Retirement planning starts with one simple rule: estimate how much you’ll spend each year in retirement, then multiply that number by 25. That gives you a quick savings target. For example, if you expect to spend $48,000 a year, you’ll need around $1.2 million saved to retire comfortably. It’s called the 25x rule—a practical way to see if your nest egg is on track.
Quick Takeaways
- Calculate your target: annual spending × 25 for your retirement fund
- Start at 30 with $600/month to reach $1M by 65 (7% return)
- Capture full 401(k) match first, then IRA, then back to 401(k)
- Roth wins if you expect higher taxes later; Traditional if lower
- Automate with Emma: alerts, auto-increases, and progress tracking
Why this retirement planning guide works
You’re here because you want one monthly number to automate today and a plan that grows without constant stress. Your life is busy. Some months feel tight. Some feel great. Your retirement plan must survive job changes, kids, and real-life expenses.
We’ll map your goal into a monthly contribution by age, decide Roth vs Traditional using plain math, and set a low-cost ETF mix. Then we’ll automate everything with Emma inside Finhabits. For more age-specific strategies, check retirement savings in your 30s.
Turn your future into one number
Take the amount you expect to spend each year in retirement and multiply it by 25. That simple rule of thumb helps estimate a nest egg that could support you for roughly 30 years.
- $40,000/year spending = $1,000,000 target
- $60,000/year spending = $1,500,000 target
- $80,000/year spending = $2,000,000 target
Write your annual spending number. Multiply by 25. Circle it. That’s your retirement planning target.
Your monthly target by starting age
For example, if you start at 30 with $600/month, you’re on track for $1,000,000 by 65. Increase by 1%-2% yearly to keep pace with raises.
This table shows monthly amounts to reach $1,000,000 at 65 (assuming 7% annual return):
| Starting Age | Monthly Contribution | Years to Invest | Total Contributed |
|---|---|---|---|
| 25 | $420 | 40 | $201,600 |
| 30 | $600 | 35 | $252,000 |
| 35 | $880 | 30 | $316,800 |
| 40 | $1,320 | 25 | $396,000 |
| 45 | $2,030 | 20 | $487,200 |
| 50 | $3,320 | 15 | $597,600 |
The chart shows an estimate of how much an investment could grow over time based on the initial deposit, contribution schedule, time horizon, and interest rate specified. Changes in those variables can affect the outcome. Results do not predict the investment performance of any Finhabits portfolio and do not take into consideration economic or market factors which can impact performance.
You can check our compound interest calculator to estimate how your money could grow over time.
Use the right accounts in the right order
Consider three buckets: 401(k) for employer match, IRA for control, taxable brokerage for overflow.
Smart contribution order
- Contribute to your 401(k) — at least enough to get the full employer match (it’s free money).
- Max out an IRA (Traditional or Roth) if you’re eligible.
- Return to your 401(k) and keep contributing until you reach the annual IRS limit.
Example: A 4% employer match on a $60,000 salary equals $2,400 per year. If invested for 25 years at a 7% annual return, that match alone could grow to around $130,000 — money you wouldn’t have without contributing enough to earn the match.
Roth vs Traditional comparison
| Factor | Traditional IRA | Roth IRA |
|---|---|---|
| When taxes paid | At withdrawal | Now (after-tax) |
| Tax deduction | Possible if eligible | No deduction |
| Withdrawals | Taxable | Tax-free if qualified |
| Best if future taxes | Lower than today | Higher than today |
| RMDs* | Required at 73 | None for owner |
*RMDs stands for Required Minimum Distributions.
Catch-up contributions (50+)
At 50, IRS allows extra contributions. These additional amounts close gaps fast in your fifties.
Keep It Simple and Diversified
A well-built portfolio doesn’t need to be complicated. The key is diversification — spreading your investments across different types of assets — and time, allowing those investments to grow and recover through market cycles.
As you get closer to retirement, it’s common to gradually shift from a higher share of stocks toward more bonds, reducing risk while maintaining long-term growth potential. Keeping costs low and staying consistent often matters more than trying to time the market.
That’s the same approach we take at Finhabits: building portfolios that stay diversified, low-cost, and aligned with a long-term vision.
Meet Emma: Your financial planner
Emma turns your retirement plan into automated routines with nudges and progress tracking.
Plan safe withdrawals – the 4% rule
The 4% rule is a simple guideline for retirement income. It suggests that withdrawing 4% of your savings in the first year, then adjusting that amount for inflation each year, has historically supported about 30 years of retirement spending.
For example, if you retire with $1,000,000, you’d start by withdrawing $40,000 in the first year.
- If markets look expensive or uncertain, some retirees choose a more conservative 3–4% range.
- Others take a flexible approach, skipping inflation increases after poor market years to help their money last longer.
Delaying Social Security can also boost your monthly benefit and reduce how much you need to withdraw from your portfolio
Activate in 15 minutes with Finhabits
Set up your retirement plan from your phone with SSN or ITIN:
- Download the Finhabits app.
- Open account with address, DOB, bank info
- Pick risk level – Finhabits uses low-cost ETFs
- Connect your bank, and choose auto-deposits
- Turn on Emma to create your financial plan
- Set calendar reminder to bump deposit after raises
Download the Finhabits app.
Common challenges and solutions
Tight budget
Start $50/month, schedule quarterly $25 increases..
No employer 401(k)
Open an IRA, fund monthly. When changing jobs, capture new matches immediately.
Starting at 50
Use catch-up contributions, aim for a higher savings rate. Small changes free $300-500/month, adding $100,000+ over 20 years.
Your 15-day action plan
- Calculate retirement budget × 25
- Pick monthly contribution from age table
- Set 401(k) match-capturing percentage
- Open/fund IRA, choose Roth or Traditional
- Set auto-deposits on payday
- Activate Emma alerts and auto-increase
- Schedule rebalancing reminders
Frequently Asked Questions
How much do I need to retire?
Quick starting point: annual spending × 25. If you plan spending $50,000 yearly, target $1.25 million. Adjust for housing status, health costs, pensions, and Social Security timing. This gives you a baseline to start your retirement planning with confidence and clarity.
What are current 401(k) contribution limits?
IRS updates limits annually for inflation. For 2025, the elective deferral limit is $23,500, with $7,500 additional catch-up for those 50+. Always capture your full employer match first – it’s free money that compounds over time for your retirement.
Should I choose Roth or Traditional IRA?
Both Roth and Traditional IRAs offer tax advantages — they just work in different ways. With a Traditional IRA, contributions may be tax-deductible now, but withdrawals are taxed later. With a Roth IRA, you pay taxes upfront, and qualified withdrawals in retirement are tax-free.
The best choice depends on your current tax bracket, your expected income in retirement, and other personal factors. Some people even use both over time to balance flexibility. You should consult a qualified tax professional to understand which option fits your individual situation.
What are catch-up contributions?
Workers 50+ can contribute extra beyond standard limits: additional $7,500 to 401(k)s and $1,000 to IRAs in 2025. These help close retirement gaps quickly. If you’re behind, these extra contributions combined with compound growth make significant differences.
What is a rollover IRA?
A rollover IRA consolidates old 401(k)s from previous employers into one account. This simplifies management, often reduces fees, and maintains tax advantages. Request direct rollovers to avoid taxes and penalties.
Start your retirement plan today
You’ve got your number. You know the accounts. Now make it automatic. Open your Finhabits account, set your monthly contribution, and let Emma handle the nudges. Start small if needed – consistency beats perfection. Your future self will thank you. Get started at Finhabits app.
Your retirement planning path forward
Retirement planning boils down to three things: how much you save, how long you invest, and fees you pay. Set your monthly number, capture your match, choose accounts wisely, keep costs low. Then let automation and time work their magic.
Disclaimer: This content is for educational purposes and does not constitute personalized financial, legal, or tax advice. For guidance specific to your financial situation, consult a qualified professional. Information presented may change; always verify with official sources.
Sources
- IRS – 401(k) contribution limits: irs.gov/retirement-topics-401k
- SSA – Retirement age: ssa.gov/retirement-age
- Investor.gov – Compound interest calculator: investor.gov/compound-interest
