Find out if you are on track to retire comfortably. See exactly how much you need to save and when you can retire.
A common rule of thumb is to save 25 times your annual retirement expenses — this is known as the 4% rule. If you need $60,000 per year in retirement, you need approximately $1.5 million saved. The 4% rule assumes you can withdraw 4% of your portfolio annually without running out of money over a 30-year retirement.
Starting early makes an enormous difference thanks to compound interest. Someone who saves $500 per month starting at age 25 with a 7% average return will have approximately $1.3 million at age 65. Starting at 35 with the same contributions yields only about $610,000 — less than half — despite only missing 10 years of contributions. Time in the market is the most powerful factor in retirement savings.
Maximize tax-advantaged accounts first. Contribute enough to your 401(k) to get the full employer match — this is an instant 50-100% return. Then max out a Roth IRA ($7,000/year for under 50, $8,000 for 50+). Then return to maxing your 401(k) ($23,500/year). These accounts compound tax-free or tax-deferred, dramatically accelerating your retirement savings compared to taxable investment accounts.