You've probably heard the magic number. 15%. Most financial planners, from the heavy hitters at Fidelity to the loud voices on talk radio like Dave Ramsey, treat that 15% figure like it's etched in stone. But honestly? Real life is rarely that tidy. If you're 22 and living with your parents, 15% feels like a breeze. If you’re 38 with a mortgage, two kids in daycare, and a car that just started making a "clunk" sound, 15% can feel like a cruel joke.
Deciding what percentage of salary should go to retirement isn't just a math problem. It’s a tension between who you are today and the stranger you’re going to be in thirty years. We’re going to tear apart the standard advice and look at what actually works based on when you started and how much you actually make.
Why the 15% Rule is Just a Starting Point
The financial industry loves the 15% benchmark because it’s easy to market. It’s a clean "one-size-fits-all" sticker. This number usually includes your employer match, so if you put in 10% and your boss chips in 5%, you’ve technically hit the goal.
But here is the catch.
That 15% figure assumes you started in your early 20s and plan to work until you're 67. It assumes a steady market return and that your spending habits won't explode later in life. If you waited until 35 to start, that 15% isn't going to cut it. You’re playing catch-up. Conversely, if you're a high-earner in a low-cost area, 15% might actually be under-saving if you want to maintain a lavish lifestyle once the paychecks stop rolling in.
The Math Changes Based on Your Age
Timing is everything. Compound interest is basically a superpower, but it only works if you give it time to breathe.
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Starting in your 20s
You have the greatest asset: time. Even if you can’t hit the 15% mark, just getting started is the win. If you invest $500 a month starting at 25, assuming a 7% return, you’ll have over a million bucks by 65. Wait until 35 to start that same $500? You end up with about half that. In your 20s, the answer to what percentage of salary should go to retirement is simply "as much as it takes to get the full employer match," and then scaling up as your career progresses.
The 30s and 40s Squeeze
This is where things get messy. You're likely hitting your peak earning years, but you’re also hitting your peak spending years. Mortgages. Kids. Travel. Life gets expensive fast. If you haven't started yet, 15% is the bare minimum. Experts often suggest aiming for 20% or even 25% if you’re staring down your 40th birthday with a zero-balance 401(k).
It sounds daunting. I know.
But look at it this way: the more you save now, the more "options" you’re buying for your future self. It’s not about being a miser; it’s about not being forced to work at a big-box store when you're 75 because you wanted a slightly nicer SUV in 2026.
Income Levels and the Savings Gap
There is a huge difference between saving 15% on a $50,000 salary and saving 15% on $250,000.
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For the lower earner, that 15% represents the difference between being able to afford fresh groceries or not. It's a high-stakes sacrifice. For the high earner, 15% might not even cover their tax liability or the lifestyle maintenance they’ll want in retirement.
Social Security is also a factor that people often miscalculate. It’s designed to replace about 40% of an average worker's income. If you’re a high earner, Social Security will replace a much smaller fraction of your lifestyle. This means the more you make, the higher the percentage of your salary you likely need to save to keep your standard of living the same after you retire.
Common Mistakes People Make with Retirement Percentages
People get weird about their 401(k)s. They either ignore them for a decade or they check the balance every single morning during a market dip and panic.
- Ignoring the Match: If your company offers a 4% match and you aren't contributing at least 4%, you are literally throwing away free money. It’s a 100% return on your investment instantly. No stock can guarantee that.
- The "I'll do it later" Trap: Lifestyle creep is real. When you get a raise, your brain immediately finds ways to spend it. The smartest move is to take half of every raise and divert it directly into your retirement account before you even see it in your checking account.
- Inflation Blindness: A million dollars sounds like a lot. In thirty years, thanks to inflation, a million dollars might have the purchasing power of $400,000 today. You have to save based on future costs, not current ones.
How to Calculate Your Own Personal Target
Forget the 15% rule for a second. Let's look at your actual life.
First, look at your current annual spending. Not your salary—your spending. If you live on $60,000 a year, that’s the number you need to aim for in retirement (adjusted for inflation). The "Rule of 25" is a handy, if slightly blunt, tool: multiply your desired annual income by 25. That’s your target "nest egg."
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If you want $60,000 a year, you need roughly $1.5 million.
Now, work backward. How many years do you have left? What is your current balance? There are plenty of calculators online, like those from Vanguard or Charles Schwab, that can help you plug in these variables. You might find that your percentage of salary should go to retirement needs to be 12%, or it might need to be 30%.
Tax Diversification Matters Too
Where you put the money is almost as important as how much you put in.
If all your savings are in a traditional 401(k), every dollar you take out in retirement will be taxed as ordinary income. If you put some into a Roth IRA or Roth 401(k), that money grows tax-free and comes out tax-free. Having a mix of "taxable" and "tax-free" buckets gives you huge flexibility when you're older. It allows you to manage your tax bracket even when you aren't working.
Small Shifts Over Huge Leaps
Don't try to go from 0% to 20% overnight. You'll hate it. You'll feel deprived, and you'll eventually stop altogether.
Instead, use the "one percent" method. If you’re at 6% now, move it to 7%. You won't notice a 1% difference in your paycheck. Do it again in six months. Keep sliding that bar up until you hit your target.
Actionable Steps for Today
- Check your current contribution. Log into your portal. Don't guess. Know exactly what percentage you are currently hitting.
- Find the match. Ensure you are at least hitting the ceiling of what your employer will contribute.
- Audit your fees. Look at the expense ratios of the funds you’re invested in. If you're paying 1% or more in management fees for a basic mutual fund, you're losing tens of thousands of dollars over the long haul. Look for low-cost index funds (usually around 0.05% to 0.15%).
- Automate the increase. Many 401(k) providers have an "auto-increase" feature that bumps your contribution by 1% every year. Turn it on and forget about it.
- Re-evaluate your "End Date." Be honest about when you want to stop working. If you want to retire at 55, your savings rate needs to be significantly higher than if you're okay working until 70.
The best percentage is the one you can actually stick to without miserable sacrifice, but it has to be enough to keep "Future You" from struggling. Start where you are, but don't stay there.