The average American retires at 64 with $255,000 in savings. Financial experts say you need $1-2 million. The reality is more nuanced than either figure suggests, and the right target depends entirely on your personal situation.
How Much Do You Actually Need?
The traditional rule of thumb says you need 25 times your annual expenses saved for retirement. If you spend $60,000 per year, that’s $1.5 million. This is based on the 4% withdrawal rule, which suggests you can safely withdraw 4% of your portfolio annually without running out of money over a 30-year retirement.
However, this calculation has significant variables. Social Security replaces 30-40% of pre-retirement income for most Americans. A retiree spending $60,000 per year who receives $24,000 annually from Social Security only needs to fund $36,000 from savings, requiring approximately $900,000 — not $1.5 million.
Retirement Savings Benchmarks by Age
While individual situations vary, these benchmarks provide a general target. By age 30, aim to have 1x your annual salary saved. By 40, target 3x your salary. By 50, you should have 6x your salary. By 60, aim for 8-10x your salary.
If you’re behind these benchmarks, don’t panic. Increasing your savings rate by even 5% and working 2-3 years longer can dramatically improve your retirement outlook.
Maximizing Your 401(k) in 2026
The 2026 401(k) contribution limit is $23,500 for those under 50, with a $7,500 catch-up contribution for those 50 and older. If your employer offers matching contributions, always contribute enough to capture the full match — it’s an immediate 50-100% return on your money.
Beyond the match, maximize contributions if possible. A 30-year-old contributing $23,500 annually with 8% average returns would accumulate approximately $3.4 million by age 65.
IRA Strategies for 2026
IRAs offer additional tax-advantaged retirement savings. The 2026 contribution limit is $7,000, with a $1,000 catch-up for those 50+. Choose between Traditional IRAs (tax deduction now, taxed in retirement) and Roth IRAs (no deduction now, tax-free in retirement).
For most people under 50 in lower-to-middle tax brackets, Roth IRAs are the better choice. Tax-free growth and withdrawals provide enormous value over decades. If you earn too much for direct Roth contributions, the Backdoor Roth strategy remains available — contribute to a Traditional IRA and immediately convert to Roth.
Social Security Optimization
You can claim Social Security as early as 62 or as late as 70. Every year you delay past your full retirement age (67 for those born after 1960) increases your benefit by 8%. Delaying from 67 to 70 increases your monthly benefit by 24%.
For a worker with a full retirement age benefit of $2,500 per month, claiming at 62 reduces it to $1,750, while waiting until 70 increases it to $3,100. The breakeven age for delaying is typically 80-82 — if you expect to live past 82, delaying maximizes total lifetime benefits.