Your savings rate might just be one of the most significant predictors of wealth building, even more than your income. If you’ve been thinking about your own savings rate, you might have heard people throw around numbers like 15% as a good target for your savings rate. Does that feel high? Does it feel low? Today, I wanted to dig into the why behind a 15% target (which sits in the middle of a broader healthy savings spectrum). You can decide for yourself what feels right for you.
Follow Kevin Janiec on LinkedIn
Why Target 15% in the First Place?
At a certain income level, the 401(k) alone is not going to be enough. Your 401(k) has a limit for contributions and flexibility, and if you’re a high earner, the limited amount you’re able to put into that account does not keep up with the cost of living you’re getting used to. You are living a full life. Kids are in sports. You are doing a lot socially. You have a nice house, decent cars, and, overall, you can cover all of it with cash flow while still contributing to your 401(k). That is genuinely good.
The problem is that, as large chunks of income come in through promotions, bonuses, or commissions, the natural pull is toward lifestyle spending. Another renovation, a more expensive car, a new club membership. That is not a character flaw. It is just what we see happen when income grows, and there is no preset target to check against.
The savings rate target exists to create that check. Before the lifestyle drifts away, let’s set a challenging metric and ask: Are we protecting our future selves enough?
The Spectrum Is Real
Candidly, 15% is aggressive. It is challenging for most people (including me), and there are many real expenses at this stage of life. In practice, what we see is more of a spectrum, and the conversations look pretty different depending on where someone falls.
When clients are saving less than 10%, our conversations focus on prioritization. What are the most important expenses in your life right now? What can be deferred or cut back, and how do we carve out something for your future self?
When clients are saving more than 20%, the conversation actually goes the other direction. What are the things in your life you would genuinely value spending money on, and how do we loosen up the purse strings a little?
We are generally comfortable with a range of roughly 10% to 20%, depending on the full picture, and 15% sits right in the middle.
What 15% Actually Looks Like at $400,000 of Income
If both spouses are maxing out their 401(k)s through work, they’ve already saved roughly $50,000 before it hits their bank account. At $400,000 of income, 15% is $60,000. That gap is about $1,000 a month going toward something like a non-retirement brokerage account.
That $1,000 a month buys you a lot. It buys flexibility for a slight income setback. It covers unexpected expenses without derailing the plan. It builds a cushion over time that is genuinely useful. If you are able to set aside an extra bonus on top of that, you are striking a really nice balance between life today and future security.
In many cases, we might pull back on the 401k savings and increase the savings towards more flexible buckets…but that’s for a future blog post. This one is simply about what you’re saving vs. what you’re spending.
What “Not Enough” Actually Means
This is the part I want the < 10% crowd to take seriously. When we say saving less than 10% might not be sufficient, we mean two things: one long-term and one much closer.
Long-term: if you are making $400,000 and only saving 5% of it, you are probably not building a portfolio you can eventually live off of while sustaining the lifestyle you’ve become accustomed to. Our Financial Coach team works with retirees. We’ve seen this play out firsthand.
In the next three to five years, 5% savings leave almost no wiggle room. If you had to take a pay cut for a more fulfilling job, a more flexible role, or a layoff, and you are living off every bit of the $400,000 you are making, you’re required to keep that same income level to support your lifestyle. That is a very small margin to work with when there are only so many positions that can offer the income you’re making.
The Goal Is Balance, Not Deprivation
15% is a useful and challenging benchmark for accountability, not a verdict. The point is to make sure that as income grows, savings are growing with it, and that you are building toward a place where you have real options. The clients who get this right are not the ones who sacrifice everything today. They are the ones who strike a balance between living well now and building the flexibility to keep doing so on their own terms.
If you are not sure where your savings rate actually stands or what it would take to reach 15%, that is a straightforward conversation worth having. You can schedule a complimentary conversation with one of our coaches at financialcoachgroup.com/contact.
Not intended as a recommendation or offer of any specific advice or services. All investments carry risk, and past performance does not guarantee future results. For detailed information about our fees, services, and background, please view our regulatory disclosure materials on the SEC Investment Adviser Public Disclosure Website (https://adviserinfo.sec.gov/firm/summary/170478).