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When Social Security was first created, it was meant to be part of a three-legged stool (1) that supported older Americans in retirement. Social Security benefits were one leg, a pension was another and savings were the third.
Social Security benefits remain one part of that support structure, but they’re designed to replace just 40% of pre-retirement income (2). Unfortunately, pensions are no longer a real source of support for many Americans, since only 18% of workers have access to one (3). This leaves savings to fill the gap.
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The traditional rule of thumb recommends that Americans save 10% of their income (4), but experts now recommend a different approach, and the math says they’re right.
How much do experts say you need to save?
According to Vanguard, the magic number to maximize your security is a little higher than 10%. The asset management company wrote in its “How America Retires” report (5): “Strong retirement plans that encourage total savings of at least 12%, including employer contributions, can help position most participants for a successful retirement.”
The shift from 10% to at least 12% of income may be based on two big factors: longer life spans (6) and lower projections for future returns (7). And the math checks out, as 10% probably isn’t enough.
Consider this scenario. You start saving at 20 with an income of $40,000. You save 10% for your working life, earning a 6% average annual rate of return before retirement and a 5% ROI after. Every year, you get a 2% raise, and the inflation rate is 3%. Finally, you retire at 67 with a life expectancy of 95.
This puts you with a retirement nest egg of $1,292,957, while you’d need around $1,517,934 to replace 70% of your pre-retirement income (a common projection for what retirees will require to live comfortably). That’s a substantial shortfall.
Of course, Social Security may be able to cover some of that gap. However, Social Security replaces around 40% of pre-retirement income, and you can’t qualify for your full benefit until 67 or your maximum benefit until 70. And that assumes no changes are made to the program to reduce benefits or adjust the ages when you can claim benefits. With Social Security facing shortfalls in 2032 (8), making assumptions could lead to issues.
However, you’ll end up with a slight surplus if you switch to saving 12% instead.
Of course, if you start saving late in life, even 12% won’t cut it, and you’ll need to do more to close the gap. If you begin investing at 30 with an income of $50,000 but all other parameters stay the same, you’d have $819,425 in your nest egg but would need $1,556,544.
In this case, hitting your “magic number” to produce this outcome would require you to invest not 12% of income, but around 19%.
That’s one big reason why investing early is often encouraged. You can also try to earn a higher ROI to reduce the amount you need to invest, but that carries added risk. Critically, the personal savings rate among Americans was just 3.8% in September 2026 (9). This is often thought of as the amount of money after taxes and expenses that someone has left to invest.
The good news is that understanding the truth about how much you need invested gives you the opportunity to act. And there are plenty of good ways to maximize your chances of ending up with the funds you need.
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Make investing automatic
As the experts recommend and the math shows, investing early and saving at least 12% of your income is the key to building the retirement nest egg you need. Acorns makes it easy to do just that.
How it works is simple: Once you sign up and link a debit or credit card, every purchase you make is rounded up. The difference — your spare change — is invested into a smart portfolio tailored to your risk tolerance. Once you have at least $5, your money is put to work for you in ETFs. This can help you build good investing habits over your life in a relatively secure way.
Acorns makes getting your money into ETFs effortless, so it’s easier to hit your savings targets if you’re playing the long game. Then, once you’re comfortable with saving your spare change, you can add in recurring monthly contributions to give yourself an extra boost, and get closer to a 12% target.
And, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey.
Acorns also allows you to take advantage of tax breaks for retirement investing — and gives you a nice bonus for doing so. You can create an IRA plan, get recommendations for your long-term goals, and get a 3% IRA match on new contributions during your first year with Acorns Later.
Budget for your future
Investing 12% of your income or more is going to require careful budgeting, but doing the math yourself can sometimes feel like a full time job. Good financial habits start with understanding where you stand. This is also when you can start assessing your own personal savings rate, and hopefully find ways to increase it.
Monarch Money puts all your finances under one roof, from your banking statements to your investments. A centralized dashboard allows you to get a top down view of all your finances, including a net worth tracker. If you link your accounts, it can give you insights into banking behavior and your investments.
You can even customize your separate and joint accounts, making it easier for couples to track spending on specific expenses or help monitor your progress toward bigger goals.
And the best part? Monarch Money offers a seven-day free trial so you can make sure it’s right for you. If you like what you see, you could then snag 50% off your first year with code WISE50.
Choose the right brokerage account
Finally, you’ll want a great brokerage firm to make investing for retirement effortless.
SoFi’s easy-to-use DIY investing platform makes it simple to buy stocks, ETFs and more with no commission fees and no account minimums.
SoFi is designed for both beginners and seasoned investors to use, with instant access to real-time investing news, curated content and ample data to help you make smart decisions about the stocks that matter most to you.
Plus, for a limited time you can get up to $1,000 in stock when you fund a new account.
Get started using these tools today, and aim to hit your savings target so you can have a more secure tomorrow.
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Article Sources
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
Social Security Administration (1), (2), (8); Pension Rights (3); The Retirement Board (4); Vanguard (5); Congress.gov (6); Morningstar (7); Bureau of Economic Analysis (9)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
