Discover how to save for retirement with expert strategies by age and income. Learn how much to save, when to start, and how to stay on track.
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Saving for retirement might be the most important thing you ever do with your money. And the earlier you begin, the less money it will take!
Key insights
- Saving for retirement helps ensure financial security when you stop working, so you can better manage rising health care costs and maintain your desired lifestyle.
- Your planned retirement age, estimated lifespan/time in retirement, and retirement lifestyle are a few key factors that determine how much you should save for retirement.
- Compounding—or the earnings generated by your previous earnings—can help your savings grow faster, making it a crucial strategy for long-term financial goals like retirement savings.
Why retirement savings matter
Financial security in retirement is essential for maintaining your health and independence and enjoying peace of mind during your golden years. Setting aside money in specialized accounts, such as IRAs or 401(k)s, which offer tax-advantaged growth opportunities, allows your savings to grow more efficiently over time. Unlike general savings, these accounts are designed specifically to help you build a substantial nest egg for your later years when you may no longer be earning a steady income. While Social Security can provide a basic level of income, it's often not enough to cover all your needs. By saving strategically, you can ensure a comfortable and secure retirement.
Social Security shouldn't be your only retirement plan
Social Security benefits are designed to supplement retirement savings, not replace them entirely, and they often don't come close to matching pre-retirement income.
The future of Social Security is uncertain, with benefits and eligibility facing many potential challenges. Diversifying retirement income sources through personal savings, investments, and employer-sponsored plans is essential for financial stability and security.
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When to start saving for retirement
Saving for retirement as early as possible allows your account balance to grow exponentially over time. Starting sooner provides a longer investment timeline, enabling you to take advantage of market growth and recover from potential downturns. It also reduces stress and financial pressure in later years, as smaller, consistent contributions over a longer period are more manageable than trying to save large amounts closer to retirement.
Compounding puts both time and money to work for you, allowing the earnings on your savings to generate their own earnings over the years, which can significantly increase the growth of your retirement savings. This potential for boosted growth is especially powerful when you save early because it provides more time for interest to accumulate, ultimately helping you establish a more comfortable and financially stable retirement.
However, it's never too late to start saving, and catch-up contributions can help you make significant progress even if you're starting later in life.
The benefits of starting early
Exponential growth. Compound interest allows savings to grow exponentially over time due to returns on your accrued earnings. Even small contributions made early can add up to significant amounts over time, reducing the financial burden of making larger contributions later in life.
Greater risk tolerance. Investors with more time in the market can typically take on higher-risk investments and generally have a better chance of overcoming market downturns. This means potentially achieving higher returns over the long term.
Retirement flexibility. A higher retirement savings balance offers more choices, like enjoying an early retirement or having more spending options during retirement.
Peace of mind. Knowing you're prepared reduces financial stress and contributes to overall well-being.
How to start your retirement savings
It's natural to have questions about saving for retirement. How much will I need? What year will I retire?
The good news is that you don't need to figure everything out right now. The most important thing to do is get started. Here are some of the best ways to save for retirement:
- Assess how much you need to save for retirement. Vanguard's general rule of thumb suggests saving 12% to 15% of your pay each year for retirement, including any employer contributions.1
- Find the right type of retirement account for your savings. Employer plans, IRAs, and taxable accounts can all be used to help you reach your retirement savings goals.
- Fund your new account and set up automatic contributions. You'll also need to choose investments to contribute to within your selected retirement account(s).
- Periodically reevaluate how you choose to divide your investments as part of asset allocation planning.
- Maximize your contributions each year to take full advantage of tax benefits, compounding, and any employer match that may be offered. Be sure to stay mindful of the annual contribution limits and deadlines to ensure you're making the most of your retirement savings.
Figure out where you stand with your retirement goals
Average retirement savings
Vanguard's 2025 How America Saves report found that the average participant account balance for Vanguard defined contribution plans was $148,153 as of year-end 2024.
Check out the report to see how your retirement savings compare based on age and income.
How America Saves 2025 is an examination of retirement plan data from nearly 5 million defined contribution (DC) plan participants across Vanguard's recordkeeping business.
Average retirement savings by age
Factors like income, age, and how long you've been working can have a significant impact on your retirement savings. Individuals under 25 have the lowest average savings of $6,899 and a median savings of $1,948, which may be due to factors like lower earned income, less time to save, student loan debt, or not recognizing the importance of saving early for retirement.
Savings grow progressively across age groups, peaking at an average of $299,442 and a median of $95,425 for those age 65 and older. Individuals can experience substantial growth in retirement savings as they age, highlighting the importance of creating a long-term retirement savings plan and the power compounding can have on your bottom line.
Average retirement savings by age, 2024
Vanguard defined contribution plans
| Age | Average | Median |
|---|---|---|
| <25 | $7,351 | $2,816 |
| 25—34 | $37,557 | $14,933 |
| 35—44 | $91,281 | $35,537 |
| 45—54 | $168,646 | $60,763 |
| 55—64 | $244,750 | $87,571 |
| 65+ | $272,588 | $88,488 |
Average retirement savings by income
Our study shows a clear, positive connection between income and average savings, emphasizing the importance of income growth for future financial security.
Individuals with an income of less than $15,000 have average retirement savings of $25,716. Balances increase significantly with higher income brackets, peaking at $377,488 for those earning $150,000 or more.
Average retirement savings by income, 2024
Vanguard defined contribution plans
| Average | Female | Male | All |
|---|---|---|---|
| <$15,000 | $17,949 | $23,424 | $24,175 |
| $15,000—$29,999 | $17,227 | $19,920 | $18,610 |
| $30,000—$49,999 | $26,823 | $26,131 | $25,096 |
| $50,000—$74,999 | $59,731 | $62,613 | $59,273 |
| $75,000—$99,999 | $101,845 | $111,918 | $106,875 |
| $100,000—$149,999 | $168,642 | $189,245 | $178,818 |
| $150,000+ | $300,200 | $382,012 | $336,470 |
| Terminated | $115,337 | $155,250 | $137,430 |
How to catch up on retirement savings
If you're behind in saving for retirement, here are some proactive steps you can take to catch up.
- Evaluate your current financial situation and create a detailed budget to figure out if you can save more.
- Increase your retirement contributions to the maximum allowed in employer-sponsored plans and IRAs.
- Take advantage of catch-up contributions if you're 50 or older. A catch-up contribution is an additional amount of money that individuals age 50 and older can contribute to their retirement accounts, such as 401(k)s or IRAs, beyond the standard annual contribution limits.
- Explore additional retirement account options, such as a Health Savings Account (HSA) or a taxable brokerage account, if you've already maxed out your contributions to your primary retirement accounts. These can provide extra ways to save and invest, helping you build a more robust retirement portfolio.
No matter why you're behind on your retirement savings journey, the important thing is to start now.
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Frequently asked questions (FAQ)
According to Vanguard's 2025 How America Saves report, the average participant account balance for Vanguard defined contribution plans was $148,153 as of year-end 2024.
When planning for retirement, key factors include your retirement age, anticipated lifespan, and desired lifestyle. These elements significantly influence how much you need to save. Vanguard recommends aiming to save 12%−15% of your annual income each year to ensure a comfortable retirement.
Estimating how long your retirement savings will last involves considering several key factors. First, determine your expected retirement age and lifespan to gauge the number of years your savings will need to cover. Next, assess your anticipated retirement expenses, including housing, health care, and daily living costs. It's also important to factor in inflation and potential investment returns. Using a retirement calculator can help you project your savings and adjust your plans accordingly.
The Retirement Savings Contribution Credit, often referred to as the "Saver's Credit," is a tax credit designed to encourage low- to moderate-income individuals to save for retirement. It provides a direct reduction in the amount of federal income tax you owe based on the contributions you make to eligible retirement accounts, such as IRAs, 401(k)s, or other qualified plans. The credit amount varies depending on your income level and filing status, and it can be a significant incentive to boost your retirement savings.