Global Guide · Retirement
What Is the Retirement Savings Gap?
The retirement savings gap is the difference between how much you have saved and how much you actually need to retire comfortably. It is not just an American problem — it affects workers everywhere, across every income level.
The gap exists because most people either start saving too late, save too little, or dip into their retirement funds early. Over time, small shortfalls compound into a major crisis — often only visible when it is almost too late to fix.
The best time to measure your gap is right now, no matter how uncomfortable that number feels. Understanding your position is the first step toward closing it. For a deeper look at why so many people fall short, see our guide on why most people can’t retire on schedule — and what to do now.
The Age-Based Savings Benchmarks
Widely used financial benchmarks give you a quick snapshot of where you should be. These are based on your annual gross salary as a multiplier:
| Age | Benchmark Target | Example (salary: $60k / £48k / equivalent) | Status if below |
|---|---|---|---|
| 30 | 1× your salary | $60,000 / £48,000 | Catching up needed |
| 35 | 2× your salary | $120,000 / £96,000 | Common gap zone |
| 40 | 3× your salary | $180,000 / £144,000 | Significant gap |
| 45 | 4× your salary | $240,000 / £192,000 | Critical zone |
| 50 | 6× your salary | $360,000 / £288,000 | Urgent action needed |
| 55 | 7× your salary | $420,000 / £336,000 | Very limited runway |
| 60 | 8× your salary | $480,000 / £384,000 | Final stretch |
| 67 | 10× your salary | $600,000 / £480,000 | Full retirement target |
These are general guidelines, not guarantees. Your actual number depends on your lifestyle, expected retirement age, and other income sources. But they give you a clear reference point to measure yourself against.
Why Most People Are Behind
Starting Too Late
The single biggest driver of the retirement savings gap is delay. Every year you wait to start investing costs you far more than you realise, because compound growth works exponentially over time. Someone who starts at 22 and stops at 32 can end up with more than someone who starts at 32 and saves continuously until 65 — purely because of the time advantage. Learn more about building wealth from scratch in our guide to starting to invest with little money.
Lifestyle Inflation
As income rises, most people increase their spending proportionally. The retirement contribution stays flat — or worse, gets sacrificed to fund a better lifestyle in the present. This is one of the most insidious retirement savings killers because it feels like progress. For a full breakdown of this trap, read our article on why your income is not the same as your wealth.
Early Withdrawals
Dipping into retirement funds before retirement — whether for emergencies, home purchases, or debt — is common and severely damaging. Not only do you lose the withdrawn amount, but you also lose all the future compound growth on that money. In many countries, you also face tax penalties on early withdrawals, so the real cost is even higher than it appears.
Not Knowing the Target
Many people simply never look at the benchmarks. They save whatever feels manageable each month without ever checking whether that amount puts them on track. The result is a gap that silently grows for decades before it becomes visible.
You don’t need to close the entire gap overnight. The most important move is to know your gap today and then act consistently. Even increasing your savings rate by 2–3% per year can dramatically change your retirement outcome over a 20-year horizon.
How to Start Closing the Gap
- Calculate your current gap using the benchmarks above. Multiply your annual salary by the benchmark for your age. Subtract what you have saved. That number is your gap.
- Maximise employer contributions first. If your employer matches retirement contributions, that is an immediate 50–100% return on your money. Always capture the full match before doing anything else.
- Automate your contributions. Set up automatic transfers to your retirement account on payday. You cannot spend what you never see. Start with whatever you can afford and increase it every time your salary rises.
- Reduce fees on your investments. High-fee funds quietly eat your returns every year. Index funds and ETFs with low expense ratios (under 0.20%) keep more of your money compounding for you.
- Avoid early withdrawals at all costs. Treat your retirement account as permanently locked until retirement. Build a separate emergency fund so you are never tempted to raid your long-term savings for short-term problems.
- Increase your savings rate with every pay rise. Commit to saving at least 50% of every salary increase before lifestyle inflation absorbs it. This one habit alone can close a significant portion of the gap over time.
- Track your net worth annually. Knowing where you stand each year keeps you honest and motivated. Our guide on how to track your net worth walks you through the process.
- Pausing contributions during market downturns — markets recover; missed contributions do not
- Keeping all savings in low-interest cash accounts for decades
- Assuming a pension or state benefit will cover everything
- Waiting for the “right time” to start — the right time was yesterday, the second best time is today
How Much Should You Actually Save Each Month?
A common starting target is 15% of your gross income — this includes any employer match. If you are starting late or have a significant gap, you may need to save 20–25% to catch up. The exact figure depends on your age, current savings, expected retirement age, and desired lifestyle.
Use the calculator below to estimate your personal gap and get a monthly savings target based on your situation.
🧮 Retirement Savings Gap Estimator
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