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Here's How Much You Should Be Saving Every Month to Retire Comfortably

By Katie Brockman - Jun 13, 2019 at 6:45AM

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Hint: It's probably more than you think.

Saving for retirement can feel like a lofty, abstract goal. You know you should be saving for the future, but exactly how much may be a mystery.

Retirement planning is complicated, and a variety of factors contribute to how much you need to save. The short answer, though, is that you'll likely need to save more than you think to live comfortably in retirement. The average person age 65 and older spends around $46,000 per year, the U.S. Bureau of Labor Statistics reports, and the Social Security Administration estimates that a third of today's 65-year-olds can expect to live past age 90. So if you were to spend $46,000 every year for 25 years (not accounting for inflation), retirement could cost around $1.2 million.

Piggy bank on the beach wearing sunglasses.

Image source: Getty Images.

Of course, Social Security benefits will help cover a portion of those costs, but they likely won't cover all (or even most) of your expenses -- which is why it's critical to be able to lean on your personal savings in retirement to bridge the gap.

Financial experts typically recommend saving between 10% and 15% of your salary to accumulate enough to retire comfortably, but new research suggests you may need to save even more to reach your financial goals.

What it takes to retire comfortably

If you start saving early, it will be easier to set aside enough for retirement (thanks to compound interest). Those who begin saving at age 25 will need to contribute between 10% and 17% of their salary, a report from the Stanford Center of Longevity explains. Those numbers are assuming individuals will be retiring at age 65 and that their income in retirement will be enough to replace 70% of their preretirement income. So if you plan to retire earlier than 65 or expect to need more than 70% of your current income in retirement, you may need to save more.

Those who are a little late to the saving game will need to save even more to catch up. Wait until age 35 to begin saving, and you'll need to contribute between 15% and 20% of your income, researchers found. And if you were to wait until 45 to start preparing for retirement, you'd need to stash away at least 25% of your salary.

The report also noted that the majority of Americans are nowhere near those savings goals. Across all age groups, the average worker contributed 4% to 5% of their income and received an additional contribution of 2% to 3% from their employer -- bringing their total retirement savings to around 6% to 8% of their income.

To ensure you're doing enough to prepare for retirement, you first have to have a goal in mind. Next, find a way to financially reach that goal, or have a backup plan in mind.

Preparing for retirement one step at a time

Depending on your age and how much you already have saved for retirement, you may need to make some serious sacrifices to stash enough cash to retire comfortably. But if you take it one step at a time, it's not such a daunting task.

Start by taking a hard look at your budget and slashing any unnecessary expenses. Maybe you're paying for monthly subscription services you don't even use, or perhaps you could cut cable if you rarely watch it.

Next, start trimming not-so-necessary-but-still-important costs -- like dining out or hobbies. You don't need to completely eliminate these costs, but try to cut back at least a little in multiple spending categories. By cutting costs slightly in several areas of your budget, you won't feel like you're missing out on anything like you would by taking a machete to your finances and eliminating everything you love. This type of approach makes it more likely you'll stick to your budget and not give up after a month when you're miserable.

If that's still not enough to reach your saving goal, consider whether you're willing and able to make more drastic changes -- like downsizing your home. Housing is likely one of your biggest expenses, and saving a couple hundred dollars on your mortgage or rent each month can go a long way toward retirement. This is a big step, though, so be sure to weigh the pros and cons before calling a real estate agent and packing your bags.

When simply cutting back isn't enough

If you're far behind on your retirement planning and can't afford to scrape together enough cash to reach your saving goal, you have a couple of options: increase your income or rethink your retirement expectations.

Picking up a side hustle can bring in some additional income each month, and if you put all that money toward your savings, it could seriously beef up your retirement fund. Even an extra couple hundred dollars per month could go a long way, so don't discount the power of spending a few hours a week on a side job.

Simply working more might not be an option for everyone, though, so if that's the case, you may have to reconsider what retirement will look like. Perhaps you'll need to work a few more years to continue saving, or you might not be able to travel as much as you'd hoped in retirement. If your savings run dry a few years into retirement, it could force you to depend on Social Security benefits to make ends meet. The average Social Security check comes out to around $1,400 per month, so consider the type of lifestyle you'd need to live if it ever came to that point. Could you still pay all your bills with Social Security benefits alone? Would you need to move to a less expensive neighborhood?

Saving for retirement can seem like an impossible task, but it's more manageable when you break it down into a step-by-step process. You don't need to save $1 million overnight, but if you take it one month at a time and stick to a series of smaller goals along the way, you can achieve your overarching goal and enjoy a comfortable and stress-free retirement.

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