The 15% Rule: Why This Magic Number Unlocks Retirement Wealth

When we were kids, the most nerve-wracking grade to get back from the teacher wasn't the one for the test that we already knew we failed. Instead, it was the grade for the test that we genuinely didn't know if we aced or tanked.

That's how logging into your retirement accounts can feel sometimes. You know that you're putting away money every paycheck, but you never feel confident that your contributions are adding up in a meaningful way. You might start to suspect there's some complex formula for successfully hitting one's retirement savings goals, and you're the only person who can't crack the code.

There’s good news: Your retirement savings plan doesn't have to feel like solving a calculus problem. There's a simple method recommended frequently by financial experts, and it's called the 15% rule.

What is the 15% rule in retirement planning?

The 15% rule is stunningly simple: invest 15% of your gross income toward retirement. That's it. No complex calculations, no questions about whether it works. Thanks for reading, and have a great rest of your day!

Kidding. There's a bit more to it than that, but it is thankfully pretty straightforward and takes the guesswork out of your retirement savings. To get an idea of what that 15% would look like, if you earn $75,000 annually, you would aim to contribute $11,250 toward retirement each year. That breaks down to roughly $938 per month. However, if your employer matches your retirement contributions, that money counts towards the total. So, your personal contributions might come out to even less than 15%.

Why 15% is the sweet spot

Financial planning doesn’t need to feel extreme. For example, Fidelity analyzed national spending data and found that saving 15% of your pre-tax income annually for retirement, including any employer match, is generally all it takes to enjoy the same quality of life you enjoy now in your golden years.

Experts estimate that overall, people need anywhere between 55–80% of their pre-retirement total income to maintain their lifestyle after they retire. After factoring in Social Security benefits, about 45% of retirement income needs to come from personal savings. When you consistently save 15% throughout your career, you position yourself to hit that target.

The math works because of three powerful factors working in your favor: consistent contributions over time, compound interest, and the long runway most people have until retirement. T. Rowe Price's research assumes people start saving at age 25 and increase contributions gradually, reaching 15% by working up from an initial 6% savings rate. Starting early and maintaining that 15% contribution rate through age 67 gives your money decades to grow, and that growth becomes exponential when returns generate their own returns.

How an employer 401(k) match can turn 15% into 10%

Remember, your employer's contributions help you reach that 15% sweet spot. More than 85% of 401(k) plans offer some type of employer contribution. According to Vanguard's 2025 data, a typical employer match is about 4–5%. This means you might only need to contribute closer to 10% of your own money to hit that 15% target.

Since no one wants to turn down what's essentially free money — cha-ching! — You can use the following tier to decide where you contribute to hit your overall goal.

Employer-sponsored plans first. Contribute enough to your 401(k) or 403(b) to capture the full company match, since this is your highest-return account.

Individual Retirement Accounts next. If you've maxed out your employer match and haven't hit 15% yet, consider a Traditional IRA or Roth IRA. These accounts offer tax advantages and often have lower fees than employer plans.

If necessary, loop back around to your employer-sponsored plan. If you've maxed out your IRA contributions but still haven't met your savings goal, return to your employer plan and increase contributions until you reach that 15% target.

When 15% might not be enough savings for your financial future

For most people, the 15% rule is appropriate, but there are some situations where it might not be the most ideal fit.

Starting later

Life happens, and some people don't get a chance to start saving for retirement until their 40s or 50s. In this situation, it's advisable to save above the 15% rate. Thankfully, there exists special retirement accounts designed to enable those in their 50s to get caught up. For 2025, those age 50 and older can contribute an additional $7,500 to 401(k) plans and $1,000 to IRAs. Those between ages 60-63 can contribute an even higher catch-up amount of $11,250 to 401(k) plans.

Planning for early retirement

Since the 15% rule is based around a retirement age of 67, it won't work if your goal is to retire before that. You'll need your nest egg to last longer, and you won't have access to Social Security benefits until age 62 at the earliest.

Expecting minimal Social Security

Self-employed individuals who haven't consistently paid into Social Security or those with sporadic work histories might receive reduced benefits. In these cases, your personal retirement accounts need to do more heavy lifting. It's also important to remember that high-earners receive less in Social Security benefits — this might not necessarily mean that you have to contribute above the 15% rule, but it is important to factor in when planning for retirement.

Making the 15% rule work in real life

The difference between a good plan and a great plan comes down to how you implement this strategy. Here's how to make 15% feel less like a sacrifice and more like smart financial goal setting.

Start where you are

If 15% feels overwhelming right now, you don't have to implement it overnight. T. Rowe Price research shows that starting with 6% and gradually increasing by one percentage point each year offers a solid approach to reaching that 15%. There’s no need to beat yourself up; get started. Begin with what you can manage, even if it’s only 5%. Then increase your contribution rate by 1% every six months or whenever you get a raise.

Automate everything

Set up automatic transfers from your paycheck to your retirement savings plan. This removes willpower from the equation entirely. What you don't see, you don't miss!

Many plan providers offer an auto-increase feature where you set the increase to happen later automatically. You can tell the system how often to increase, by what increment and when to stop.

Don't think of it as a sacrifice

You're not giving up money, you're paying your future self first. That 15% isn't disappearing; it's working for you by growing through compound interest and market returns while you sleep.

Adjust for life changes

Got a raise? Increase your contribution percentage. Paid off your car? Redirect that monthly payment toward retirement. Unexpected financial burden? Increase your... oh, wait.

There might be years when you have to maintain your current contribution rate, or even reduce it temporarily. That's okay. It's the 15% rule, not the 15% law. Always approach retirement planning by trying to hit that overall 15% figure, but be prepared to adapt when life occasionally throws some curveballs in your direction.

Planning for the future while enjoying life today

The 15% rule works because it acknowledges a fundamental truth about financial independence: retirement security matters, but so does the life you're living right now. You want to prepare for the future, but you don't want to work solely to retire and not enjoy the life happening around you right now.

Fidelity's 50/15/5 rule helps to get a sense of the bigger picture. You should aim to allocate no more than 50% of take-home pay to essential expenses, save 15% of pre-tax income for retirement, and keep 5% of take-home pay for short-term savings. This isn't about deprivation or choosing between today and tomorrow. It's about finding the balance point where both can coexist. Yes, that even includes the occasional splurge.

Your next step

Ready to incorporate the 15% rule into your retirement planning? You'll need to start by calculating 15% of your gross income. Our Folio dashboard includes a retirement planning calculator, so this part is easy. Next, you'll need to compare it to what you're currently contributing to your retirement savings. If you're below your target amount, start working towards small changes that will eventually allow you to hit your goal, such as increasing your 401(k) contribution by 1%, opening that IRA you've been thinking about, or committing to redirecting your next raise toward retirement. Progress happens one decision at a time, and the 15% rule gives you a clear target to aim for.

Still feel like your retirement accounts are like that test you're not sure you passed? We invite you to book a 20-minute or 50-minute session with a Mentor in your Fruition account. They can answer questions about your current financial situation, debunk any myths you've heard over the years, and help you work towards your long-term financial wellness.