It may be a larger number than you think.
You'll often hear that Social Security alone won't get you through retirement. And that's totally spot-on. The average Social Security recipient this year collects $1,827 a month. That's an annual income of roughly $22,000 a year, which isn't very high.
That's why it's so important to do what you can to save for retirement, whether by signing up for your company's 401(k) plan or contributing steadily to an IRA. You could even opt to save for retirement in a taxable brokerage account if you want more flexibility with your money. The key is to be saving somewhere.
But just how much of your income should you be saving for retirement? The answer is pretty much the same no matter what you earn. But if you happen to be pulling in a $100,000 salary, you may want to aim for $15,000 to $20,000 a year in annual savings.
You may need more replacement income than you think
As a general rule, you should aim to sock away 15% to 20% of your annual income for retirement each year. This holds true whether your salary is $25,000, $50,000, $100,000, or more.
If you're thinking that sounds like a lot, remember that many seniors end up needing a good 70% to 80% of their pre-retirement income to live comfortably. And Social Security will only replace about 40% of your former income if you earn an average wage (and if benefits don't get cut universally). So the rest of that money may need to come from your savings, which explains why you have to part with so much of your income during your working years.
Of course, not all retirement plans allow you to sock away $15,000 to $20,000 a year. IRA accounts, for example, max out this year at $6,500 for savers under age 50 and $7,500 for those 50 and over. But if you don't have access to a 401(k) plan, and you're eager to save, say, $15,000 this year, you could always max out your IRA and then put the rest of that money into a traditional brokerage account.
Can you get away with saving less?
The guidance to save 15% to 20% of your annual income for retirement is really just a general guideline. And so there's wiggle room in that range to some degree.
It may be that you plan to scale back your lifestyle in retirement by downsizing, moving to an inexpensive part of the country, and just plain living very frugally. You may also be willing and planning to work part-time as a retiree. In that case, you could potentially get away with saving a bit less for retirement -- perhaps 10% to 12% of your present-day paychecks.
But for the most part, saving 15% to 20% of your earnings should set you up with a nice nest egg for retirement, especially if you invest that money savvily. So while parting with that much of your income might seem tough, remember that your future self will thank you for having made that sacrifice through the years.
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FAQs
With a $100,000 salary, the average person will need $80,000 in retirement income. If you anticipate $30,000 in annual Social Security income, this lowers the need from your savings to $50,000.
How much should I save for retirement if I make 100k a year? ›
So, if you currently earn $100,000 a year, 80% of your pre-retirement income works out to $80,000. So, assuming you're receiving monthly Social Security checks and following the 4% rule, if you're aiming for $80K a month in retirement, you'd need to have this amount in your portfolio: age 62: $1.6 million.
How much income will 500k generate in retirement? ›
It may be possible to retire at 45 years of age, but it depends on a variety of factors. If you have $500,000 in savings, then according to the 4% rule, you will have access to roughly $20,000 per year for 30 years. Retiring early will affect the amount of your Social Security benefit.
How long will $1 million last in retirement? ›
Around the U.S., a $1 million nest egg can cover an average of 18.9 years worth of living expenses, GoBankingRates found. But where you retire can have a profound impact on how far your money goes, ranging from as a little as 10 years in Hawaii to more than than 20 years in more than a dozen states.
Can I retire with 100K and Social Security? ›
Add in another $22,000 or so from Social Security, and you could be in pretty decent shape. Coming into retirement with $100,000 in savings is far better than not having any savings at all. But the reality is that $100,000 just isn't a ton of money for what could easily be 20 years of retirement or more.
Is 100K no longer a good salary? ›
More than half (52%) of Americans say they would need at least $100,000 a year to feel financially comfortable, with 26% saying they would need a salary in the range of $100,000 to $149,000 per year, according to a 2023 CNBC Your Money survey conducted by SurveyMonkey.
Can you live on $3000 a month in retirement? ›
That means that even if you're not one of those lucky few who have $1 million or more socked away, you can still retire well, so long as you keep your monthly budget under $3,000 a month.
What is a good monthly retirement income? ›
Average Monthly Retirement Income
According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of May 2024, the average check is $1,778.24, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
Is $1500 a month enough to retire on? ›
In the recent GOBankingRates retirement survey, 56% of Americans said they plan to live on $1,500 a month or less in retirement (aside from housing costs). Yet for many, this is an unrealistically low amount, especially when you consider irregular expenses.
With $400,000 in your 401(k), how much can you expect to draw down from that portfolio? Will it be enough to last throughout retirement starting at age 62? The answer is, maybe. This money can generate a modest income that might be enough to pay your bills depending on your standard of living.
How much money do most people retire with? ›
The average retirement savings for all families is $333,940, according to the 2022 Survey of Consumer Finances. The median retirement savings for all families is $87,000. Taken on their own, those numbers aren't incredibly helpful. After all, not everyone who is the same age will retire at the same time.
Can I live off interest on a million dollars? ›
Once you have $1 million in assets, you can look seriously at living entirely off the returns of a portfolio. After all, the S&P 500 alone averages 10% returns per year. Setting aside taxes and down-year investment portfolio management, a $1 million index fund could provide $100,000 annually.
How much should I save with a 100K salary? ›
The key is to be saving somewhere. But just how much of your income should you be saving for retirement? The answer is pretty much the same no matter what you earn. But if you happen to be pulling in a $100,000 salary, you may want to aim for $15,000 to $20,000 a year in annual savings.
How much should I put in my 401k if I make 100000? ›
Most retirement experts recommend you contribute 10% to 15% of your income toward your 401(k) each year.
How much money do you need to retire with $120000 a year income? ›
One standard piece of advice is to save 10 to 12 times your annual salary1 by the time you retire. So, for example, if your current salary is $120,000 per year, you should have at least $1.2 million saved up by the time you retire. This rule of thumb focuses on savings.
