How to save for retirement in the US
Start with the number: how much you actually need
Most retirement advice jumps straight to "save more" without saying how much. The cleanest way to set a target is the 25ร rule, the flip side of the famous 4% rule: if you can live on 4% of your savings in the first year of retirement and adjust for inflation after that, your portfolio has historically lasted at least 30 years. Reverse it and your number is simply your annual spending multiplied by 25 โ plan to spend $60,000 a year and you need roughly $1.5 million invested.
The 4% rule comes from the 1994 work of financial planner William Bengen and the later "Trinity study," which tested withdrawal rates against decades of US market history. It is a planning rule of thumb, not a guarantee โ but it turns a vague worry ("am I saving enough?") into a concrete goal you can work toward. Our retirement calculator applies the 25ร rule to your own spending and shows how many years your savings would last.
The 401(k): your biggest tax-advantaged bucket
A workplace 401(k) is the heaviest lever most people have. For 2025 you can contribute up to $23,500 of your own pay, rising to $31,000 if you are 50 or older (a $7,500 catch-up), with a special $11,250 catch-up for ages 60โ63 under the SECURE 2.0 law. Traditional 401(k) contributions are pre-tax, so they also cut this yearโs taxable income โ meaning each dollar saved costs your paycheck less than a dollar.
The single most important rule: capture the full employer match first. If your employer matches 50% of contributions up to 6% of pay, that is an instant 50% return you get nowhere else โ skipping it is leaving free money on the table. See exactly how matching and decades of growth stack up with the 401(k) calculator.
The Roth IRA: tax-free growth for life
After the match, a Roth IRA is usually the next stop. You contribute money you have already paid tax on, and in return every dollar of growth and every qualified withdrawal in retirement is completely tax-free. For 2026 the limit is $7,500 ($8,600 if you are 50 or older). There are income limits โ in 2026 the ability to contribute phases out between $153,000 and $168,000 for single filers ($242,000โ$252,000 for married couples filing jointly).
A Roth is especially powerful when you are young or in a lower tax bracket today than you expect to be in retirement, because you lock in tax at todayโs rate and never pay it again. The Roth IRA calculator projects your tax-free balance and estimates the tax you would have paid in an ordinary taxable account.
Let compounding do the heavy lifting
The reason starting early matters so much is compound growth โ your returns earn returns. At a 7% average annual return, money roughly doubles every decade, so a dollar invested at 25 can become eight dollars by 65, while the same dollar invested at 45 only doubles twice. This is why a smaller amount saved in your twenties often beats a much larger amount started in your forties.
It also means consistency beats timing. Steady monthly contributions through good markets and bad โ known as dollar-cost averaging โ remove the impossible job of guessing the marketโs next move. Play with different rates and time horizons in the compound interest calculator to see how powerful a few extra years of saving really is.
Donโt forget the tax on what you sell
Money inside a 401(k) or IRA grows shielded from tax, but investments held in an ordinary brokerage account are not. When you sell a winning investment you may owe capital gains tax โ 0%, 15% or 20% on assets held longer than a year, depending on your income, and your ordinary income-tax rate on assets held a year or less. Holding for the long term is itself a tax strategy.
For most savers the priority is to fill the tax-advantaged accounts first and only invest in a taxable account once they are maxed. If you do hold investments outside a retirement account, the capital gains tax calculator shows what a sale would cost so you can plan around it.
A simple order of operations
Putting it together gives a priority waterfall that works for most people: (1) contribute enough to your 401(k) to get the full employer match; (2) pay down any high-interest debt such as credit cards, where the guaranteed "return" from clearing the balance beats the market; (3) max out a Roth IRA; (4) go back and increase the 401(k) toward the annual limit; (5) invest anything left in a taxable brokerage account.
You do not need to do all five at once. Automate each contribution, raise it by a percent or two every time you get a pay rise, and let compounding carry the rest. The hardest part of retirement saving is starting โ the math, as the calculators above show, takes care of itself.