What Percentage of Income Should Go to Retirement?

Estimated read time: ~5 minutes

Summary: Wondering what percentage of your income should go to retirement? This article breaks down savings targets, key factors to consider, and steps to help you catch up if you’re concerned.

As retirement approaches, one question looms large: how much of your income should you be saving? While there’s no one-size-fits-all answer, knowing what percentage of income should go to retirement can help provide much-needed clarity and peace of mind as you plan for the future.

Here’s a look at the numbers, the factors to consider, and how to adjust your savings to make sure you’re staying on track for retirement success.

Understand your target retirement age

The first thing to figure out when planning your retirement savings is when you want to retire. According to Morningstar Center for Retirement & Policy Studies, around 45% of U.S. households will run out of money if they retire at 65.¹

If you’re aiming for early retirement, you may need to save more aggressively. However, if you plan to work longer, you can be more flexible with the portion of your income you save each month.

Generally, the earlier you retire, the higher the percentage of income you’ll need to save. If you feel you’re close to retirement, it’s important to take a hard look at where you stand in terms of retirement savings—and whether your contributions are enough to sustain you for the long haul.

The basic rule: 15% of your income

Many financial experts recommend saving around 15% of your pre-tax income for retirement. But this isn’t a hard rule—it’s a general target. Your ideal savings rate depends on your age, current savings, and retirement goals.

One thing to consider is your existing retirement savings. If you already have a substantial nest egg, you might not need to save as much as 15% of your income. On the other hand, if you haven’t saved much, you may need to start putting away more than this to catch up.

How much do you actually need to retire?

The percentage of your income that should go to retirement also depends on how much you’ll need to retire comfortably. As a general rule of thumb, a financial advisor can help you look at your current monthly expenses to help determine your required retirement income. If you plan on traveling or spending more, you may need to aim for higher savings.

Factor in other income sources

If you have other income sources like a pension, rental income, or side businesses, these can affect the percentage of your income you need to save for retirement.

Social Security is another factor to consider. The average monthly Social Security retirement benefit in 2025 is $1,976, which adds up to $23,712 annually.² While that can help supplement your retirement income, it likely won’t be enough to cover all of your expenses unless you’re living modestly. If you’re planning to rely on Social Security or other passive income sources in addition to your retirement savings, be sure to factor those into your financial plan.

Working closely with a financial advisor can help you plan more completely. A complete plan includes determining your budget, which includes expenses, and then comparing that to your income sources like pensions, social security incomes and more and finally, bridging the gap with personal savings and investments.

Tax advantages of retirement accounts

Tax-advantaged retirement accounts, such as 401(k)s, IRAs, and Roth IRAs, are a key way to boost your savings.

If you have access to a 401(k) through your employer, especially with a company match, prioritize contributing at least enough to get the match. This is essentially free money. Over time, this can add up significantly to your retirement nest egg.

Tip: If you’re 50 or older, take advantage of catch-up contributions to retirement accounts. For 401(k), you can contribute an extra $7,500 per year ($11,250 if you’re aged 60, 61, 62 or 63), and for IRAs, you can contribute an additional $1,000³.

Adjust your lifestyle as you near retirement

As you get closer to retirement, it’s critical to evaluate your spending habits and adjust your lifestyle to ensure you’re saving enough. A good idea is to try to test your retirement budget while you are still working to ensure it’s doable. This gives you enough time to determine if any adjustments need to be made or if you need to save more to make the budget work for the lifestyle you want.

If you haven’t reached your retirement savings goals, this may mean cutting back on discretionary spending or increasing your savings rate. The sooner you make adjustments, the longer your money has to grow.

A few easy ways to boost your retirement savings are:

• Track your expenses: Monitor your monthly spending to see where you can cut back. Maybe you can spend a little less on eating out or hold off on big purchases in the last few years before retirement.
• Downsize: If your home is bigger than you need and expensive to maintain, selling and moving somewhere smaller could free up more cash for retirement savings.
• Avoid new debt: Review your debts and prioritize paying off high-interest debt before retirement. Carrying debt into retirement can eat into your savings and limit your financial flexibility.

Planning for a comfortable retirement

So, what percentage of income should go to retirement? While 15% is a solid rule of thumb, your exact number depends on your personal circumstances, including how much you’ve saved, when you plan to retire, and what you’d like your retirement lifestyle to look like.

Whatever decision you make, Mutual of Omaha will help plan for a safe and comfortable retirement. Contact a financial professional to help you tailor your retirement plans.

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Frequently Asked Questions

Q1: What is the 4% rule for retirement?

The 4% rule is a guideline that says you can withdraw 4% of your retirement savings for the first year (adjusting for inflation in subsequent years) without running out of money for about 25–30 years. While it’s a helpful starting point, many experts suggest adjusting that number slightly depending on market conditions and personal needs.

Q2: How long will $1 million last in retirement?

Your lifestyle, investment returns, and inflation affect retirement income. The 4%-rule suggests $1 million provides about $40,000 yearly for 25–30 years. Higher spending or poor market performance could deplete funds sooner.

Q3: What is a good 401(k) balance at age 65?

A solid goal is to have about 25x your planned annual spending in retirement savings when you retire. Though this may not fit everyone’s unique circumstances and personal factors like health care costs and lifestyle will play a role too.

Disclosures:  

Registered Representatives offer securities through Mutual of Omaha Investor Services, Inc., Member FINRA/SIPC. Investment Advisor Representatives offer advisory services through Mutual of Omaha Investor Services, Inc.

Mutual of Omaha and its representatives do not provide tax and/or legal advice, and the information provided herein is general in nature and should not be considered tax and/or legal advice.

Not all Mutual of Omaha agents are registered representatives or financial advisors.

All investing involves risk, including the possible loss of principal and there can be no assurance that any investment strategy will be successful.

Sources:

1. Morningstar, https://www.morningstar.com/news/marketwatch/20240803255/almost-half-of-those-who-retire-at-65-could-run-out-of-money, August 2024
2. Social Security Administration, What is the average monthly benefit for a retired worker? January 2025
3. IRS, 401(k) limit increases to $23,500 for 2025, IRA limit remains $7,000, November 2024

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