How to Determine Your Ideal Retirement Savings at 30 and Beyond

Close-Up Of Coins In Jar On Table
••• Ekapat Suwanmanee / EyeEm / Getty Images

Figuring out how much money you'll need when you retire can be challenging in the early stages of your career. Fortunately, some helpful planning benchmarks can help you decide whether you're on the right track.

The best guidance is usually to save as much as possible if you're in your 20s. Then, you begin looking for a better way to track your progress over time as you grow older. Certain benchmarks, such as those provided by Fidelity, T. Rowe Price, and J.P. Morgan Asset Management, can help you determine how much you should have in your accounts by the time you reach age 30.

Key Takeaways

  • Fidelity recommends having saved the amount of your current salary by age 30; by age 67, you should have saved 10 times your annual income.
  • T. Rowe Price takes a different approach—a 30-year-old should have saved half their annual salary and have 11 times their salary put aside by 65.
  • J.P. Morgan's model uses a series of multipliers based on income: A 30-year-old who earns $50,000 would be on track with 0.8 times their income—$40,000—saved.

The Fidelity Benchmark 

Fidelity Investments analyzed data to estimate the ideal amount of savings needed at certain ages. It estimated how much you'd need to have to maintain the same lifestyle if you want to retire at age 67.

Fidelity recommends having saved the amount of your current salary by age 30. It suggests that you save at least 15% of your income each year, beginning at age 25. After that, you should invest over half of your savings in stocks over the course of your lifetime. If you want to enhance your standard of living, this plan will not work for you. To use this plan to your best advantage, you'll need to maintain your current lifestyle.

Ideally, you'd want to have 10 times your salary saved for retirement in order to quit working at age 67, using the same set of assumptions.

If your age is ... ... your total retirement savings to be "on track" to retire at 67 should be approximately ...
30 1 times your annual income
35 2 times your annual income
40 3 times your annual income
45 4 times your annual income
50 6 times your annual income
55 7 times your annual income
60 8 times your annual income
67 10 times your annual income

Source: Fidelity Investments

The T. Rowe Price Benchmark

T. Rowe Price takes a slightly different approach in its retirement-saving benchmarks. The savings multiples start smaller and increase more rapidly at age 50. This system indicates that a 30-year-old would be considered to be on track if they had saved half the amount of their annual salary, but they would need to have 11 times their salary put aside by the time they turn 65.

If your age is ... ... your total retirement savings to be "on track" to retire at 65 should be approximately ...
30 0.5 times your annual income
35 1 times your annual income
40 2 times your annual income
45 3 times your annual income
50 5 times your annual income
55 7 times your annual income
60 9 times your annual income
65 11 times your annual income

Source: T. Rowe Price

The multiples adjust for your status, such as single, married in a dual-income household, or married in a single-income family. T. Rowe Price also says you can adjust the multiples to account for any pension and Social Security income you'll receive.

The J.P. Morgan Asset Management Benchmark

J.P. Morgan Asset Management's 2019 Guide to Retirement uses a few benchmarking models. In the first, it assumes an annual gross savings rate of 5% if you make less than $100,000 a year. The second model assumes a rate of 10% if you make $100,000 or more. Others use a pre-retirement return of 6%, a post-retirement return of 5%, an inflation rate of 2%, and a retirement age of 65 for the primary earner and 62 for the spouse. It also assumes that you'll spend 30 years in retirement and that you want to maintain the same lifestyle you had before retiring.

J.P. Morgan's model uses a series of multipliers based on your annual pre-tax income. For example, a 30-year-old with $50,000 in gross annual income would be on track with 0.8 times their income saved, or $40,000 saved in retirement accounts. The savings factor jumps to 1.2 times your income ($210,000) if your annual gross income is $175,000.

If your age is ... ... and your annual gross income is ... ... your total retirement savings to be "on track" to retire at 65 should be approximately ...
30 $30,000 0.6 times your annual income
30 $40,000 0.7 times your annual income
30 $50,000 0.8 times your annual income
30 $60,000 0.9 times your annual income
30 $70,000 1.1 times your annual income
30 $80,000 1.3 times your annual income
30 $90,000 1.4 times your annual income
30 $100,000 0.6 times your annual income
30 $125,000 0.8 times your annual income
30 $150,000 1.0 times your annual income
30 $175,000 1.2 times your annual income
30 $200,000 1.4 times your annual income
30 $250,000 1.6 times your annual income
30 $300,000 1.8 times your annual income

Source: J.P. Morgan Asset Management

The 80% Rule

Another gauge used to estimate retirement savings is the 80% rule. This method says you should strive to replace 80% of your pre-retirement income.

A more simple version of this method would involve taking 80% of your annual salary and then multiplying the result by 20 for a 20-year retirement. The result is how much you would need in overall retirement savings.

Now divide that number by how many years you have left before you retire, assuming you haven't started saving yet. That's how much you should save each year to reach your goal.

For example, if you earn $45,000, you'll need 80% of that, or $36,000 a year, in retirement. Multiply $36,000 by 20 years, and you get $720,000. If you're 30 years old, have no retirement savings yet, and expect to retire at age 65, you'd need to save an average of about $20,600 a year for the next 35 years: $720,000 divided by 35.

If you have already been saving, you would subtract how much you have now from the 20-year amount. Then, divide by the number of years you have until you retire to determine how much you'll need to save each year going forward. If you've already saved $15,000, you would subtract that from $720,000, then divide $705,000 by 35 to arrive at savings of about $20,140 a year.

Keep in mind that this method estimates the amount you should save for retirement and does not consider factors like growth, interest income, or dividend income between now and retirement.

But what about inflation? How do you know how much you'll be earning or what your lifestyle will look like before you retire? Will you have a pension? How much social security income will you receive?

These are all valid questions. Your post-retirement income will include a combination of anticipated pension (if you're lucky enough to have an employer that provides one), social security (assuming the system remains solvent), and investment earnings.

Inflation is a valid concern. To account for it, you could adjust the 80% rule to include it. Inflation averages around 2% to 3% per year, so you could use 83% of your annual income as your guide.

Taking all of these factors into consideration to come up with a savings goal can sound a little daunting. Luckily, many free online tools can make the process easier.

If you work for an employer that offers a 401(k) retirement plan, the custodian that manages it may also provide guidance and support.

Retirement Calculators

You shouldn't rely solely on benchmarks to measure your savings progress, but they provide some guidelines that can be helpful during the early stages of your working life.

The best way to determine your ideal savings rate is to run a basic retirement calculation. It's vital to rely on more detailed retirement estimates if you don’t plan on retiring in your 60s, because most retirement planning benchmarks use a retirement beginning at the age of 65 or 67 in their estimates. 

Most calculators allow you to input personal variables that can affect the results, such as the age at which you started working and saving, the average rate of return on your investments, whether you also have a pension, and whether you have—or expect that you might have—other assets that generate passive income, such as rental properties.

Taking the Next Steps

Don't panic if your current retirement savings amount falls short of these goals. You can take some important steps to get your plan on the right track.

First, focus on your overall financial wellness and the things you have control over right now. Building a solid financial foundation often means establishing an emergency fund, paying off high-interest debt, and saving at least enough in your retirement plan to capture any employer matching funds.

Next, determine how much you can potentially save. Most financial planners recommend saving 10% to 20% of your income per year for retirement. Aim for as high a percentage as you can reasonably afford, and commit to meeting that goal every year.

Participating in automatic rate-increase programs that might be offered by employer-sponsored retirement plans is a great way to factor in contribution increases over time and help you bridge any savings gaps.

The Balance does not provide tax, investment, or financial services and advice. The information is presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Investing involves risk, including the possible loss of principal. Investors should consider engaging a financial professional to determine a suitable retirement savings, tax, and investment strategy.