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Retirement Savings
Definition
Retirement savings are funds set aside during working years specifically to provide income after retirement, typically held in tax-advantaged accounts.
Explanation
Retirement savings accounts in the US include 401(k)s, IRAs, Roth IRAs, and pensions. These accounts offer tax advantages such as tax-deferred growth or tax-free withdrawals. The earlier you start saving, the more you benefit from compound interest.
A general rule is to have 1x your salary saved by age 30, 3x by 40, 6x by 50, and 8-10x by retirement age.
Example
Saving $500 per month from age 25 to 65 at 7% annual return would grow to approximately $1.2 million.