In For Beginners, Money, Retirement

How much should you save each year for retirement? The rule of 30

I’ve written before about a Fidelity benchmark floating around on how much you should save for retirement, but here’s another benchmark via Yahoo from Jim Otar of RetirementOptimizer, and that’s the rule of 30.

You should take how much you need each year for retirement, and multiply that by 30.

So let’s say you need about $50,000 of income each year in retirement.

$50,000 x 30 = $1.5 million

The multiplication by 30, allows you to (roughly) account for inflation and life span (average is 82 for women and 77 for men in Canada).

It’s a pretty simple retirement calculation to use if you don’t want to get down and dirty, but there are some things you should be aware of.


The only flaw I see in it, is it doesn’t take retiring early into consideration. Let’s say you DON’T want to work until 65, how much do you need then?

The multiplier will obviously be higher than 30.


Another point that shouldn’t be forgotten is any company pension plan, or government pension plan. In Canada, we have the OAS (Old age pension) and CPP (Canadian pension plan).

The article makes a note that a couple who makes about $100,000 a year, can expect to receive about $33,500 from these three sources of retirement income.

So if the couple in the article wants $50,000 of income, they only really need to make up the difference to $50,000 which is $16,500 a year, and to save at least half a million on their own.



FInally, you need to start saving at least $10,500 a year (net) by age 35 to reach this half a million dollar goal.

Here’s the chart that was created of how much you should have in your retirement plans by age, assuming 5% interest rate of return and accounting for 2% inflation:

  • 25 = $0
  • 35 = $0
  • 45 $121,500
  • 55 = $283,500
  • 65 = $500,000

For those of us who are PF geeks, we’ll probably be groaning and clutching our heads at the big fat $0s staring at us for the ages of 25 to 35, but for you late bloomers to the money management game, it still gives hope that you can turn your finances around and make an impact.


Personally I find saving $500,000 by the time I retire a bit low, but then again, I’m someone who can’t really count on government pensions.

See, with my company, I can only withdraw money as dividends, and as a result, I don’t actually earn a “salary”, and I don’t get any RRSP ( or like a 401K ) retirement room to contribute to, because it isn’t “earned income” in the government’s eyes.

The RRSP room is calculated as 18% of your earned income in a year, and we don’t get a set limit to be able to contribute to like the 401K in the U.S. that gives $17,500 a year.

All I have is my TFSA room ( a lot like a Roth IRA for you Americans ) which is about $5500 a year.

As a result, I have to save the entire $1.2 million on my own, which is why it makes me highly motivated to continue saving at least $50,000 net a year on average before I decide to retire.


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Sherry of Save. Spend. Splurge.

Am my own Sugar Daddy. Am a millionaire at 36 after getting out of $60K of student debt in 18 months, a little over a decade earlier, using I have worked 50% of my career (taking 1-2 year breaks), and quadrupled my income within 2 years of graduating, going from $65K to $260K with an average lifetime savings rate of 50%. I have 11 side incomes that are on track in 2020 to make me $50K - $75K. I could retire today if I wanted, but love my work-life balance as a freelancing consultant in STEM (Science, Technology, Engineering, Math). I am all about balance - between time and money, and also enjoying my money. I also post daily on Instagram @saverspender.

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  1. Ben

    Completely serious question – why do you say you’d need a bigger multiplier than 30 if you want to retire early? Isn’t that the whole point of the 4% rule? If I decide I’m going to need $50k a year in retirement and I have $1.5 million in my fund at age 30, wouldn’t I be able to live on that forever (theoretically) given the long-term upward trend in the market of 7% a year on average?

    1. saverspender @ save. spend. splurge.

      Yes, you are right on all counts. I am just a paranoid person who likes to OVER PLAN and be OVERLY conservative so that I more than meet my target.

      Also, you can’t plan for things like health going down the drain. Sometimes things happen and it’s nice to have a buffer.

  2. Tammy R

    Thank you for putting this together for us, Mochimac! I am one of those late bloomers happy to see the 0 columns…oh, kick my self, kick myself. But, better late than never. We’re on our way to a more secure retirement now that we’ve been saving, have IRAs, and are paying down our debt. It makes me sleep a lot better.

    1. saverspender @ save. spend. splurge.

      It always helps to be in control to feel like you’re in control. Money management is the first step.


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