How Much Should You Be Saving for Retirement/Financial Independence?

How Much Should You Be Saving for Retirement/Financial Independence?

How much money should you be saving in order to reach financial independence on your own terms?

It’s a good question, and an important one. And by the end of this article you’re going to have your personal answer to it.

Now, I don’t want to mislead you into thinking that there are any guarantees here. There are simply too many variables in play to give you a definitive answer that will absolutely allow you to reach financial independence at a specific point in time.

But I CAN give you a monthly savings target that puts you on the right track. You will still have to re-evaluate your savings plan from time to time (and you can use this exact same process to do that), but this will give you as good a start as you can get.

So that’s exactly what we’re going to be figuring out in this post: the monthly amount you should be saving in order to get yourself on track to financial independence.

This section makes use of a Financial Independence Savings Calculator that you can get here:

To access it, simply click the link, click File in the top menu, and either Make a copy… to use it in Google Sheets or Download as to download it in Excel.

You’ll want to have that open as you work through this post.

Here are a few notes on using the calculator:

  • I will be using “FI” as a shortened version of “financial independence” throughout this section. Just wanted to give you a heads up to avoid any confusion!
  • You will be doing all of your work in the FI Projection worksheet.
  • The FI Assumptions & Notes worksheet explains some of the assumptions that go into the calculator. You are welcome to review these and even change them if you would like, though I would only change them if you are confident in what you are doing.
  • The Example FI Projection worksheet gives you an example of what it will look like once you’ve filled it out completely, using made up numbers for a made up couple.

Quick note: For step-by-step guidance on how to invest all this money you’re saving, check out the guide Investing Made Simple.

Step 1: Enter Your Current Age

Open up the Financial Independence Savings Calculator and enter either your current age or your spouse’s age if you are married and he or she is older. For example, if you are 32 and your spouse is 34, you would enter 34.

Step 2: Enter Your Current Financial Independence Savings

In the Current FI Savings section of the spreadsheet, there are spaces to enter your current balance in any dedicated retirement/financial independence accounts, as well as those for your spouse.

Once you enter your current balance for each account, the Current FI Savings field in the Variables section will automatically add them up to get your total current balance.

Step 3: Estimate the Age at Which You Would Like to Reach Financial Independence

You may not have a specific target age yet, but one of the fun parts of this calculator is that you can enter different ages here to see what your savings target would be in each scenario. And honestly, I would encourage you to do just that.

Play around with this field and note the savings target needed to reach financial independence at different ages. That can help put some definite numbers around this question that may help you set your eventual goal.

Step 4: Estimate Your Monthly Expenses at Financial Independence

Along with your estimated FI age, your Estimated Monthly Expenses at FI is the big unknown that will have a big impact on the savings needed to reach financial independence. Simply put, the lower your required expenses, the easier it will be to reach financial independence.

And this is another variable that’s hard to know ahead of time. So what I would do is start with your current monthly expenses, since that represents your current lifestyle. If your lifestyle remains consistent between now and when you reach financial independence, this estimate will be reasonably accurate.

If you don’t know how much you’re typically spending per month, I would simply make your best guess for now. But for a more accurate view, I would suggest using a tool like to track your spending for a few months. That information will be helpful for this projection and your general financial health.

You can get a little more detailed by making some adjustments to your current spending based on things you expect to add or remove once you’ve reached financial independence. Here’s a quick list of things to consider if you want to do this:

Include in Your Estimated Monthly Expenses

  • Any savings that’s really going towards expected irregular expenses like home repairs, car maintenance, etc.
  • Health insurance premiums
  • 1/12 of annual payments for things like car insurance
  • Any spending you might like to add once you’re financially independent, like travel

Consider Removing

  • Financial independence savings (you will already be there!)
  • A mortgage payment, if you plan on having it paid off
  • College savings (unless you plan on reaching financial independence before your kids are done with school)
  • Life and disability insurance premiums (you may no longer need this coverage once you’re financially independent)

Step 5: Estimate the Social Security Income You Will Receive

There’s a lot of doom and gloom out there about Social Security, but the truth is that it’s in much better shape than many people think. In fact, according to the 2016 Trustees Report on Social Security, it should still be able to pay out about 74% of the current estimated benefits through the year 2090, even if no changes to the program are made.

So it makes sense to factor it into your plans. What I like to do is get the full estimation of benefits and then only count 50% of it in the calculation, just to be conservative. That’s exactly what we’ll do here.

There are two different ways to get your estimated Social Security income. Both are described below.

Just a heads up, the first three steps are the same no matter which method you are using.

If you have a spouse, you can both go through this exercise and add the two numbers together.

Method #1: For People Who Expect Their Income to Stay Relatively Steady and Have Enough Work Credits

I recommend you try this one first, just to get your statement and see where you stand.

Here’s how to get your Social Security benefit statement:

  1. Go to
  2. If you’ve done this before and have an account, you can click the “Sign In” button.
  3. Otherwise, you can click the “Create an Account” button and go through the process of setting up your account.
  4. Once you have an account, you can sign in and click the “Estimated Benefits” tab. This leads you to a page that shows your estimated benefits for a number of different Social Security programs, including retirement.
  5. Under “Retirement”, you will have three different estimated benefit amounts depending on when you plan to start claiming benefits. You can choose whichever one is most relevant for you and then:
    • Enter the monthly benefit into the Estimated Social Security Income field of your Financial Independence Savings Calculator.
    • Enter the age associated with that monthly benefit into the Estimated Social Security Start Age field.

If you haven’t accumulated enough work credits yet for it to display estimated benefits, or if you expect your income to change in the future, you can use this next method instead.

Method #2: For People Who EITHER Don’t Have Enough Work Credits or Expect a Significant Change in Income

Here’s the step-by-step (same first 3 steps as Method #1):

  1. Go to
  2. If you’ve done this before and have an account, you can click the “Sign In” button.
  3. Otherwise, you can click the “Create an Account” button and go through the process of setting up your account.
  4. Sign in, and this time click on the “Earnings Record” tab. Keep this open. You will use it in a minute.
  5. In a new browser window, go here:
  6. Fill out the information requested. Here are a few important notes:
    • Unless you genuinely plan to stop working much earlier, and therefore stop earning an income, enter your “Age at retirement” as 67. Because even if you reach financial independence earlier, you may still be working (on something you love) and earning money that counts towards your Social Security benefit.
    • Leave the “Today’s dollars or future dollars” box marked as “today’s dollars”.
    • For the “Annual earnings” boxes, you can refer back to the “Earnings Record” you opened up in Step 2 to fill in your income from previous years.
    • For “Earnings in 2015 and later“, enter your estimated annual income going forward. This will only significantly change the result if it’s significantly different from what you’ve been earning to this point.
    • After filling out that information, your estimated monthly retirement income is in the box labeled “Your monthly retirement benefit” in the “Benefit estimates” section.
      • Enter that amount into the Estimated Social Security Income field of your Financial Independence Savings Calculator.
      • Take the “Age at retirement” you entered above and put that into the Estimated Social Security Start Age field.

Whichever method you used, 50% of that estimated benefit will now be factored into your monthly savings need.

Step 6: Get Your Savings Target!

Once you have entered everything above, the Savings Target field at the bottom of the calculator will show both your monthly and annual savings goal. This is your answer for how much you should be saving in order to reach financial independence along the timeline you want.

Play with the variables a little bit to see what the monthly savings target looks like in different situations. In particular, play with the Estimated Age at FI and Estimated Monthly Expenses at FI fields, since those are the two that you have the most control over.

Playing with the numbers can give you a sense of what’s possible, and seeing that range of opportunities will make it a little bit easier to start setting a concrete goal.

What If You Can’t Save That Much?

You may not be able to hit that savings target right away. That doesn’t mean that you won’t ever be able to reach financial independence. It just means that you will have to do a little work to get yourself on track.

Here’s what I would do in that case.

First, start by saving what you can right now. Even if it’s not the full amount, saving something will put you in a much better position than waiting until you can save more to get started.

Then, work on increasing your savings rate in small increments. Here are some ideas for how to do that:

  • Set a calendar reminder to increase your savings by 1% every 6 months.
  • Every time you get a raise, put 50% of the increase towards your monthly financial independence savings.
  • Negotiate a lower cable bill, switch to a lower-cost cell phone plan, or otherwise lower your monthly bills one at a time and start putting the savings towards financial independence.
  • Any time you have found money — like a birthday gift, a bonus at work, or cash from something you sold on Craigslist — put some portion of it towards financial independence.

The best part about those first three points is — each time you make the effort — you see the benefit for as long as you continue saving. If you can make enough of those small improvements, you’ll be on track before you know it.

Step 7: Re-Evaluate Regularly

While your savings target is a great start that will absolutely put you on the right track, this is still very much an imprecise exercise with many assumptions that may not play out exactly as expected.

Revisit this process on a regular basis to see where you stand and whether you want to adjust your savings target. Setting a calendar reminder to re-evaluate your savings plan each December is a good idea, so that you have time to make any necessary adjustments to your contributions for the new year.

And if you’d like some guidance on how to invest all the money you’re saving, check out the guide Investing Made Simple.

Start building a better financial future with the resource I wish I had when I was starting my family. It’s free!
35 Comments... Read them below or add one of your own
  • holly April 17, 2013

    =) We are fairly lucky to have super generous 401K matching and profit sharing at work. So, the total of the money we put into our 401k equals out to 20 percent of our income. We have other retirement investments as well, but that gives us an edge!

  • Matt Becker April 17, 2013

    I would love to have a 401k with matching. We’ve made do with IRAs for now, but this year we’ll be setting up a solo 401k for my wife. Really excited about that.

    I’ve liked reading about how you plan on using your rental properties as part of your college/retirement plan. It’s not something I’ve really thought much about before, but it sounds like you guys have really turned it into a solid resource. Very cool!

  • The Frugal Path April 17, 2013

    I’m probably aiming for 50 times the amount. It may seem extreme, but I would like to prepare for unexpected expenses and bad market conditions.

  • Matt Becker April 18, 2013

    That’s an ambitious goal! I think it’s important for people to consider their own unique circumstances and adjust their goals accordingly, which it sounds like you’ve done. Just out of curiosity, are you implementing a more conservative investment style to go along with your more aggressive savings rate? I’m just interested in how you’re thinking about it.

    Thanks for the feedback!

  • MyMoneyDesign May 5, 2013

    Very straightforward advice! I’m a big fan of using the 4% withdrawal rate also for back-of-the-envelope calculations such as this also. Excel comes in very handy when I want to play with the numbers to figure out how much I need to save each month, how much return I will make, and how long it will take to get there.

    One thing to note is that if you can create some steady income streams that will carry on into retirement, then you won’t need to build your nest egg so large.

  • Matt Becker May 6, 2013

    That’s a great point you make about building some income streams. One way I’ve seen several people try to do that is with real estate. That’s honestly not something I had given a whole lot of thought to, but it definitely seems worthwhile to investigate. Thanks for the comment!

  • Matt @ momanddadmoney November 11, 2013

    Especially for young people, there’s really no sense in making it more complicated. There are far too many variables that will change far too often to try and account for them. Give yourself a ballpark target and make adjustments as you go along.

  • MyMoneyDesign March 3, 2014

    I saw I commented in the past before but I’ll comment again. Nice write-up! I like the addition of the retirement calculator. That’ a nice touch.

    • Matt @ momanddadmoney March 4, 2014

      Thanks. That calculator took me FOREVER to get right. But I think it makes this a much more useful resource.

  • DC @ Young Adult Money March 3, 2014

    I agree with all of this except for social security. I don’t think 20-somethings should expect to receive social security, at least not at the levels they currently are at. That’s a discussion for another day, though 😉 I think contributing to retirement accounts is the best way to get started.

    • Matt @ momanddadmoney March 4, 2014

      So I’ll say that I had the same opinion as you for a long time. But let me ask you a few questions:

      1. What do you think about the numbers showing that even if nothing is done to change the system, it has the funds to pay out 70% of projected benefits for the rest of the century?

      2. What are your thoughts on the fact despite that 70% number, I’m only counting 50% of the benefits in the calculator?

      3. Given that nothing is guaranteed, what is the real difference between conservatively including some social security vs. assuming a certain rate of return from stocks? Certainly no one is guaranteed a 7% rate of return on stocks like I use here, but that doesn’t stop me from using it. Everything here is an assumption, including Social Security. In my view, the goal is to make a conservatively realistic assumption, get started, and make adjustments as you go along.

  • John S @ Frugal Rules March 3, 2014

    Solid write up Matt! I think so much of this is geared towards focusing on what you can control and not obsessing about what you can’t. If you wait for the uncertainty to die down then it’s simply going to be too late for most. Love the calculator!

    • Matt @ momanddadmoney March 4, 2014

      Couldn’t agree more with this. Take what you can control, make the best of it, and get started.

  • Michael Solari March 3, 2014

    I like step one. You can’t be fearful of what may come. Embrace it and move on!

  • Shannon March 3, 2014

    I am actually a doomsday type person, and I advise any of my clients under 45 to not include social security as part of their analysis. I do it to scare them to save more, but also to change their mindset of social security as a “crutch.” I have too many 60+ clients who have relied solely on the promise of social security and not saved enough to support “surprises” that will not be covered by social security. I would rather SS be a happy surprise than a depressing reality.

    • Matt @ momanddadmoney March 4, 2014

      I can understand that, but I think my response to DC also serves to answer you. I’d be interested to hear your responses to those 3 questions.

  • Becky March 3, 2014

    I am just glad to have started saving for retirement. My employer has matched a portion of my 401(k) since I started, back when I was 21. I have continually been putting money in there and plan to increase my monthly input once we are debt free.

    • Matt @ momanddadmoney March 4, 2014

      “I am just glad to have started saving for retirement.” That is SUCH a perfect sentiment. Whatever you do, getting started at all is so important. And it sounds like you’ve not only started but done a great job taking advantage of a company match, which is a hugely powerful step.

  • Shannon Ryan March 3, 2014

    Great calculator, Matt. I find when I meet people they are often panicked because they heard this “number” they needed for retirement. I know people want a hard, fast number that is universal to everyone but that really doesn’t exist for retirement. It is personal. They need to figure out their retirement number, which is based on them and their retirement goals – not the average.

    • Matt @ momanddadmoney March 4, 2014

      Totally agree. There’s no rule of thumb that can answer the question for you, and this really isn’t a definitive answer either. But I think it’s personal enough to give people a great starting point without having to overstress or overcomplicate things.

  • March 3, 2014

    This is a great calculator. I was just looking for a good one to share on our blog and I found this one a little too late.. might need to update that post!

  • Andrew March 4, 2014

    I have a generous pension plan, but I’d actually prefer a generous 401K matching plan. I’d like to be able to control how much I can save, rather than staying at that job to get the pension. I agree with you on Social Security. While it might be reduced (as it has been done in the past), I do not think the system will be bankrupt since there will always be people paying into the system.

    • Matt @ momanddadmoney March 6, 2014

      I can definitely understand that mindset, although if you like the job the pension can be a pretty great asset. But it would be tough to feel tied to the place.

  • Done by Forty March 4, 2014

    Man, I love this calculator. I am sharing this around, Matt — fantastic stuff!

  • Cat Alford/ Budget Blonde March 4, 2014

    Oops I don’t know if my last comment went through. I was just saying how we dont have 401ks either and rely on IRAs until we can add more down the line!

    • Matt @ momanddadmoney March 6, 2014

      I’ve actually only always had an IRA as well. Although I’d love to open a Solo 401k down the line.

  • Adam Kamerer March 5, 2014

    This is one of the best retirement planning articles I’ve read in a while, Matt. Love that calculator!

  • Cashville Skyline March 10, 2014

    I’m still only 29 (until next week!), so I’m nervous to include social security estimates. What if that fund is not longer available in 30 years? Great post and calculator!

    • Matt @ momanddadmoney March 10, 2014

      Well, I certainly don’t have any guarantees. But what do you think about the fact that it would be able to pay out over 70% of the current benefits for the rest of the century (over 80 years), even if nothing at all is done to fix the program? I think that gives us a pretty good reason to expect something out of it. But if it makes you feel better, I only include 50% of the benefit in the calculation, just to be conservative.

  • Rik July 23, 2015

    Great write up Matt, thanks! One question – I don’t think your calculator is including income tax in the calculation? I know there is no certainty around future tax rates, but isn’t the Monthly Target going to be too low if the 4% withdrawal rate/monthly-expenses combination doesn’t take them into account?

    • Matt Becker July 23, 2015

      Great point Rik! And yes, you are correct that it is not factoring in potential income taxes on withdrawals. There are two main reasons I didn’t include them here:

      1. There are so many variables when it comes to future tax rates, whether the money is in a tax-deferred account like a 401(k), tax-free account like a Roth IRA, or taxable account, different withdrawal strategies, investment returns, and the like that it’s impossible to estimate a reasonable tax rate for everyone.

      2. This is meant to help people get on the right track as simply as possible, and I have tried to be clear that this will give you a ballpark estimate, not a precise answer.

      If you are closing in on retirement, and therefore have a better understanding of your exact needs and your expected personal tax liability, then this is not the calculator for you. But for someone who is still years away this will definitely get you on the right track.

I’d love to hear from you, please leave a comment