How Much of Your Salary Do You Need to Save for Retirement at Each Stage of Life

Saving money for retirement is on everyone's mind. Whether you are in your 20s, 30s, 40s or beyond, what you save today impacts how you live tomorrow. That is why it is important to save as much as you can at each stage of your life regardless of your other commitments. To help guide you to financial security, here's how much of your salary you'd need to save for retirement by age.

Saving in your 20s may sound easy but today, many recent college grads have mountains of debt to repay. If you can save between 10 and 15% of your income, you will be heading out on the right track. It is a great time to invest in your company's 401k especially if you receive a matching fund from your employer. If your company doesn't offer a 401k, consider investing in a ROTH IRA. While these have income limitations, 20-somethings are in the best place to take advantage of this offering. By the time you reach the end of your 30s, aim for banking the equivalent of your salary.

In your 30s, consider investing more heavily in your 401K, up to 20% of your salary. If you aren't eligible to open a ROTH IRA, consider opening a traditional IRA or other investment vehicle. By this time, you probably have multiple competing expenses like childcare, college funds, mortgage payments and/or continued college debt. Stay on top of your retirement savings by setting up automatic withdrawals. As a goal, having twice your annual income saved for retirement would set you on the right path.

In your 40s, you are in your high earning years. Don't waste those dollars on wants rather than needs. Max out those 401k contributions, continue investing in your personal vehicles and consider other areas where you can invest in your future. If you haven't bought a home, consider this as a way to build wealth. If you own your own home, consider purchasing another property as an investment or retirement home. If you have kids entering college and you are considering helping them with tuition, that's great, but don't do it at the expense of your own retirement savings. Maybe they would consider community college for the first two years or a state school to help save money. Looking at your retirement savings at the end of the decade, two to three times your salary is a great goal. 

As you hit your 50s, you can start to make "catch up contributions" to your 401k. This means you can contribute $25,000/year to your retirement fund, $6,000 more than younger workers. The same principle applies to your IRA. You can contribute up to $7,000, $1,000 more than younger folks. At this point, you want to be getting rid of your debt. With your peak earning years behind you, living within your means is more important than ever. Learning to live on less will help you determine how you will live on a fixed income. If you still need to make money, think about other forms of income like an at-home business or online venture.

Finally, as you hit your 60s, you should have saved about 8 times your salary. Does this seem like an unattainable goal? Think about how long you have been putting money away. After 40 years of saving, your money has done all the hard work, so you won’t need to rely on Social Security. If you can physically work, work. Hold off on any distributions from social security, your 401k or IRAs until you have to access it.

Saving is such an important part of planning for retirement and saving early can help. While these amounts may seem beyond your reach, remember that any amount you can contribute to retirement is beneficial.