replace all of your living expenses by 65, including Social Security. Without Social Security, you’ll need to save 23% of your income.
  • If you’re 40, you’ll need to save 23 % of your income to replace all of your living expenses by 65, including Social Security. Without Social Security, you’ll need to save 34% of your income.
  • If you’re 50, you’ll need to save 35 % to replace all of your living expenses by 65, including Social Security. Without Social Security, you’ll need to save 52% of your income.
  • If you’re 60, you’ll need to save 54 % to replace all of your living expenses by 65, including Social Security. Without Social Security, you’ll need to save 79% of your income.

But What About Building Abundant Wealth?

If you follow Dave Ramsey, you’ll know about Step 7: Build Wealth and Give Abundantly. What if you really ramp up your savings so you’re able to invest 50% of your income each year? When will you be a millionaire, and how much will you be able to take home to spend (and give) each year?

Given the assumptions I listed above, you’ll be a millionaire (in today’s dollars) in 22 years. But you’ll be able to replace your living expenses in just sixteen years.

Save 50% of your income, and you’ll be able to:

  • If you’re 40 now, you can retire – without relying on Social Security –at the age of 56
  • If you’re 50, you’ll be able to retire at 66 without social security. Or, if you’d like to take social security at the age of 62 when it’s first available, you’ll be able to retire then.

Closing Thoughts

If you’re getting close to 40 (or way beyond), it’s important to save more than 15% of your income to be able to have a comfortable retirement. But to really supercharge your wealth, saving 15% won’t cut it. Put away 50% of your income for retirement, and you’ll be able to spend more – and give more – while really building wealth.

Will you have enough income for retirement?

Investing Money Retirement


My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. Derek,
    Another excellent post! Wife and I are in our mid-50’s and are glad to see you educating younger folk. A decade from retirement and I still think you need to save even more than what your article predicts.

    • Glad you liked it, Jim! If you think you need more, then by all means, save more! Heck, I’m saving over 50% of my income and I’m only 30! 😉

  2. I totally love this one! I just turned 30 last May and this is really helpful for me, I know I’m bad at budgeting and I’m trying to save every month for my retirement.

    • Kate, I’m glad you find it helpful! I like knowing what % I should be aiming to save for retirement as a minimum while I’m balancing all my other goals.

  3. This is a very inspiring piece. Am amazed at how early retirement savings can guarantee you a very enjoyable and comfortable life during your prime age. I am personally challenged to begin my retirement saving as early as now to secure my old age. Great piece!

    • Thanks Chella! Go for it. 🙂

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