**WARNING: This post contains math.**

Last time, when I talked about saving for retirement, I mentioned that I put away at least 15% of my income away in retirement. It occurred to me that some readers may feel like I’ve taken that number randomly.

To be fair, I didn’t invent the number. I find it to be a standard value given by most financial advice-givers, though some see it as a floor rather than a ceiling.

I think it’s a good rule of thumb. But why? Let’s see.

### What does 15% get you?

So the rule is: **save 15% of your gross income for retirement**.

What will that give you? Now, everyone’s situation is different, so we’ll have to make some assumptions. To make things less abstract, **let’s assume that you make $50,000 a year**, which is within striking distance of the median household income in the U.S. today. Let’s also assume that your income is fixed at that amount forever; you start out at that amount and never get a raise ever. Neither are particularly likely, but I believe that for the sake of calculation they balance each other out.

So what is 15% of $50,000? $7,500. That turns into **$625 a month**.

So that is how much I recommend you put away if you make $50,000 a year.

Now, more assumptions. Let’s assume that you’ll make an average annual return of between 6% and 9%. **So if you save $625 a month for 30 years, you’ll have between $628,000 (6% return) and $1.1 million (9% return).**

Do you think you could retire on that amount?

Well, if we further assume that we can take about 4% a year without losing our principal, **we get a range of about $25,000 to $45,000 per year**. That turns out to be **between 50% of our pre-retirement income to 89% of our pre-retirement income**.

Now, standard wisdom is that you don’t need to live on 100% of your pre-retirement income when you’re in retirement (estimates say it’s more like 70%-80%) so in all but the lowest estimated case here, you’d be on track for that. And I repeat: **we’re talking about never running out of money here**.

This is why I like the 15% rule of thumb. It gets most of us to the retirement amount that we’re going to need.

### Run your own numbers

Note that the $50,000 example I used was just that, a way to plug in the numbers.

But the percentages are the same even if you assume a different income level. For example, if you say you’re going to make $30,000, you’ll have between $15,000 (50%) and $27,000 (89%) each year to spend in retirement if you invest 15% of your income for 30 years. If you say you’re going to make $100,000, you’ll have between $50,000 and $89,000 each year to spend in retirement.

Do you think you can do this? I think you can. You may not be able to get there immediately, but I believe you can get there.

If you can’t hit that 15% mark right now, give it time. **As you make more money, put more away.** After all, I didn’t start hitting 15% until recently, and only then it was after I had paid off all of my other debts.

If you don’t have 15% to put away, you’ll need to save for longer. If you don’t have 30 years, you’ll need to put away more. Everyone’s situation is different, and we did use a fair amount of estimates and assumptions here. (Please, as always, check my work.)

But if you remember nothing else, **aim for 15%**. Or work up to it. That number is used with good reason.

*But enough about me: How much do you put away for retirement?*

*As always, this site is for education purposes info, and is not official legal or investment advice. Please don’t be foolish. Thanks.*