Knowing how much to save for retirement is a two-fold challenge. First, it's difficult to estimate your expenses—and thus, your income needs—for a retirement that's years, if not decades, away. Second, even after you settle on a target portfolio size, it's hard to gauge if you're saving enough to reach that goal.
To bring some clarity to this retirement-savings conundrum, we've developed a guide to help you estimate how much you should have in your retirement portfolio today based on your age and income. Once you've determined whether your portfolio is on track, behind, or ahead, you can act now to help make sure you achieve your retirement goals.
Calculating your target savings
Retirement looks different for everyone. But assuming you'll maintain the same lifestyle in retirement that you currently enjoy, you can calculate how much you should have saved by now using your annual income and an appropriate multiplier based on your age, which you can find in the following table.
Annual income multiplier range by age
To find your multiplier, go to the row with the age closest to your own and use the multiplier given in the column to the right. If you find yourself between ages, consider averaging the lower-age and higher-age multipliers. If your income is less than $100,000, focus more on the lower end of the annual income multiplier range. If you earn more than $250,000 or want to be more confident that your savings can withstand unexpected retirement expenses, think about using a higher multiplier.
| Current age | Annual income multiplier |
|---|---|
| 30 | 1X |
| 35 | 1-2X |
| 40 | 3-4X |
| 45 | 4-5X |
| 50 | 5-7X |
| 55 | 7-9X |
| 60 | 8-12X |
| 66 | 11-15X |
Source
Source: Schwab Center for Financial Research
The underlying calculations use forward-looking Capital Market Expectations (CMEs). An income range between $50,000 and $300,000 was used to test different effects on the multiplier rate. Income is assumed to steadily increase with inflation at 2.27% annually. Retirement saving is assumed to begin at age 25 and end at age 66. From our research, the target savings rate is used as an assumption—based on an estimated range of 11% to 16% of annual income including employer matched contributions—and represents what someone would need to contribute to the portfolio from age 25 to 66.
Retirement is assumed to last 30 years. Initial retirement income withdrawal is based on needing 50% to 70% of the current income determined by reducing the current annual income by the target savings rate and hypothetical Social Security benefit amount at full retirement age taken at age 66 for the income range tested. Retirement portfolio income is based on a sustainable, initial withdrawal rate calculated by simulating 1,000 random scenarios using a 75% probability of success. Probability of success is calculated as the percentage of times where the portfolio’s ending balance was greater than $0. Portfolio follows an age-based glidepath during the savings period, ending with a moderate portfolio. The initial withdrawal amount, in dollars, is increased by an annual inflation rate of 2.27%.
Let's look at a couple of scenarios.
Scenario 1
Ruth is 45 years old and makes $265,000 annually. Based on the table, her current estimated retirement portfolio should be around 4–5x her income, or around $1,060,000 to $1,325,000. Since her earnings are on the higher end of the income spectrum, she should consider comparing her current portfolio value to the higher estimate.
Scenario 2
Alan is 53 years old and has an income of $100,000. Because Alan is between ages in the table, he could look at the midpoint of the multiplier ranges for age 50 (5–7x) and age 55 (7–9x) and use 6–8x to calculate his target savings, making his current estimated retirement portfolio around $600,000 to $800,000. If Alan plans to splurge on travel in retirement, then he might consider focusing on the higher end of the estimated portfolio range.
Remember, these multipliers are meant to be a quick guide to help approximate where your estimated retirement savings should be at a certain age. For more specific recommendations and guidance, we suggest that investors complete a personalized retirement saving plan and seek professional support and advice.
Do you need to adjust your retirement savings plan?
Once you know whether you're behind target, on track, or ahead of target to reach your retirement savings goal, here's what to do next:
If you're behind: Don't panic—but do take action.
- Save more now: It's the most obvious—and probably the most difficult—solution, but the sooner you boost your savings, the longer your money can potentially benefit from compound growth. Increase your annual contributions and remember to save at least enough to capture your full employer match, if offered.
- Reassess your goal: Can you live on less? Some expenses may go away in retirement, such as commuting costs or a mortgage payment. If you feel you can also reduce your retirement spending during down markets, you can also work with fewer assets.
- Stay flexible: Don't get discouraged. If you work a few years longer, or if you work part time in retirement, you may not need to tap your portfolio for income right away. That could also help delay Social Security, which could boost your benefit by as much as 8% per year after you reach full retirement age.
If you're on track: Keep up the good work. Continue making contributions and rebalance your portfolio regularly.
- Aim to max out your retirement accounts: For 2025, individuals can contribute up to $23,500 (plus a $7,500 catch-up contribution if your age 50 to 59 and age 64 or older, $11,250 for age 60 to 63) to a 401(k) and up to $7,000 (plus a $1,000 catch-up contribution) to an individual retirement account (IRA).
- Still consider stocks: Many people should tilt their portfolios toward conservativism as they near retirement. Depending on your risk tolerance, you may want to maintain at least some exposure to stocks to capture potential market growth but not so much that you lose sleep should the market stumble.
If you're ahead: Congratulations. Stay focused and maintain your cushion.
- Keep saving: Continue saving as much as you can for as long as you can. You never know when life—or the market—will throw you a curveball.
- Review your assumptions: Are you planning to retire early? Are you planning to spend more in retirement? Are you not planning on other income sources in retirement like Social Security or a pension to supplement your savings? Make sure your savings align to your retirement vision.
- Prepare for transition: Age 50 is a great time, in our view, to create a more personalized, up-to-date retirement plan, if you don't have one already, or if you haven't updated it for some time. Then the years after, the 5–10 years before retirement, whatever that date may be for you, are particularly important—and impactful. Review your plan, your assets, and your potential spending, to go beyond multipliers, to a personalized retirement number—and plan.
Get a second opinion
Multipliers and rules of thumb may be place to start. The guidelines in this article provide a starting point. But no matter where you are on your journey to retirement, working with a financial planner is a great way to add detail and pressure-test your assumptions, progress toward retirement, and create or adjust a realistic plan. The sooner you act, the more time you'll have to build additional savings, no matter where you are now.
