How Much to Save Monthly for a Comfortable Retirement at Any Age
Time is the most critical element in building wealth and preparing for retirement, according to financial experts. Understanding how much to save can be a daunting task, but one decision stands out above all others: starting early. A comfortable retirement is not solely about choices made after stopping work; financial decisions made decades earlier can have a profound impact.
The Power of Early Saving and Investing
Saving and investing early in life is the single most influential decision for retirement, multiple financial advisors have confirmed. The sooner you begin, the better, stated Jordan Vlastuin, a certified financial planner and founder of Make the Memory Financial Planning. In an email to The Independent, Vlastuin emphasized, "Start investing now. Time is the most critical piece of building wealth and preparing for retirement. The earlier you start, even with small contributions, the more you will have invested when you are ready to retire."
This approach maximizes the effect of compound interest, which includes interest on both contributions and past growth, accelerating balance increases over time. However, if you have delayed preparing for your golden years, do not worry—financial experts assert it is never too late to begin. You may simply need to make more sacrifices compared to starting in your twenties or thirties.
Savings Roadmap Based on Age
A crucial aspect of building retirement savings through investing is knowing how much to save according to your age. For instance, aiming to live comfortably in retirement, saving $245 monthly from age 20 can accumulate $2 million by age 67. This target amount is likely to rise with inflation, so consulting a financial planner can help ensure you stay on track.
Using a NerdWallet retirement calculator and assuming an 8 percent return—the average inflation-adjusted stock market return over the past five years, per SoFi—here is a breakdown of monthly contributions needed to retire at 67 with $1 million, $2 million, or $3 million:
- Monthly contributions for a $1M retirement: 20 years old: $160, 25 years old: $245, 30 years old: $370, 35 years old: $565, 40 years old: $875, 45 years old: $1,395.
- Monthly contributions for a $2M retirement: 20 years old: $325, 25 years old: $485, 30 years old: $735, 35 years old: $1,130, 40 years old: $1,755, 45 years old: $2,800.
- Monthly contributions for a $3M retirement: 20 years old: $485, 25 years old: $730, 30 years old: $1,105, 35 years old: $1,690, 40 years old: $2,630, 45 years old: $4,190.
Sacrifice Now for Smooth Sailing Later
If targeting a $3 million retirement fund, contributing $485 monthly at age 20 might seem challenging. However, making early sacrifices—such as reducing weekend outings or food deliveries—can make these contributions more manageable as your career advances and income grows. For those unwilling to cut back, early twenties offer more energy for overtime or side hustles.
Bobbi Rebell, a certified financial planner and personal finance expert at CardRates.com, explained in an email, "Giving yourself the gift of time allows for the ups and downs of various investments and will smooth out your returns. Time is finite, but it can also be magical for your money."
Automate Your Savings for Consistency
To safeguard retirement contributions, automated saving and investing are essential, according to Derek Brainard, a certified financial planner and director of financial education at AccessLex Institute. He told The Independent, "The single most powerful retirement move you can make is to automate savings as early as possible, long before you feel ready to retire. Consistency and time matter more than the perfect investment choice."
One of the simplest methods to automate retirement savings is contributing to an employer-based 401(k), where employers often match contributions up to a limit and allow employees to select their contribution percentage. For those without a 401(k) option, alternatives like IRAs and solo 401(k)s provide easy ways to automate contributions.
