80% rule for retirement savings: How much money should you save to retire comfortably?

Many of us tend to delay planning for our retirement, even though we know that we won't have a steady income once we retire. However, experts warn that delaying our retirement savings and prioritizing pleasure and comfort in our younger days can result in a financial crisis in our retirement years. To avoid such a scenario, it's crucial to start planning early for our retirement and begin saving as soon as possible.

Retiring at 60? How much to save

Determining the amount required for a comfortable and happy retired life is subjective and depends on individual perceptions, expectations, expected income, estimated inflation, expenses and debts, and the expected lifespan. However, financial advisors propose certain general guidelines to establish a benchmark target to help individuals achieve a comfortable and relaxed lifestyle during retirement.

Also read: How to save for your retirement


"One theory suggests that saving 15% of one's annual income every year (including employer's contribution) can be appropriate for many. Another popular theory says the ideal corpus for retirement should be 7-8 times one's salary by the start of one's 60s. According to the 30X rule of retirement, for a comfortable retirement, the total savings should be 30 times one's current annual expenditure," according to the HDFC Life Insurance website.

Also read: Retirement planning: 10 simple steps to calculate your ideal retirement corpus

Tips for saving for retirement by 60

Here are a few tips that you can follow when saving for your retirement as per the HDFC Life Insurance website:

• Start early on retirement savings when you have fewer liabilities. The earlier you start, the higher you benefit.
• As your income grows with age, focus on saving a higher percentage of it accordingly. This will help in fighting inflation.
• Get medical insurance at lower premiums when you are young. The coverage will be a great support when you face health issues at an older age.
• Purchase life insurance with a return of premiums option which can provide a life cover on one hand and pay you into a lump sum corpus at maturity, on the other.
• Invest wisely. Focus on growing your returns by investing in sound pension plans while you are young and protect your capital at an older age. A good pension plan calculator can help you evaluate your needs, by factoring in future inflation, and help you choose the right plan for your needs.
• Capital guarantee solutions can be a good choice while investing in the NPS scheme, pension/annuity plans for a regular flow of retirement income are helpful too.
• Try and reduce the debt burden by completing your loan EMI schedules.

To retire comfortably, how much money do I need?

Assess your current expenses to project your retirement savings. Except your daily commute, your daily expenses are likely to remain static upon retirement. It is advisable to strive for 80% of your annual working income as your retirement income. It is important to factor in inflation to maintain your current standard of living.

Retirement experts advise that you save at least ten times your pre-retirement salary and live on 80% of your pre-retirement annual income to ensure a comfortable retirement. This 80% rule is intended to help you cope with inflation by gradually increasing your yearly withdrawals. Therefore, you do not have to limit yourself to withdrawing only 80% of your final salary annually. Instead, you can consider slowly increasing the amount of money you withdraw each year to maintain your purchasing power even as inflation erodes the value of your savings.

Also read: What is the 4% rule for retirement withdrawals?

However, this is a general guideline and may not apply to everyone's individual situation. Certain factors, like lifestyle choices and existing financial obligations, can significantly influence retirement income. Additionally, if you have considerable debts, such as mortgage payments, your expenses may exceed the standard 80%.

It's crucial to note that the 80% rule for retirement savings might not be sufficient if you anticipate new expenses in the future. For example, some people wait until they retire to explore new hobbies or travel destinations, which may require additional financial resources. Therefore, understanding how much money you need to save for retirement will depend on your goals and financial circumstances.