How To Save More For Retirement If You Don’t Make Much Money

Hawaii Sunset* $180,000 by age 30

* $500,000 by age 40

* $1 million by age 50

* $2 million by age 60

These are the rough estimates for what I think everybody needs to have in their 401Ks or savings accounts to have a reasonable attempt at a comfortable retirement. Of course these figures aren’t set in stone and there are many other things you can do to help your retirement quest. I advise keeping an open mind and using these figures as targets.

If you read the comments from my “401K amount by age” article, you will notice that those in their mid-30s and below tend to disagree with these amounts, while those older generally agree, verify, and accept.

I don’t know why younger folks aren’t willing to follow along. It’s often times just rebel and justify why they aren’t saving.  “Live life!“, they say.  True, but who says you can’t live life while saving?  The easiest way to learn, is to listen to an older person who has gone through what you will go through. Perhaps it’s immaturity, or the way things are where every generation needs to question the next generation and the status quo.

There’s really no mystery to money. The more you have, the more you can make.  It’s all about building the NUT large enough so that when you make a fortuitous 10% return, you’re pulling in an extra $50,000-$100,000 on your $500,000-$1 million portfolio.  Get going so you can have more significant returns.

If you aren’t on retirement track based on my 401k age chart and disagree with my figures, just do the math YOURSELF and see whether you’ve saved enough to retire on. I don’t think you’re going to like the results.

There’s one question that kept coming up over and over again, and that’s, “How can I save so much, if I don’t make so much?” It’s a fair question that needs addressing. One commenter mentioned my table must be of “California Currency”, which made me chuckle. The problem of not making enough and therefore not being able to save enough is an honest problem which I’d like to address via a change in mindset and a chart.


* If you don’t find it painful saving money, you’re not saving enough. If you’re not sweating at the gym and your muscles don’t feel sore the next day, you might as well go eat a double cheeseburger with a milkshake and fries because you’re just wasting your time. The same goes with saving. Since you’re in the lower income bracket, savings is not supposed to be easy. If you’re not feeling the disposable income pinch of putting away, 20%, 25%, 35%, 50% of your income into your 401K, IRA, or savings account, you simply are not saving enough. You need to feel the pain, so you are forced to change your spending habits.

* Recognize that you are not rich. For whatever reason, you do not make a lot of money. It could be by choice (messed up in school, less lucrative field) or misfortune (laid off, accident, starting over). Once you recognize you are of lower income, you’ve got to come to grips with the fact that retirement is not going to be filled with milk and cookies.  Think tasty water and crackers instead.  You’re going to be working longer and harder than others. You’ve got to save more than your wealthier friends simply because you have less.  If you only make $50,000 a year, what on earth are you doing driving a $25,000 car? That’s 50% of your gross income, and around 65% of your net income! If you guys only earn a combined $70,000 a year and have a child, what are you doing living in a 3 bedroom apartment that costs $2,500+ a month? Downsize to a two bedroom apartment and save the difference. A family of four in Tokyo live in 600 square foot, 2 bedroom apartments!  Don’t act rich, because you are not.

* Do the math. One commenter asked how he can put away $17,000 a year in his 401K and then another $5,000 in his traditional IRA if he “only” makes $70,000 a year. I told him to do the math. He did the math, and he did it all wrong!  This is what he calculated:

70k – 17k (401K) = 53k —> Fine. 
53k * 0.4 (taxes)= 31.8k —> 40% tax rate on a $53,000 income?
31.8k * 0.2 (after tax) =25.4k —> What’s this extra 20% tax?
25.4k-5k (Roth) = 20.4k —> Why contribute to a Roth after tax, when you can contribute to a traditional IRA pre-tax?
20.4k/12 = 1.7k per month. —-> Wrong.  Should be around $35,500 net = $2,960/month, 74% more than what is stated.

The effective tax rate on a $53,000 income is around 17%.  Add on 9% state tax, and at most he’s around 26%.  His Roth deduction is fine, if he doesn’t want to contribute $5,000 in a traditional pre-tax.  However, I always recommend paying less taxes than more.  I am shocked how little people understand what their effective tax rates are, and the difference between pre-tax and post-tax contribution. Do the math people. You have more than you think!

* The new normal is a lower rate of return.  Anybody telling you to input more than a 5% constant rate of return on your investments is being too aggressive.  The days of 8%+ portfolio returns are gone in an environment of 2% long-term treasury yields.  There is an inextricable link to fixed income and equities, and baking in more than a 2.5X return over the risk-free rate is a stretch.  We can increase our assumptions once we see an uptick in inflation, corporate earnings, and risk appetite, but not now.

* Realize that making more money is a choice, especially if you live in a developed country.  According to one researcher, it only takes around $34,000 to be in the top 1% of world income earners. Meanwhile, $33,000 so happens to be the middle line between the top 50% and bottom 50% of US income earners. You have a choice to work more than 40 hours a week to get ahead. You have a choice to have as many or as little kids as you wish. You have a choice to start a business and make extra income on the side. You have a choice to get in before everyone and leave last, while proposing new profitable ideas for your company.  You don’t have to be a top income earner, you just have to make enough to be happy and save.  We live in a free country, not North Korea.

* Acccept bigger government.  With a ~$2 trillion dollar deficit generated under the Obama administration, the incumbent is your best bet for ensuring that social welfare programs, unemployment insurance, affordable healthcare, and low taxes continue for the middle class.  By raising taxes on “the rich”, the current administration is effectively redistributing wealth to lower income individuals through government programs.  Republicans are more focused on cutting spending to balance the budget, and not raising taxes given our system already has a progressive structure already.  Both systems have its merits and flaws, but if you are making under $200,000 and your retirement accounts are light, from a financial point of view, you’re better off voting for the incumbent. At least you know what you’re getting.


Now that you’ve changed your mental outlook, here’s a proposed savings chart I developed to slowly turn the screws so that you get to your retirement goals.  Here are some following assumptions:


Income LevelSavings %Pre-Tax SavingsPost-Tax SavingsFed Tax Rate

Assumptions for the chart:

* No matter what your income level, you are saving some money.  Develop the savings habit early and always.

* As your income level increases, so does your savings percentage rate.  Challenge yourself to save more as you make more.

* It’s important to keep your rate of spending slower than your income and savings growth.  Don’t let lifestyle inflation derail your plans.

* After you have maxed out your 401K at $17,000, the after-tax savings is simply the difference in your income X savings rate – $17,000. The after-tax savings amount is higher than reality, because you have to pay taxes on the gross income. Hence, multiply your after-tax savings by your Federal + State marginal income tax rate to get your true after-tax savings amount.

* At around $65,000-$85,000, I am assuming you should be able to maximize your 401K contribution, and save more money. In other words, try and target $65,000-$85,000 in annual income as soon as possible.

* I stop at a 35% savings rate to allow one to enjoy their income.  Furthermore, at a 35% savings rate at $100,000-$200,000, you will have more than $5,000,000 in retirement savings if you consistently save for 43 years assuming a 5% constant rate of return.

* If you can save more than 35% of your gross income, go for it! After you earn $200,000, you should gradually aim to save 40-50% of your after tax income.  We stop at $200,000, because this is the level President Obama deems rich, although plenty of people who make more have difficulty saving a well.


AgeYears WorkedLow EndHigh End


The good thing about not making much money, is that you are used to living on not much money, and therefore you don’t need much money to retire on!  With the above assumptions and chart, I hope I’ve provided a guide for those who have wondered how they can save so much if they don’t earn much at all.  Savings should be an automatic way of life.  Always save money before you pay yourself.  That way, you will always operate in the confines of your disposable income.

Another good thing about retirement is that when you are retired, you do not have to save for retirement.  That 5-35% savings rate I discuss in my charts disappears, making you suddenly that much richer.  Meanwhile, you’ve hopefully paid off all your debts, and can live in your home mortgage-free for the rest of your life.  But, even if you still have a mortgage, or are renter, with the above system, you should still have enough money to support you until the end.

Please try not to make excuses for why you cannot save even just 5-10% of your pre-tax income in your 401K.  I lived in super expensive Manhattan on $40,000 a year and managed to put away $15,000 into my 401K.  $40,000 in Manhattan is like $35,000 in San Francisco, and only $25,000 in the MidWest.  You just have to make a choice whether you want to build a safety net for your retirement or not.  Hopefully you will continue to make more money the longer you work, making saving more money easier and easier.  You’ll wake up 10 years from now and amaze at how much money you’ve managed to accumulate.

It’s really up to you.  See you at the beach!


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Updated 2H2015

Photo: Oahu Sunset, Sam.



Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship. Sam focuses on helping readers build more income in real estate, investing, entrepreneurship, and alternative investments in order to achieve financial independence sooner, rather than later.

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  1. Jman says

    I wanted to point out what I think is a bit of vaugeness in one of your examples. The example of the 70k income, that chooses roth instead of traditional. You question this choice as strange, however its common for 401k participants to make this choice. I think you are correct in this specific example that the MAGI would be less than 59k (53 in this example assuming no other sources apply) but at 59k (not too far away) the ability to deduct a IRA contribution for someone participating in a 401k plan (as this person is) — is limited. And goes away entirely by 69k. If you can’t deduct your contributions to IRA, you’re better off using Roth. You didn’t say anything incorrect, per se — but by not talking about it you make it sound like the traditional is always preferable in these circumstances, when infact, there are some limits you need to pay attention to.

  2. Conny says

    You forgot an important aspect in your “why you don’t have enough money” list: medical issues and lack of decent, affordable health insurance (meaning a plan that costs less than $500+ per person per month and comes with a deductible that’s less than $3k).

      • mACNAO says

        i UNDERSTAND GOOD ARTICLE . I get what Conny says. Although OBuma care. Many small to medium sized corps adjust to this and some take penalty hits as they are harsh but still not harsh that they make decreases and changes to their employees plans. So yes if you make nothing Medicaid. But the working poor have to buy something OBAMA care not cheap for a family of 3 or 4. And if like conny says has medical issues that if you made nothing medicaid would pay 100%. You a family and make 35,000 with 20 % deductibles for surgery you are heading towards bankrupt or 401K early withdrawl. So in theory yes. But the sad reality for many working class folks and familys this is more the reality that noneone has good answers for. Many familys live paycheck to paycheck and never expected to see a huge recession and be out of worjk that long even those with degrees who had worked consistany for many years bought house had a family planned on emergencys but not sunamis. Take care .

  3. Brad says

    Thank your for the re-emphasis on saving more now while we’re young. I’ve been working now at 70k for two years and only the start of May this year, have I been maximizing my 401k per paycheck. Looking forward to the start of next year where I will be maximizing it to the fullest!

    By the way, I’d like some updates on your P2P investing. How has your performance been since the start and at what percentage of overall portfolio would you keep at? Right now, I’m at 10%.

  4. Jan says

    For evermore!! I was trying to educate myself a bit and found I don’t even speak the language. It’s like trying to read computer lingo when your experience is on an IBM select III. Really, does everybody else understand this? I must be a total idiot. A poor one; that explains a lot, eh?

    • Ro says

      Hi, if you want to learn the language go to ameritrade website they have free training on investment and also investopedia that can help you a lot with the definitions etc.

  5. Rob says

    “Realize that making more money is a choice, especially if you live in a developed country.”

    So where did you get your free job? Because most of us are working our asses off – we are smart, hard-working and do everything right but even so, no one wants to hire people.

    People get laid off because some 80 year old dude who won’t give up his job decides to take their spot. Employers are lazy and entitled and expect employees to have years of experience for entry level positions because they don’t want to spend any time training them. Some people have mental illness that isn’t taken care of by their community’s doctors and organizations. Some people have no friends and therefore no contacts to help them get into the jobs.

    It’s not THAT easy to even GET a job, let alone get one that pays above minimum wage. And people who say “keep applying”: Towns and living areas have a finite amount of companies that are hiring and compatible with the particular employee. If they all turn the person down, they’re out of luck. And sometimes a person could have made a mistake in their past that prevents them from getting hired, for example having a criminal record. What if you don’t even have money or a home to enable you to get around and apply for jobs? Spend your life applying for welfare cheques that don’t come through? Or take out another loan and get yourself more in debt? Stay in school forever?

    Even if you are privileged enough to have had the finances and living situation required to get a post-secondary education (even in “developed countries”, this is often not possible), you still struggle to find a job at McDonald’s. But it’s easy to get a job if you’re 50 and built up plenty of experience and contacts when they were handed out like pamphlets to anyone who said they would work hard, and have settled into a position with upward mobility.

    YOU can say that making money is a “choice”, because for you, it is. (To be fair, I am making an assumption here. Maybe you are poor or job-impaired. But in that case, you shouldn’t have such an attitude).

    And can we stop with the tired, childish accusations that younger people don’t want to work hard or suffer? Yes, we SHOULD be able to live life. God forbid we enjoy ourselves before we die. If you think it’s entitled to forgo savings in favour of not being depressed: There’s no joy in living if you are only spending your money on a future self that may not even be alive. And if you’re young and poor, the only “choice” is how to spend the measly $50 that you have to yourself for the entire month – put it in savings, or buy yourself something you’ve been wanting for months but couldn’t afford. So I think plenty of us have had enough “pain” and are going to be staying away from the gym for a while so we can heal.

    • says

      To answer your question; I got my first job after 55 interviews and 6 rounds after I was the only one to get on the bus from my college at 6am to go to DC for a finance job fair.

      My second job was after I decided to make the move to SF after entertaining a headhunter,

      My final job was created by myself by starting this site and writing consistently for 6 years, 3-4 posts a week.

      I’m lucky. I also try very, very hard and will frequently work 70 hour weeks.

      Please share your situation Eg age, occupation, etc. I strongly believe half the battle is having that positive mindset.

  6. Dbroadnax says

    Can you do saving plan if you do not have a Company 401k and match. If you make over 6 figures where do you put your money would you do a 18k max for a standard IRA?

  7. AF says

    Hey there,
    By the time I’m 40, I’ll be in the “low end” of your spectrum for retirement (maybe a few thousand dollars added to that). In your view, is that low-end still acceptable for retirement? Are you saying that $300K would be in the low-end of the acceptable range for retiring comfortably?

  8. SB says

    Sam, I’m an avid reader of your writing and I have used several of your suggestions. I’ll be candid in admitting that I use your suggestions like commandments to filter my spending urges. “What would Sam do?”
    In your retirement savings guideline by age, I was wondering whether you are netting out savings used for buying a home, paying off student loans, bringing up kids, etc. Just so you know, I live in Brooklyn, NY, and I consider myself, for all practical purposes, poor. By your standards, it would seem to me that you have to be earning upwards of $250,000 from a rather young age to hit these targets? Am I missing something here? I would really like to get a perspective here, before I jump off the Brooklyn Bridge in total despair! (just kidding but you know what I mean…)
    Many thanks!

    • says

      Hi SB,

      Good question! I think you can consider paying off debt, saving for a down payment, paying for tuition etc as part of the savings number b/c after all, what is savings for, but to have for security and spend on life’s most important things!

      I just got back from Asia and saw a lot of poverty again in Cambodia. As a result, I’ve turned my hustle barometer to OVERDRIVE and have been testing out being an Uber driver for the past week. So far, so good as I’m grossing $32/hour and netting $24/hour after commission and taxes. Now, whenever I plan to buy something, I think to myself, how long must I drive to afford it!

      There’s something fun and magical being able to make money anytime within minutes. You should check out driving for Uber if you want to make more and have a car. I think they are giving a $250 bonus for drivers after their 20th passenger.

      • SB says

        Thank you Sam. That was helpful. I’ll just keep at it and see where I land when I retire. I intend to move to a little town in the Himalayas, when I do, which hopefully will be less expensive than NYC, but you never know!
        Yes, I have been thinking about driving for Uber. I don’t own a car though – it’s just a hassle to maintain it without a “critical mass” of usage. But if I can make that depreciating asset into a cash-flowing one, then I would even buy a used car to drive for Uber.
        Keep the hustle going Sam. We need it more than you know!


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