Retirement planning has one central question: how much money do you need so you can stop working and not run out? The answer depends on three things — when you want to retire, how much you plan to spend in retirement, and how long you'll live. None of those can be known with certainty, but you can make solid estimates that give you a realistic target and a path to reach it.
The most widely used retirement withdrawal guideline comes from the "Trinity Study," which analyzed historical market data to determine a "safe withdrawal rate" — the percentage of your retirement portfolio you can withdraw each year without running out of money over 30 years.
The conclusion: withdrawing 4% of your portfolio in year one, then adjusting for inflation each subsequent year, has historically succeeded (portfolio lasting 30+ years) in roughly 95% of historical scenarios using a diversified stock/bond portfolio.
The practical implication: you need 25 times your annual retirement spending saved to retire sustainably.
These figures assume Social Security covers some of your needs — the average Social Security benefit in 2026 is approximately $1,850/month ($22,200/year), which reduces how much you need from your own savings.
The math of compound interest means that starting to save earlier requires dramatically less monthly effort to reach the same goal. Here's how much you'd need to save monthly to accumulate $1,000,000 by age 67, assuming a 7% average annual return:
| Starting Age | Monthly Savings Needed | Total Contributed |
|---|---|---|
| 22 | $340/month | $183,600 |
| 30 | $580/month | $243,600 |
| 35 | $860/month | $278,640 |
| 40 | $1,300/month | $312,000 |
| 45 | $2,050/month | $336,200 |
| 50 | $3,450/month | $345,000 |
The dramatic increase in required monthly savings is why financial planners emphasize starting early so strongly. A 22-year-old needs to save $340/month to reach the same goal a 50-year-old needs $3,450/month to achieve.
Fidelity Investments recommends these milestones for retirement savings as a multiple of your annual salary, assuming you want to retire at 67:
If you earn $70,000, that means $70,000 saved by 30, $210,000 by 40, $420,000 by 50, and $700,000 by retirement. These assume consistent saving throughout your career and average market returns.
Your employer-sponsored plan should be your first priority, at minimum to capture any employer match. The 2026 contribution limit is $23,500 ($31,000 if age 50+). Traditional 401(k) contributions reduce your taxable income now; Roth 401(k) contributions grow tax-free. Always contribute at least enough to get the full employer match — it's an instant 50–100% return on those dollars.
If eligible (income below $161,000 single / $240,000 married for 2026), a Roth IRA allows $7,000/year ($8,000 if 50+) in after-tax contributions that grow completely tax-free. Withdrawals in retirement are also tax-free. For most workers under 40, the Roth IRA is the single most powerful retirement savings vehicle available.
Contributions may be tax-deductible depending on your income and whether you have a workplace plan. Growth is tax-deferred, and withdrawals in retirement are taxed as ordinary income. Required minimum distributions begin at age 73.
Project your retirement savings growth and see if you're on track to hit your target.
Retirement Calculator →Using the 4% rule, $1 million supports $40,000/year in withdrawals. Combined with Social Security (average ~$22,200/year), that's roughly $62,000/year in retirement income. For many Americans, especially in lower-cost areas, that's comfortable. For those with higher expenses, a mortgage, or living in expensive cities, $1 million may be insufficient. The number that matters is 25× your expected annual retirement spending, not $1 million as a universal target.
Financial planners commonly recommend 15–20% of gross income, including any employer match. If you start at 22 and earn average market returns, 15% is generally sufficient. Starting later requires a higher rate. If you're currently saving less than 10%, prioritize closing that gap — even going from 6% to 10% dramatically improves long-term outcomes.
Even small amounts matter enormously when invested early. $50/month starting at 22 grows to approximately $175,000 by 67 at 7% returns. If you have employer matching, contribute at minimum to capture it — declining a match is like declining part of your salary. Start with what you can, automate it so it happens without decision, and increase by 1% each year you get a raise.