How Much Should You Invest Each Month?
Run the Numbers for Your Situation
The 15% Rule
Most financial experts converge on 15% of gross income as the retirement savings target — including employer contributions.
Why 15%?
Working backwards: if you want to retire at 65 with enough savings to replace 80% of your income for 30 years, and you start at 25, saving 15% gets you there with a 7% average return.
Starting later requires saving more:
| Age You Start | % Needed to Retire Comfortably at 65 |
|---|---|
| 25 | ~12–15% |
| 30 | ~15–20% |
| 35 | ~20–25% |
| 40 | ~25–35% |
| 45+ | 35%+ (or plan to work longer) |
These are rough approximations — actual needs vary widely based on income, expenses, Social Security, and lifestyle.
Getting to 15% from Zero
Most people can't suddenly jump to 15%. A practical ramp:
Year 1: Contribute at least enough to get the full employer match (~4-6%). This is "free money" from your employer — start here.
Year 2-3: Increase by 1-2% per year. A 1% increase on a $60,000 salary is $50/month. You'll barely notice.
Year 5+: Increase by 1% every time you get a raise. If your salary goes up $3,000 and you direct 1% ($600/year = $50/month) to retirement, you still take home more.
The trick: Automate the increases. Many 401(k) plans have an "auto-escalation" feature that increases your contribution by 1% each year automatically.
What Different Savings Rates Mean
Starting at age 30, investing monthly at 7% return, retiring at 65:
| Monthly Amount | Total After 35 Years | Total Contributed |
|---|---|---|
| $200 | ~$295,000 | $84,000 |
| $400 | ~$590,000 | $168,000 |
| $600 | ~$885,000 | $252,000 |
| $800 | ~$1,180,000 | $336,000 |
| $1,000 | ~$1,475,000 | $420,000 |
At 7% return, your money roughly doubles every 10 years. Starting at $0, investing $600/month for 35 years, you'd have ~$885,000 even though you only contributed $252,000 — the difference is compound growth.
If You Can Only Invest a Little
Don't let perfect be the enemy of good. $100/month at 7% for 35 years grows to ~$147,000. That's $147,000 you wouldn't have otherwise.
The order of priorities, once you have a starter emergency fund:
- 401(k) up to employer match
- Pay off high-interest debt
- Build full emergency fund
- Roth IRA ($7,000/year)
- Rest of 401(k) limit ($23,500/year)
- Taxable investing
The Impact of Starting Earlier
The difference between starting at 25 vs. 35 isn't just 10 years of contributions — it's 10 years of compound growth on everything you invest. A dollar invested at 25 is worth roughly twice what it's worth at 35 by the time you're 65.
This is why "start now, even small" beats "wait until you can invest more."
FAQ
Should I count my employer match in the 15%?
Yes. If your employer matches 4% and you contribute 11%, you've hit 15%. You don't have to contribute 15% from your paycheck alone.
I'm 45 and haven't started. Is it too late?
No. Starting now is always better than not starting. You'll need to save a higher percentage than someone who started at 25, and may need to work a few extra years — but meaningful wealth-building is still achievable.
What about Social Security?
Social Security replaces roughly 30-40% of the average worker's pre-retirement income. Including it, you need your savings to cover the remaining gap. Run a personalized estimate at SSA.gov.
→ Compound Interest — How compounding works with an interactive calculator → Investment Vehicles — 401(k), Roth IRA, and other accounts → Priority Ladder — The right order for every financial decision