How Much Money Should I Save Each Month? How Much Do I Need To Retire?

We all know that saving money is important, and asking yourself “how much money should I save?” can be a difficult question to answer when beginning. Being a personal finance expert, I am asked this question a lot. Between saving for emergencies, retirement, vacations, etc. there are a lot of things to consider. And, knowing…

Michelle Schroeder-Gardner

Last Updated: January 22, 2021

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We all know that saving money is important, and asking yourself “how much money should I save?” can be a difficult question to answer when beginning. Being a personal finance expert, I am asked this question a lot.

How much money should I save each month? How much do I need to retire? These are common questions I receive and you will finally receive an answer! #howmuchmoneyshouldisave #howmuchmoneyshouldyousave #howmuchdoineedtoretireBetween saving for emergencies, retirement, vacations, etc. there are a lot of things to consider. And, knowing how much to save is something that many people don’t often talk about. When it does come up, it can seem like there is no straight answer.

I’ve talked a lot about savings on this blog, and in my post 56% Of Americans Have Less Than $10,000 Saved For Retirement, I stated that 56% of Americans have less than an average of $10,000 in retirement savings and 33% have no retirement savings at all. This is something incredibly important to address!

Other interesting statistics mentioned in this article include:

  • 42% of millennials have not begun saving for retirement.
  • 52% of Gen Xers have less than $10,000 in retirement savings.
  • About 30% of respondents age 55 and over have no retirement savings whatsoever.
  • Nearly 75% of Americans over 40 are behind on saving for retirement.

There are many reasons for why a person may not save money each month, which I discuss further in the article.

However, one of the biggest reasons I’ve noticed is that people don’t realize that they should be saving more – because they think they’re “invincible” (they think they don’t need to save at the moment, they think they’ll never leave their job, etc), because they truly do think that they are saving enough money, or because they are so overwhelmed by the idea of saving money that they just don’t save any money at all.

Really, all of these reasons get back to the question I began with, “how much money should I save?” If you find that you are asking that question and not getting any straight answers, I am here to help you figure that out today.

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So, how much money should I save each month?

According to the U.S. Bureau of Economic Analysis, the personal savings rate has averaged around 5% in the past year, and averaged 8.33% from 1959 until 2016.

There are a lot of people that think saving between 1% and 5% of their income is enough to be on track for retirement.

Sadly, it’s unlikely that amount will be enough to retire.

While 5% is better than nothing, just one small emergency each year could easily and completely wipe out that savings.

Further, saving just 5% means it will take you a very long time to retire.

How much money should I save each month? How much do I need to retire? These are common questions I receive and you will finally receive an answer!
Retirement Calculator:

As you can see from the above:

  • With just a 1% savings rate, it would take you 98.9 working years until you reach retirement.
  • A 5% savings rate means that it would take you 66 working years to retire.
  • A 20% savings rate means that it would take you 37 working years to retire.
  • A 50% savings rate means that it would take you 17 working years to retire.
  • A 75% savings rate means that it would take you 7 working years to retire.

So, by saving more of your money, you are likely to retire sooner. Makes sense, right?

Related content: Do You Know Your Net Worth?

Now, all of those statistics are dependant on how much you make, but for the average person, I recommend saving at least 20% of your income. That would still be around 37 years of working.

However, there is no perfect percentage.

If you have a high income, then you should probably save more of your income so that you aren’t just wastefully spending your money. For example, we save over 80% of our income each month after personal and business expenses.

On the other hand, if 20% just seems like a crazy high percentage for you to save, then just start somewhere, anywhere! Saving something is better than saving nothing (please head to the section below “Still think you can’t any save money?” for more information).

And, everyone has different financial goals. If you want to retire early, then you’ll most likely have to save more than 20% of your income.

Recommended reading: The 6 Steps To Take To Invest Your First Dollar – Yes, It’s Really This Easy!


Think about your goals when understanding “How much money should I save?”

One person’s answer to “how much money should I save?” will most likely be completely different from the next.

Due to that, your savings percentage goal can vary depending on your specific goals. Retirement calculators can be great and all, but you really need to make sure you are thinking about your own goals.

Remember though, it’s not always just about retirement. There are other things in your life that you may want to save for.

When asking yourself “how much money should I save?” you will want to think about your:

  • Short-term goals – What are you saving for that you may purchase in the next year? This could be a vacation, an event you want to attend, holiday gifts, etc.
  • Mid-term goals – Think of a goal that you want to reach in the next decade. This may include saving for a down payment on a house, buying a car, building up an emergency fund, etc.
  • Long-term goals -This will most likely be your retirement goal, paying off your mortgage completely, etc.

Yes, that’s a lot to think about. And, this is why I always recommend saving as much as you realistically can.


Pay yourself first.

To make reaching your savings goals easier, I recommend starting to pay yourself first.

If you are unfamiliar with the idea, it’s basically setting aside money in savings before you pay any other bills. I also know someone who pays themselves first by putting extra money towards their debt before paying any other bills.

Paying yourself first before you pay your monthly expenses may be a scary thought. No one wants to over withdraw from their checking account or be unable to pay their monthly bills.

However, your future is just as important too, so it is much better to think about saving money as a need instead of something that can be pushed aside. Or, you can look at it this way, saving money is a bill you pay to yourself.

Paying yourself first becomes the first thing you do with each paycheck – you don’t even pay your other bills first. When you turn savings into a budget line item, rather than just putting what’s leftover into savings, it really can help you save more money. Yes, it may be difficult at first, but you will get used to living on less money.

For this to become part of your answer to the question “how much money should I save?” you may have to do some cutbacks with your budget or find ways to make more money. But, by only having a limited amount of money to spend each month, you will find that you are more closely watching your spending.

This may allow you to really see what is a need and what is just a want.

Here are my tips so that you can pay yourself first:

  • Take a look at how much you are currently saving and spending each month. Start tracking your spending a little more closely and see how much of that is actually unneeded. Calculate how much money you should be saving each month and set that aside at the beginning of each month.
  • Make it automatic. To make it easier and to simplify your finances, you may want to autopay a certain amount of money for savings each month.
  • If you feel uncomfortable with paying yourself first, then you may want to find ways to cut your budget back or make more money.


Still think you can’t save any money?

Okay, so now you may be thinking “How much money should I save, if I don’t have much money?!”

Thinking about that recommended 20% savings number can be frustrating if you are already having a hard time paying your bills and/or living paycheck to paycheck.

However, I recommend saving as much money as you realistically can. This may be nowhere near 20% at first, heck, this might not even be 5%, but any little bit will help. If you are not able to save that much, just save something! Start with $25 a month if you have to – seriously, every little bit does help.

Even if it’s just $1 a day, set that amount aside and start saving it.

So, no matter how you are doing right now, just start with something, no matter how small. Then, work your way up until you are saving a percentage of your income that you are happy with.

Start small and work your way towards your savings goal. And, if you are currently paying off debt, keep in mind that it counts too! Just keep moving in a positive direction and keep getting closer and closer to reaching your financial goals.

Remember that 5% of your income most likely won’t be enough for the average person to retire, so you will want to continue to improve that percentage well into the future so that you will be able to retire one day.

I understand that some people have financial situations in which they may not be able to save as much money as they would like. Living paycheck to paycheck, being in medical debt, or having a major unexpected expense can wreck a person’s financial situation and their goals, and I understand that.

However, you will need to find a way out of that. To find a way out, you may want to find ways to cut your spending, make more money (learn ways to make extra money), and more. You will have to challenge yourself, and it may not be easy. However, it will all be worth it once you reach your financial goals!

By spending less money, you’ll decrease the amount of money you need for the future, including money for emergency funds, retirement, and more.

Just think about it: If you are currently living a frugal lifestyle, then you will be used to living on less in the future. This means that your saved retirement amount doesn’t need to be as large, which means it may be easier to reach that savings goal.

Also, if you start saving now, you can take advantage of compound interest, which I’ll talk about next.

Here are some great articles that I recommend reading that will help you learn how to save money and make extra money:


The power of compound interest.

Saving for retirement as soon as you can is a great thing, especially because of compound interest.

With compound interest, time is on your side- meaning you should start saving money as early as you can.

Compound interest is when your interest is earning interest. This can turn the amount of money you have saved into a much larger amount years later.

This is important to note because $100 today will not be worth $100 in the future if you just let it sit under a mattress or in a checking account. However, if you invest through your retirement account, then you can actually turn your $100 into something more. When you invest, your money is working for you and growing your savings.

For example: If you put $1,000 into a retirement account with an annual 8% return, 40 years later you will have $21,724. If you started with that same $1,000 and put an extra $1,000 in it for the next 40 years at an annual 8% return, that would then turn into $301,505. If you started with $10,000 and put an extra $10,000 in it for the next 40 years at an annual 8% return, that would grow into $3,015,055.

So, if you are wondering “How much money should I save for retirement?” you should also focus on the reasons for saving for retirement now, such as:

  • It can help make sure you aren’t working for the rest of your life.
  • You can retire sooner rather than later.
  • You can lead a good life well after you finish working.
  • Compound interest means the earlier you save the more you earn.
  • You won’t have to rely on your children or others in order to survive.

As you can see, learning how much money you should save, such as for retirement, is very important.

Side note: I recommend you check out Personal Capital if you are interested in gaining control of your financial situation. Personal Capital is similar to, but much better. Personal Capital is free, and it allows you to aggregate your financial accounts so that you can easily see your whole financial situation, including investments.

So, what’s your answer for when a person asks “How much money should I save?” What are you currently saving for? What percentage of your income do you save?

Michelle Schroeder-Gardner

Author: Michelle Schroeder-Gardner

Hey! I’m Michelle Schroeder-Gardner and I am the founder of Making Sense of Cents. I’m passionate about all things personal finance, side hustles, making extra money, and online businesses. I have been featured in major publications such as Forbes, CNBC, Time, and Business Insider. Learn more here.

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  1. Amber

    I AM currently saving 20% of my income (pre tax). However, 11% goes into my state pension and I have an additional 9-10% being put into a 403b. So, technically I am at 20. However, I do wonder what I should be doing differently. I am looking into starting a Roth IRA in the next couple months. Suggestions?

    1. If you have more money to save, then definitely save more 🙂 Perhaps you could look into a Roth or 401k?

  2. We are saving 50% of pre tax income. If it’s after taxes…. we’re saving 70%. Which is much fatter than 5-8%, purposefully so.

    We’re saving for children + retirement + legacy. I want both of us to be home and retired so we can optimize time for family.

    1. Great job! When do you think you’ll retire?

  3. Great stats Michelle, I have been consistently saving over 50% of my income over the past few years and it does really add up quickly.

    Now I am focusing more of my energy on my passions such as my Youtube channel, and focusing less on my 9 to 5.

    It’s crazy how much freedom money can buy.

  4. We were always confused by how much we should save too! All the common advice said 20% is amazing, so that’s what we did. But then we kept digging, and discovered those stats you shared! Neither of us wanted to need to work until our 60s so we worked hard to pay off debt, cut our expenses and now save about 75% of our income. The awesome thing is that now, after three years of intense saving we feel safe for my hubby to pursue his passions and take a 60% pay cut. Without our high savings rate for a few years we definitely would t be making this leap!

  5. One of my favorite saving “tricks” is to save 100% of raises and bonuses. You did not have the money yesterday so you won’t miss it tomorrow. This trick alone can make you a millionaire.

  6. When I first started saving money, I did the 52-week challenge, would throw extra change into savings, basically whatever I could to build an emergency fund. Now I have a certain amount taken out and it’s crazy how fast my savings account has grown! To think that if I saved 75% I’d be able to retire so quickly is insane!

  7. SMM

    These stats never cease to amaze me! Saving is definitely hard at first because if you’re not used to it, there is some adjustment required. But over time and just like everything else, it becomes natural and a way of life. The big difference is the amount of money you have and continue to save up. The dollar a day method is a great start and pretty soon you realize you didn’t really need it in the first place!

    1. Yes, it definitely can become natural!

  8. “As much as you can” is the easy answer, with the caveat of “while still enjoying life”

    The key is the balance between the two. If you learn to value people, relationships, and experiences more than things, you’ll win big in this balance.

  9. Every people don’t have the ability to save a fixed amount. People with the ability to save most of them are not in a situation of danger. But they can improve their lifestyle by one year of saving. I really feel that this article has a great effective site. This is a matter of high quality imagination. Thanks for the great support to people with the high level of knowledge.

  10. That is something to truly think about, Michelle. If I saved just a mere $5 daily for 365 days a year, that would be $1825 annually. And In 5 years, that would be $9125. Interesting blog and something to change the history of human thought. Thank you. 🙂

    1. Yes! It’s a great thing to think about.

  11. I’m currently not saving nearly as much as I should, but I’m trying. I put $50/month into a TFSA, $50/month into an RRSP, and also have a pension through work. As a natural saver, I’d love to save more, but debt repayment has left me sort of stuck with this for now. Gotta start somewhere, right?

    1. Trying is the best first step! 🙂

  12. Awesome! When do you think you’ll retire?

  13. Mrs. Picky Pincher

    Whenever people want to know how much they should save for retirement, I always say, “As much as possible.” Because most people’s notion of saving just isn’t enough to cut it to make a difference.

  14. I am one of those persons who have nothing saved for retirement. This post may just be the one that motivated me to start saving for the rainy day. will try to save as close as possible to the 20% saving you recommended.

  15. Kris

    I am maxing out my IRA and close to maxing out my 401K. We are saving as much as possible and getting a 75% savings rate. We are projecting to retire within the next 10-15 years when we are in our early 50s.

  16. By investing in stocks and real estate … we have managed to save my whole salary for 20 years … seeing the actual amount we saved, we invested and the total yearly net gain has been equivalent to my whole salary for 20ish years – 🙂 CPO, From the Far Side of the Planet 🙂

  17. Jax

    I read somewhere (wish I could remember from who!) that you should be saving just enough to feel the pinch. Currently I save 20% of my income in my retirement accounts but I want to do a better job saving in my “regular” accessible accounts.

  18. MarLeigh

    We are self employed so the company puts 20 to 25% of our income in the IRA. I save 15% of business income in the business savings account. Then on the personal side, we save 11% of our net income but that gets split between savings and paying down the mortgage. We are anticipating giving ourselves a 25% raise next year while keeping expenses the same or lower so I hope to save more on the personal side next year.

  19. Leah Cobin

    This article is a real wake up call, I’d say.

    Some of the stats here were really depressing though. About 30% of respondents age 55 and over have no retirement savings whatsoever, that’s very depressing, 🙁

    I guess it’s time to be more serious with my saving habits, or just make more money lol.

    Thank you Michelle.

  20. Most – if not all of us – have heard Dave Ramsey’s quote, “live like no one else, so you can live like no one else”. Love him or not, this is a brilliant message, and sadly one that not enough people embrace. Most people are not willing to work two jobs or a job and a side hustle, but think with me for one moment what your financial world would look like if you have a job that paid your bills and another income source (I highly recommend a side hustle) that you could bank.

    Let’s make it real. Let’s say you need to earn $50,000 to make your budget work, so you get that $50k job and it works. The key is to NOT BE CONTENT JUST PAYING YOUR BILLS. That’s not “living” and it’s also not what we were created to do. The question you should ask is “how much can I make in my side hustle and how much of that can I save?” Imagine what earning just $500 per month would look like if you put that into retirement. Well, I can tell you. It’s over $250,000 into your retirement (assuming 7.5% interest over 20 years). Now keep in mind, a $500 per month side hustle is pretty easy to attain. You could grow your side hustle to $1,000, $5,000, or more. Heck, you might even be tempted to leave your day job, but I always say bank as much as you can.