How Much Should I Be Saving?

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I and my wife have grown up in a different environment and different parenting style. She is pro in Savings and Investing the money in FD and Life Insurance. She learned this from her parents. On the other side, I was brought up by the family who was running businesses. I was never really taught about managing money. Never was really given any education regarding Savings and Investing. My Father”s philosophy was earning to spend. He never really taught us about creating the nest-egg for retirement or for financial independence. Even though he was running his own business he always asked us to study, get good grades, get a good job and earn monthly income.

I never had learned about savings from our parents, however, we learned not to spend lavishly on things which are not required. I admit that I am not a big savings person but always viewed money as a means to spend. One earns to spend. Since we married in 2007, my wife always asked me to save for the future and was very much focused on financial planning. She was against all sorts of credit and never wanted to have any kind of debts.

I searched this question on Google, “How Much Should I Be Saving?”. “As much as you can”, is the answer I got as one of the first search results. And I think this is as perfect and honest answer as it gets. This is the standard advice. However, many financial advisers recommend between 10% to 15% of one’s income for retirement, beginning from your 20s. If you are like me nearing 40s, this would give an average outcome and stress and will make one work until 65+ and dependent on social security – which would be perfectly fine advice to follow. But, I think, we are better than that otherwise you wouldn’t be here.

So, let’s say we are better than average then, what savings rate we should target?

This is something I found and was recommended by many financial advisors. The savings rate is the amount of money, expressed as a percentage or ratio, that one deducts from his total income that is set aside as a nest egg or for retirement. That means any tax-advantaged account contributions plus total post-tax income.

Savings Rate Recommendations:

Salary $50k-70k /y $70k-$120k /y $120k + / y In US
35k – 50k sek/m 50k – 85k sek/m 85k + sek/m In Sweden
Individual 40% 50% 70%
Family 30% 40% 60%

More the savings rate, one will have their career for less number of years and will have plenty of time to check out the world while you are still young and healthy. Of course, you should workout and relax to remain healthy. Just see what is best suited to the country you are in and what are the income and expenses you have.  At these savings rate, you will reach the retirement much faster than others in high speed. So 30% is the minimum savings rate you should target and if its 50% it will be juicy and more attractive for your overall nest-egg.

Let’s dive deep into more for detail understandings.

Retirement Age and Savings Rate

To figure out your countdown to retirement, the rule of thumb is to ask what it would take to maintain the existing standard of life and the status quo. For this, you consider what you make now gets extended at a flat amount through the future and that the expenditure in retirement will be exactly the same as what you spend now. With this, you can come to a conclusion how long it will take you to get to the retirement based entirely on your savings rate.

I can retire in 9.3 years with current income and with the 60% savings rate with net worth around 6,9 MSEK this is what I would need with 4% withdrawal rate. Learn more here about what is a 4% withdrawal rate. 

Your time to reach retirement depends on only one factor, Your savings rate, as a percentage of your take-home pay.

To break it down further, your savings rate is determined entirely by these two things:

  • How much you take home each year
  • How you can live on

If you are spending all of your income, one will never be prepared to retire unless someone else is doing the savings for you e.g. wealthy parents, social security, pension fund, etc and so you can work for an infinite time.

Check out this tool which will help you to understand how long it will take you to create a nest egg enough to last you forever where you only live on the interest it returned each year rather than spending any principal amount.  This is how it looked like for me.

Savings Rate Retirement Age

Chart inspiration provided by Mr. Money Mustache and created with the tools at NetWorthify

If you save a reasonable percentage of the take/home pay, like 50% or 60% and then live on the remaining 50% or 40% by frugal living, then you will be rocking your finances and will be financially independent in a reasonable number of years.

Here is the graph I created to better understanding. The table below will tell you a nice figure of how many years it will take you to become financially independent. I have calculated this figures considering 8% annual return on investment.

Savings Rate (Percentage) Working Years until Retirement
5 48
10 38.3
15 33
20 29
25 26
30 23
35 20
40 18
45 16.5
50 14.3
55 12.6
60 11
65 9.5
70 8
75 6.6
80 5.3
85 3.9
90 2.6
95 1.3
100 Zero


If you were to save between 10-15% of your income as suggested by the financial advisors, then it would take about 33 to 39 years to become financially independent or retire. The more you save, it would take less number of years to get retirement.

I am nearing my 40 and with 10-15% savings, I will be in my golden years in the 70s provided, I will find work through that age.

A lot of people will look at these number and think its impossible to cut spending that low and they will shrink their dreams smaller and smaller. If you want to save more then one need to cut their daily delicately foamed mocha choco coffees and maybe they need to eliminate monthly Tommy Hilfiger purse-handbag-backpack purchases.

When I looked at these numbers, I wondered how is it possible to live a full life at that level of spending and save more. You may also have same question. Is it really possible?

The simple answer is yes. It is Possible and people are doing it from all different walks of life. Check out some tips for frugal living here and you will find many more if you search on it. I am convinced people are doing it on normal salaries, and you can do it too. We will see and explore it more on how in the future articles.

At the end of the day, happiness does matter and if one is happy with an average outcome, one can go ahead and do average things. But if you want to have an above-average outcome, you will have to do different and above-average things. That means changing old habits, learning new techniques and implementing new strategies.

It is your choice to make and it’s a hard one. And the exceptional thing is the outcome is entirely in your hands and no one is putting a gun to your head.


  1. The savings grid was done with the help of calculator at NetWorthify. It is also inspired by Mr. Money Mustache, one of the interesting bloggers in personal finance. 


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21 thoughts on “How Much Should I Be Saving?”

    1. Hi GiGi,
      Yes, it depends on how much you make per year and how much you spend per year as well and that will define your savings rate. As I said, I was like earn to spend guy and now completely focused on earn to save.

  1. Personal finance is so important. It’s a topic many people want to avoid but it needs to be discussed. Knowing the basics about saving, credit, and investing is vital for financial growth and money management.

  2. Thank you for sharing all about savings. The last time, e and my husband are actually planning for our retirement and saving is one of our list.

  3. This is such good information. I need to start saving more so that I can feel better about retirement. I will keep these tips in mind.

  4. Great tips on saving! I love how you showed us the breakdown of savings until retirement, that is a stark reminder for most of us.

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